Investing in University Spin-Offs

Vinit Nijhwan,

Managing Director, Boston University Office of Technology Development

U.S. public and private research universities are by far the best in the world at educating young people and conducting basic and applied research. Harvard College was founded in 1636 and was followed by many other universities up and down the east coast. However, the first university to emphasize research along with education was Johns Hopkins, founded in 1876 with a $7 million gift from railroad baron Johns Hopkins. Johns Hopkins’ model was partially adapted from German research universities. Following Johns Hopkins many U.S. industrialists became benefactors of private and public research universities: Rockefeller to the University of Chicago in 1892; Carnegie Institute in 1902, etc.

The Federal government established the National Academy of Sciences in 1863 and the Morrill Act was signed in 1862 provided federal land to states to establish public universities. The first “land-grant” college was Kansas State University which started in 1863 (where my father went for his engineering degree in the late 1940s). Michigan State University, Pennsylvania State University, Rutgers, University of Wisconsin followed closely behind. The Federal government also passed the G.I. bill after WWII that allowed hundreds of thousands military personnel to get university education. Federal institutions like the National Science Foundation (NSF) and National Institute of Health (NIH) were also created right after WWII, launching the 60-year technology led economic boom the U.S. has enjoyed. Between 1940 and 1950, the contribution of the federal government to university incomes increased from $39 million to $524 million. The direction of university research shifted away from research intended for local industry application to more basic scientific research, with applications to national goals in defense and health care.

The economic impact of U.S. research universities in commercializing their research has been immense:
* Since 1939, Stanford faculty and students have founded more than 2,454 companies, such as Hewlett-Packard, Cisco, Sun Microsystems, Google, Yahoo, contributing to the economic dynamism of Silicon Valley.

* In 2009 MIT publishedEntrepreneurial Impact: The Role of MIT. In 2009 there were 25,800 active companies founded by MIT alumni that employ about 3.3 million people and generate annual world revenues of $2 trillion, producing the equivalent of the 11th-largest economy in the world.

* According to AUTM (Association of University Technology Managers) just in 2009: 658 new commercial products introduced; 5,328 total license and options executed; 596 new companies formed; 3,423 spinoff companies still operating as of the end of 2009

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