From Idea to Invoice
As entrepreneurship grows at Thayer School, innovators encounter pains as well as gains.
Illustrations by Doug Ross
In the early 1990s a Dartmouth student approached Charles Hutchinson, then-dean of Thayer School, to ask him to support a new entrepreneurship club. The student explained that Dartmouth administrators had turned him down on the premise that entrepreneurship and the liberal arts were incompatible.
“I told the student that I couldn’t disagree with that opinion more,” says Hutchinson, founder of three successful companies, including, most recently, GlycoFi, a biotherapeutics firm located in Lebanon, N.H.
If there’s any doubt that barriers toward entrepreneurship at Dartmouth are falling, consider this: In 2001 the College established an institution-wide equivalent of an entrepreneurship club, the Dartmouth Entrepreneurial Network (DEN). This resource for faculty, students, staff, and alumni attempts “to link the intellectual firepower of the university with the execution power of industry,” says DEN’s executive director, Gregg Fairbrothers ’76.
Entrepreneurship, long a part of the Thayer School curriculum, is gaining momentum at all levels. Students in ENGS 21, the ever-popular introductory class, not only design solutions to real-world problems but write business plans as part of their final projects. Graduate students, particularly those studying for master of engineering management degrees, are encouraged to take an entrepreneurship elective at Tuck School of Business. In the late 1990s then-dean of Thayer School Lewis Duncan emphasized the need for students to understand how to take a project “from an idea to invoice.” Even at the Board of Overseers level, entrepreneurship is on the agenda. E-ship, an ad-hoc group of overseers, is working to foster an entrepreneurial environment at Thayer School and Dartmouth to enhance the educational experience for students and faculty. Several overseers are also members of Angeli Parvi, an independent, nonprofit organization founded by board chair John Ballard ’55, TT’56 that invests in selected Dartmouth start-ups.
Even if institutional barriers to entrepreneurship are coming down, however, many Thayer School faculty and administrators contend that attitudinal walls remain. As Hutchinson describes it, “There’s this mindset that anything that makes money is evil. And that’s not too much of an exaggeration.”
Critics of the entrepreneurial trend on campus worry that potentially lucrative research will receive higher institutional priority than less-profitable research. Others are concerned that teaching will take a backseat to business development, or that the free exchange of ideas will be hampered by the desire to protect trade secrets.
Interim Dean William Lotko acknowledges that these are serious concerns. “There is a tension, and I think we have to be vigilant,” he says. However, engineering and entrepreneurship have always gone together in the sense that engineers create solutions of value to society, he says, and “the willingness to pay for something is one way our society recognizes that value.”
While profit can be a motive for entrepreneurs, it’s usually not the only one, says Fairbrothers. “Let’s say some clinicians come to me with an idea for a new medical device. I’ll ask them what the options for success are. Usually it comes down to wanting to see people using the device in practice. That’s more important than whether they make a lot of money,” he says.
“Many faculty who are involved in a start-up activity don’t want to become a Bill Gates,” adds Lotko. “What they want is to drive this technology out the door; then, when it becomes a full-fledged activity, they want to move on.”
For many people the tech boom of the late 1990s was their first introduction to the idea of university entrepreneurship. However, the entrepreneurial trend is the result of a long-term dynamic, not some sudden change, according to Hutchinson.
“Most of us in my generation were focused through our graduate programs on the big things like aerospace, trying to get somebody to the moon and those kinds of things, which were all funded by the government. So engineering schools just really fell away from their relationships with corporations,” he says. Since the government retained ownership of intellectual property generated by federally sponsored research, researchers didn’t have to be concerned with commercializing the products that resulted.
This dynamic changed in 1980 with the passage of the federal Bayh-Dole Act. Suddenly colleges and universities were not just producers of knowledge; now the government expected them to help move that knowledge from the lab to the living room. Many of the people who criticize colleges and faculty members for moving in an entrepreneurial direction aren’t familiar with this responsibility, says Hutchinson.
“What Bayh-Dole said is, ‘If you accept federal grant monies, you’ve got to commercialize the resulting technology. That’s part of your job.’ Very few people within the academic enterprise understand that,” he says.
