what we don’t invest in. So, better to let a level playing field for anybody who wants to play.
X: The big university venture fund announced in recent months is the University of California system’s $250 million fund. What are your thoughts on that effort?
LN: The more money the better, but whether they’re going to pay off is another story. Maybe when you’re as big as the University of California, you’re not limiting your deal flow to one place. I don’t know.
The more money the better, it’s just that we haven’t needed it. We don’t have a lot of trouble getting decent companies funded. If people get their act together and the science is good, it gets funded.
X: Has an MIT venture fund been considered?
LN: In one way or another, this office has been offered investment funds consistently, maybe once every couple of years. We keep saying, “No, we don’t need it, and we don’t want to get into the conflicts [of interest].”
Whether MIT corporately decides someday that this is a good thing to do, fine. But one thing any institution doing it has to decide is, are we primarily in it for return on investment? Or are we primarily in it for getting companies started that wouldn’t otherwise get started? You usually get a mixed message if you ask people which it is. And as everybody knows, when you get mixed missions, things get very hard to manage.
Certainly one consideration early from the “well, we could make money, why not put a piece of the endowment into a venture fund?”—because the money has to come from somewhere. The money managers say, “Why would we put our money into a single fund when we can take a piece of the endowment that, in terms of portfolio management, would be in higher-risk, higher-return ventures, and pick the best venture funds in the world and invest a little in each of them so we’re not constricting ourselves on deal flow.” [That’s the consideration] if it was just about the money.
If it’s just about getting things going that wouldn’t otherwise go, well then the fund has to be managed differently.
X: What do you mean?
LN: Well, the fund managers [in that scenario] shouldn’t just be looking at what’s going to make the most money. But instead, this is a very worthy project with very good science behind it, and it deserves to be helped to be launched into a company that will bring the product to the public, to the market, whether it be for economic development or a new vaccine or the good that we think we’re supposed to be doing.
X: How well do the entrepreneurship initiatives and support organizations on MIT’s campus work together? Do they sort of operate their own fiefdoms?
LN: No, just the reverse. We’re all friends. Occasionally there will be a rivalry, but when that starts we say, “Hey, wait, wait, wait—we’re all in this together.” It’s just personalities. Nobody’s doing it to get rich and famous. A lot of this stuff is being done by volunteers or people who are doing it to give back.
It seems to work. I think if it were ever organized, it wouldn’t work as well because then it would be a corporate structure and you’re essentially being told what to do, as opposed to you invent what to do. The latter has been very successful.
X: How has the tech transfer model changed, more broadly?
LN: It’s already changing with an emphasis on entrepreneurship. The tech transfer offices have recognized that except for a few pharmaceuticals—and very few of those, that have been brought along by hospital funds to the point where the big pharma wants it—on the whole what comes out patented from university research is too risky and too early for knocking on the door of established companies.
So the universities have to start figuring out how do I ripen the technology to the point where it enters the big company stream of commerce. It’s been hard for most of the time I’ve been here, but it’s getting worse simply because the emphasis on short-term earnings makes it harder and harder for a company to invest long-range in something that’s risky. They want less risk and shorter time frame to market.
The way we to date have chosen is the startup; they ripen the technology and then go knocking on the door of corporate partners.
So various other universities—not yet us, except in the tiny, tiny sliver of the Deshpande Center—are investing funds to try to do the very late-stage research or even early product development inside accelerators of various types. The problem with accelerators is the definition has become as broad and varied as incubators, which range from science parks to little projects within universities, so you don’t know what the word means until you dig in. But some of them are putting money into product development. Some of them are venture funds expecting ROI. Some of them are [funded] through donations, as we did with Deshpande and Harvard did with their accelerator.
It’s going to be interesting to look at the mechanisms that people are trying. Because the problem is there: How do we get from the stage of which the university has done its research and maybe even gotten on the cover of Science magazine, to where somebody is going to invest in that ripening process before it actually turns into true product development, short-term product development? How do you get from the petri dish to full-scale clinical trials? You’ve got to get pretty far along before pharma’s going to do that for you.
So people are looking both within universities and outside of universities as to how you fill the gap.
X: How much equity does the Technology Licensing Office usually take when it spins out a company?
LN: Usually in the lower single digits, maybe a little higher if you have a software spinout. And it’s common shares.
If it’s research-intensive stuff—biotech, things that take multiple rounds of funding—[our stake] usually gets demoted down to [tiny] portions. You make a little money; you don’t make a lot. Except in cases when the Wall Street bubble is totally irrational.
Even nationwide, you can show that tech transfer is, at best, a lottery if you want to make an ability to influence [a university’s financial position]. The primary winners—not 100 percent of them, but damn close—are
