The University Record, February 15, 1999

‘Muddle in the Middle’ explores process of new enterprise development

By Suzanne Tainter
Division of Research Development and Administration

How public universities can bring the raw material of the global economy—knowledge and technology—to the marketplace and augment regional economic development is the challenge, according to Gary Bachula, acting undersecretary for technology, U.S. Department of Commerce.

“It is a team sport and a contact sport. Faculty need to know the potential business community,” Bachula said.

His comments came at the end of a day-long conference on Feb. 9 that explored what is required to develop new businesses from university-based discoveries.

Dubbed the “The Muddle in the Middle,” the forum brought together university inventors, venture capitalists and technology transfer professionals to share ideas and experiences. It provided an opportunity for the connections and conversations that many participants emphasized were critical to accomplishing enterprise development, explained Marvin G. Parnes, associate vice president for research and director for research administration.

One model for new enterprise development was presented by Thomas Churchwell, president and CEO of Arch Development Corp., which helps launch new companies based on University of Chicago and Argonne National Laboratory technologies. Unlike a traditional venture capital fund, in which the rate of return on investment is of primary concern, Arch’s goal is to get the technology into the marketplace.

Management is the key to new enterprises that succeed, explained Churchwell. “It is less about the invention than the business.

“Smart folks,” he said, “invest in the CEO,” so Arch matches inventions with “CEO wannabes.” The CEO and inventor then concentrate on product development. Arch provides legal, financial and other specialized services so that the new enterprise can focus on its product, not its infrastructure.

Arch shares with the faculty inventor the goal of moving the product to the marketplace, Churchwell explained. “Most fundamental research is undertaken with the desire to improve the way we live and the way we die.”

That was certainly the motivation for Victor Strecher, professor of health behavior and health education and associate director of the Cancer Center, who six months ago launched HealthMedia Inc.

The company is commercializing health promotion and prevention messages using new media based on Strecher’s university research. His personal frustration at not being able to find a company that could produce his products led him to Ken Nisbet, business start-up specialist in the Technology Management Office (TMO).

What the TMO did, Strecher explained as part of a panel of faculty inventors, was “give us the chance to become a business.” TMO led him to the proper legal expertise, worked out a plan to manage conflict of interest, did a market analysis, facilitated regental approval of the business, and provided contacts with venture capitalists.

In addition to the money, venture capitalist Rick Snyder, president of Avalon Investments, supplied business advice and mentoring, Strecher explained. “Academics think because we’re smart in our field, we’ll be smart in business. We’re not good at business.”

Other panels included Ann Arbor-area venture capitalists, who called for streamlining of university procedures for agreements and suggested more investment by universities and the state in “proof of concept” research for potential enterprises. Technology transfer professionals discussed some of the promises and pitfalls of trying to facilitate new businesses.

Capping the forum was an address by Bachula. A Saginaw native and once a staffer to former Rep. Bob Traxler, Bachula said universities should help anticipate how new technologies will reshape a region’s current economic base, and then move to position technology transfer to take advantage of new markets. He cited the example of the Department of Commerce partnership with the major auto companies to develop a standard passenger car that will get 80 miles to the gallon.

“When someone figures out how to manufacture fuel cells cheaply enough,” the new cars will abandon current engine technology. Today’s suppliers will find their market for carburetors disappear, replaced by a new market for five billion fuel cells a year. University and state and regional economic development officials may want to be sure that the fuel cell companies are located in Michigan,” Bachula said.

For more information on the conference, sponsored by the Office of the Vice President for Research and TMO, visit the Web at www.research.umich.edu/research/events/newenterprise_conf.html.