Bayh-Dole also prompted a philosophical shift in how people think about the value of research in the academy, says Fairbrothers. “In the post-Bayh-Dole model, research-based learning is about more than publishing. It’s also about what the research community calls ‘translation’ or ‘technology transfer,’ wherein innovation is taken full-cycle into products and services that will benefit society,” he says.
The most common way Dartmouth moves innovations to consumers is by licensing technology to outside companies, which then create and market the resulting products. However, in recent years researchers have been increasingly interested in forming their own small entrepreneurial ventures to commercialize their own technologies. The College sometimes issues licenses for the technology back to the inventor — an approach that is especially appropriate when the technology in question is so tied to the inventor that it can not easily be developed without his or her involvement, explains College General Counsel Robert Donin.
According to Alla Kan, director of the College’s Technology Transfer Office, the College usually receives upfront cash payments from licensees as a condition of licensing. However, she says, if a licensee is a cash-poor start-up company, the College might agree to take equity in the company in lieu of some of the cash payments.
When accepting an equity share, Dartmouth protects its integrity by placing special limits on its involvement in the company. “One of the things the College has said is we don’t want to be a manager of the company,” Donin says. To that end, the College limits its equity in a company to no more than 10 percent. College officials are also not allowed to sit on the boards of faculty companies.
At Thayer School the dean has the discretion to enter into cautionary agreements with start-up businesses based on research happening there, says Lotko. These agreements might allow a burgeoning company to use College space or equipment in exchange for equity. “One has to be careful that these are consistent with the tax-exempt and nonprofit status of the institution and that they’re aligned with our educational purpose,” he says.
In recent years there also have been a growing number of faculty ventures that are part of the Small Business Innovation Research (SBIR) and Small Business Technology Transfer Award (STTR) programs. These federally sponsored programs provide grants to small businesses to investigate the commercial potential of new technologies. The STTR program requires companies to work in partnership with nonprofit research institutions. The funding for SBIRs and STTRs comes from the same government agencies from which academic researchers already receive grants, including the National Science Foundation, NASA, and the Department of Defense.
The SBIR and STTR programs have three stages: first, to demonstrate the feasibility of commercialization; second, to develop a prototype; and third, to actually take a product to market. Government funding is only provided through the first two stages. After that the company has to secure outside funding. According to Professor and former Dean Elsa Garmire, who is a member of the Thayer committee responsible for overseeing faculty business ventures, very few projects — maybe 1 percent — ever get to the third stage. “Most of the people on campus who get these SBIRs are not interested in making vast amounts of money. They’ve just found sort of a backdoor way of getting their research funded,” she explains.
ACADEMIC FREEDOM AND THE EDUCATIONAL MISSION
One of the most frequently cited arguments against entrepreneurial activity on campus is that the need to protect trade secrets will hamper the free exchange of ideas essential to the university environment. A veteran of both academia and the corporate world, Hutchinson doesn’t buy it.
“With all due respect to my colleagues, there is nothing any more stifling and insidious than the peer-review system. It’s an old-boy network,” in which even “pure” researchers have to consider the political environment to get funding, he says. “We’re all driven by that kind of dynamic. I’m not overly critical — the system basically works — but I think anytime anyone starts to think they’re more pure than someone else, you’ve got a problem,” he adds.
Lotko takes a more moderate view. “We do have to ensure — particularly where students are involved — that people are not restricted in publishing and expressing ideas and results that come out of their work,” he says. “When an activity starts to take on that type of proprietary nature, we have to look at getting it off campus.”
Protecting the teaching mission of the College is also a high priority. Dartmouth policy restricts the amount of time faculty members can spend on outside activities, whether it’s consulting for outside companies or creating a business of one’s own, to 20 percent of their time. Thayer faculty entrepreneurs are required to report on their activities to a College-wide committee on entrepreneurial activities, as well as to a similar Thayer group.
If entrepreneurship, like consulting, has the potential to distract from the classroom, it also has the potential to make a professor’s teaching more relevant. “Engineering doesn’t take place in the abstract,” says Lotko. “One thing that really motivates students is when professors can talk about applying their skills in the real world. That’s difficult to talk about with authority if you haven’t experienced it yourself.”
Professor Victor Petrenko, whose research into the structure and properties of ice has led to several licensing agreements with outside companies, as well as the formation of his own company, Ice Engineering LLC, concurs. “For 22 years I was just a basic science scientist, and I don’t think I taught my students well,” he says. “Now in my lectures I can provide numerous real-world examples. I actually am a better teacher.”
