From Imagination to Marketplace
Opportunity knocked for A.J. Schwidder, '11 MBA, even before he completed his MBA at the Carlson School. When the civil engineer returned to graduate school to learn the business of engineering, he encountered a promising opportunity, decided to pursue it, and launched a company based on University technology that today is thriving.
As an intern with the University’s Office for Technology Commercialization (OTC), which helps faculty bring their discoveries to the marketplace, Schwidder came across a business plan for an invention that was right up his alley: a baffle developed by Professors John Gulliver and Omid Mohseni that keeps sediment from clogging waterways. Schwidder interviewed for, and was hired as, CEO of the fledgling company, called Upstream Technologies, in 2010. His charge: to get it up and running, including forming a corporation, securing investors, negotiating a licensing agreement with the University, determining how to effectively install the baffle in new and existing manholes, and further develop the product for the market. Oh, and then Schwidder had to finish business school, which he did in 2011.
Being at the University gave Schwidder unique advantages as he powered up Upstream Technologies, which is based in New Brighton, Minnesota. The OTC and its start-up–focused Venture Center introduced him to board members and investors while helping him develop a sales organization. “It’s always scary to start a new business,” says Schwidder. “There’s nothing that can really mitigate that, but it was definitely easier having the support I got from the University.”
Today, Upstream Technologies has customers in 22 states, Puerto Rico, and Canada and is doubling sales every year. It employs two people, and Schwidder is hiring two more.
The University provides rich support to entrepreneurs, both to innovators from within its walls and business enthusiasts statewide. Its two main outlets are OTC and the Minnesota Cup, a competition for new ventures. Both have played major roles in helping take research from the laboratory and classroom to the world while simultaneously securing revenue for the University, boosting the Minnesota economy, and creating jobs.
In fiscal year 2014, the University helped start 15 companies, up from 14 the previous year. As the University incubates a company, the OTC and its Venture Center line up a management team, license the University’s technology to the new company, and help its leaders obtain capital. Deploying this commercialization system led to a marked improvement from the early 2000s, when the University would spin out about two companies a year.
What changed? Everything. “There really wasn’t a process before,” says Justin Porter, '11 MBA, senior associate in the Venture Center. “Though the University had spun out companies here and there, they hadn’t spun out many, and the ones they spun out had a pretty short life.” With the formation of the Venture Center in 2006, the U enlisted the right business people and the investment community.
Jay Schrankler led the transformation, joining the University in 2006 after nearly 30 years at Honeywell. His business sensibility helped refocus staff expertise away from research and toward industry. That meant breaking the OTC into five groups: agriculture and horticulture, engineering and physical sciences, life sciences, software and information technology, and new ventures. The office added strategy and marketing specialists for each area, experts in finance and contracts, and a business advisory group whose members offer guidance on the incubating companies.
The University has enjoyed a steady increase in start-ups since then, totaling 73, including five companies in the first three months of fiscal year 2015. In 2013, it earned $39.5 million in royalties paid by companies that licensed technology developed at the U. The new companies also attracted $109.5 million in investment capital. “We’ve continued to raise the bar each year for the last five years,” says Porter.
Kai Kroll spun out Minneapolis-based Meso-Flow from the University this spring. It is both a product of the OTC and the Minnesota Cup, which named Meso-Flow the 2013 Life Science and Health IT runner-up. A 20-year medical device entrepreneur, Kroll joined forces with Allison Hubel, a professor of mechanical engineering, who developed a more effective way to clean thawed blood and stem cells for use in people.
First, Hubel fine-tuned her medical device—a simple, disposable channel that uses microfluidics to clean cryopreserved blood faster, more cheaply, and better. CEO Kroll was keen to help Hubel commercialize Meso-Flow because it’s a promising device with a short route through FDA regulations to sales.
Kroll, who is now seeking investors, says the University has helped him launch Meso-Flow in many ways. “It’s been very, very positive—the people involved with the licensing process, the ongoing relationships, the networking,” says Kroll, who is eager to apply for funding through the OTC’s new Discovery Capital Investment Program, which provides up to $350,000 in equity financing to start-ups.
Meso-Flow got another boost from the Minnesota Cup. The competition motivated Kroll to quickly complete the company’s business plan and presentation. “It forced us to focus on the things that matter and develop material that would have been delayed otherwise,” he adds. “That was a real value.”
By Suzy Frisch
This story was originally published in the winter 2015 issue of Minnesota Magazine as part of a feature on how the University helps foodies, techies, and imagineers of all sorts turn bright ideas into successful businesses