Unlike industry, where the No. 1 priority is achieving a useful solution in a timely manner, academia encourages scientists to pursue research questions for years — sometimes for decades — in search of thorough understanding. “To be honest, many academics don’t understand the compromise involved in getting a product out the door,” Garmire says. “Many of our students are going to go into entrepreneurial situations, and they need to be taught by people who are familiar with that environment.”
Professor John Collier ’72, Th’77 hopes to give students a taste of how engineers work in the real world in ENGS 21. Only since he took over the class in the 1980s have students been asked to look closely at the economic side of engineering. Working as teams, students in the class have to identify a problem and potential solution, design a prototype, identify a market, and write a business plan.
“It’s important for the students to have an idea of whether the solutions they’ve developed have any potential to be marketed,” says Collier. “It forces you to figure out who your audience might be, what folks are willing to pay for your invention, and then how many of them there might be out there willing to buy it. Once you have those kind of numbers, you can go back and do an analysis: What would it cost me to produce it if I wanted to make this number of devices? That’s really the crux of the matter.”
According to Collier, such details bring the business side of engineering alive. “If you try to teach that in the abstract, the students have very little interest,” he says. “If you put it in the context that they’ve already designed something that they’ve fallen in love with you have a very attentive audience.”
Engineering student Jeffrey Grossman ’06 took ENGS 21 during the spring of his freshman year and ended up being co-creator with four classmates of a patentable idea: a dripless gas nozzle. “Basically the theme for the class was to come up with something that would improve the transportation industry,” he says. His team’s background research revealed that dripping fuel and escaping gas vapor at filling stations was one of the most significant problems facing the industry. “The approach we took was to create a membrane that could be opened by the flow of gasoline, but would stay shut when there were just a few drops,” he explains. Although the team wasn’t able to create a working model before the term ended, their research into existing patents revealed that there was nothing like their idea already on the books. With the help of one teammate’s venture capitalist father, the dripless gas nozzle developed by the team currently is in the process of being patented.
The “real-world” focus of ENGS 21 has made the class Grossman’s favorite at Dartmouth. “We saw what we were accomplishing, and it was really rewarding,” he says.
This kind of entrepreneurship education works because it engages students viscerally, notes Fairbrothers. “If you’re out there on the ridge yourself,” he says, “your emotions kick in, and you remember and learn.”
THE OTHER SIDE OF THE COIN
Victor Petrenko’s decade of research into the structure and adhesion of ice has the potential to make even a New Hampshire winter bearable. Technology he developed makes it easier to de-ice planes and power lines, increase car-tire friction on icy roads, and improve the performance of skis and other winter sports equipment. This research has produced 27 patents, with another 20 in progress. His technology also has been licensed to several outside companies.
Petrenko says that, had he understood what lay ahead when he formed Ice Engineering LLC in 2001, he probably wouldn’t have made the leap. “I enjoy on the one hand seeing that some fundamental discoveries we made years ago can be transformed into useful products. But there’s a bloody price we pay for it with financial pressure,” he says.
One of the big challenges has been navigating the red tape associated with having a business on campus. The level of scrutiny, he says, is “very stressful.”
“We all the time are under strong inspection by Dartmouth officials who suspect we are trying to use College facilities to do something for the company,” he says. “In the past I kept a significant number of graduate students working on real engineering contracts. But now I have moved all the students away from practical applications because I am afraid I will be accused of misusing students.”
Garmire, who helped write the policy on commercial ventures at the University of Southern California before she came to Thayer School, is concerned about what she perceives as an excess of caution at Dartmouth. In addition to the Thayer committee, entrepreneurs are also accountable to another College-wide committee. In her estimation, this is both unnecessary and a detriment to innovation. She also thinks the College’s policies suggest that administrators “don’t really understand what goes on in a research lab.”
“The policy says that research done for the company has to be completely separate from what you’re doing as a faculty member. But usually when you’re doing research for a company, it’s fundamental research to advance the technology and meshes closely with projects that are funded by other means. Once it gets to a certain point where you actually have a product, that’s when you need to move it into a separate space,” she says.
Garmire is particularly concerned about the effect of excessive oversight of early-stage SBIR and STTR companies. College administrators who aren’t familiar with these kinds of companies may unintentionally defeat the purpose for which the programs were developed — to promote free-wheeling innovation. She would like to see the College cede the oversight for these very embryonic companies to the Thayer oversight committee. “The point to be worried about keeping things separate is when people start to bring venture capitalists in,” she says.
Neither Garmire nor Petrenko sees these issues as unique to Dartmouth. Like many other colleges and universities, Dartmouth is experiencing growing pains in dealing with increased entrepreneurial activity.
“The College is changing; I can see that. I think in a few years this won’t be a problem. The change in mentality takes time,” says Petrenko.
Regardless of whether faculty and students eventually become business owners, Fairbrothers reminds people that the ability to think entrepreneurially is in great demand in businesses and organizations of all kinds. “Entrepreneurs can be made; they’re not just born,” he says. “That doesn’t mean everyone is interested or will succeed at being his or her own boss. But everyone can develop entrepreneurial behaviors and attitudes that can be valuable in many contexts — and make life a lot more interesting and fun.”
Who Owns Intellectual Property?
Patents and copyrights are treated very differently in both intellectual property law and in College policy, says College General Counsel Robert Donin. Although the intellectual property created by an employee within the scope of work generally remains the property of the employer, the law has always included an exception for teachers, allowing them to keep the copyright to their works of authorship, such as books and musical compositions. Most colleges, including Dartmouth, have adopted this exception as part of their policies as well, says Donin.
However, since inventions generally involve more substantial institutional resources and are more readily commercialized, the College retains ownership of these items. Under this policy, faculty members are required to disclose new inventions to the Technology Transfer Office. College officials analyze the commercial potential of the invention and decide whether to retain ownership. If the College chooses to not exercise its option, ownership reverts to the inventor.
Should an invention eventually generate royalties, Dartmouth policy calls for a 50-50 split between the College and the inventor. Professor Victor Petrenko, whose research on the qualities of ice has resulted in eight patents, with 30 more in the works, describes this policy as “quite generous” compared to the policies of the College’s peer institutions. The portion that comes back to the school first goes to pay the expenses associated with acquiring the patent and other marketing expenses. The College’s portion of royalties is then split between the provost’s office, the originator’s school, the originator’s department, and the originator’s laboratory.
—Tamara Steinert is a freelance writer based in Kansas.
Expert Advice: So You Want to Be an Entrepreneur
The Dartmouth Entrepreneurial Network (DEN) recently sponsored a nine-week course for prospective entrepreneurs in the Dartmouth community. Here are some pointers from Tuck Professor and DEN Executive Director Gregg Fairbrothers ’76.
- Be prepared to work hard. Entrepreneurship consists of 5 percent hearing, 10 percent seeing, and 85 percent doing. As John D. Rockefeller said, “The secret of success is to do the common things uncommonly well.”
- Think about needs, not trends. Ideas that fill needs automatically have users and buyers. Trying to create a new need is generally harder than innovatively addressing an existing need.
- Weigh the competition, both existing and potential. There is always competition. Entrepreneurs often fall into the trap of thinking they have a unique market with no competitors. There is nothing wrong with competition — it means someone else thinks there’s value in what you’re doing. No competition may mean you’re smart, but it may also mean a lot of other smart people have figured out the idea or market is not going to work out.
- Specify the compelling benefits of your solution. Why is your idea better than your competition? Why will your idea be better than the competition over time?
- Pre-empt potential competition by filing for patents. Another weapon is good execution; Microsoft built an empire on this concept.
- Share your idea through pitches. Pitches help you distill the essence of your idea. Keep the pitch simple. Avoiding jargon or “geek speak” will help you reach the widest audience. Your pitch doesn’t have to cover everything; the goal is to get people interested enough to come back for more.
- Build a prototype. You’ll become aware of the limitations in resources or materials that might not be evident on paper.
- Show the prototype to potential customers. You’ll get invaluable feedback on your product’s appeal or ease of use. Finding people who are willing to pay you for your idea is the best proof of product you can give to potential investors — and to yourself.
- Don’t get discouraged. As Rosabeth Moss Cantor, editor of the Harvard Business Review, once said, “The middle of every successful project looks like a disaster.”
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