In 2014, Research Enterprise ran a series of articles on the fake startup metrics at the University of Washington:
UW claimed that it had started 17 companies in its fiscal year 2013, when of the companies listed only 4 were actually started in FY2013 or were UW startups. The others weren’t. It was fake information intended to win public favor, more funding for UW’s patent licensing program, and more funding from the state for UW “economic development.” That is, since the state was prepared to hand out funds to support economic development, UW positioned itself to compete for attention–why not have the state fund itself rather than support companies in the state in their efforts to develop new products? And why bother to compete fairly for state funding when there is no bad consequences for cheating?
Of the companies listed in UW’s claims for FY2013 only IDGenomics was a “real” startup, at that. The other three companies that actually started in FY2013 were rather, let’s say, virtual. One was a joint venture to provide web access to data with Insilicos, a company formed in 2003. Insilicos appears to still be around (two employees) but the joint venture appears to have disappeared. Another was a repackaging of medical management software UW had been distributing directly for a number of years. While a Google search for “Patientstream” and “University of Washington” turns up plenty of UW-focused press articles on “starting” the company, there’s nothing there now. A link to what once was the company’s website turns up a nice site in Chinese with pictures of puppies. No one seems to care about the half million in UW investment (via the UW-controlled W Fund, which also managed $2M of UW money–how that is legal eludes me) in the company. A third “startup” involved a card game dealing with cyber security, now called “Control-Alt-Hack” and available from a game distribution company. No mention of the startup in the “About” tab.
Thus, of the companies claimed by UW as startups in FY2013, really only one was a startup in FY2013–IDGenomics. UW was pretty lame at counting, for all that. The next year, for FY2014, UW claimed 18 more startups. It’s just that only one of those companies was actually a startup for FY2014. To bungle it all up, 8 of the companies UW reports were started in FY2014 were actually started in FY2013–but they weren’t reported for FY2013, for some reason. That flips FY2013 from 1 company to 9. That’s better than 1, of course, and still only about half of the 17 originally claimed. Of course, here near the close of FY2017, no one apparently cares at all about UW’s fake metrics from 2013 and 2014, nor about the $100M or so over six years that UW threw at starting companies (and mostly threw away) but made a big deal about how wonderful UW was at starting companies. It’s rather astonishing that $100M can disappear like that and no one cares. Well, we care–but until an auditor or attorney general or state senator or university president or governor or chair of the faculty senate cares, really, caring doesn’t even exist.
But of these 9 companies, not reported as FY2013 startups but then 8 of them fake-reported as FY2014 startups, there’s some interesting things happening. Let’s start with the fact that they all appear to still be around and active. That’s something!
Let’s take a look at each of these companies–now not startups, really–and consider what sort of company life each is leading.
- AnswerDash (November 2012)
Here’s the AnswerDash web site. AnswerDash provides software to manage context-sensitive help on web sites. It bases its pricing on how many answers it pushes to users. Thus, the poorer (or more complicated) the web site, the more problems it will have, and the more answers get pushed, and presumably, the fewer issues that live help behind the web site has to respond to. Here’s a snapshot of the competition.
AnswerDash has received $8.3m in investment, according to Crunchbase, including W Fund and WRF Capital in seed and series A rounds. That’s the most investment funding of all 9 companies in the 2013 cohort. Pitchbook has them with 11-50 employees. Owler lists them with 25 employees and estimated revenues “less than $1M.”
My take: AnswerDash has really interesting technology, but doesn’t have a clear revenue model. The company appears to be surviving on its investment subsidy, not sales revenues. 25 employees require $2M or so net. I’d expect Answerdash to be acquired as an investor exit. The technology is still good, but the company packaging will disappear.
- Applied Dexterity (December 2012)
Here’s the web site. Applied Dexterity was formed to manage a system for robotic assisted surgery. According to Applied Dexterity’s web site, the initial work was done 2002-07 at UW, then under a partnership with UC Santa Cruz, 2010-11. The Raven hardware has been sold to four research sites, gotten a lot of press, done one surgery on an animal “model,” and there are still devices available. The software has been released open source. The Applied Dexterity web site lists 18 university and research sites that have Raven technology in some form. Here’s an article describing some of the competing research teams.
According to Crunchbase, Applied Dexterity has 1-10 employees. Pitchbook lists its business address as UW’s business “incubator” in Fluke Hall, but also confusingly as Hansee Hall, a dormitory on the UW campus.
My take: really interesting technology. I like the open source. I could see a device like this operating remotely for surgeries in remote locations such as during the Antarctica winter, or perhaps even on a moon base. But there must be plenty still to work out. But where’s the investment capital? Where’s the SBIR/STTR grants to the company? While UW is not as well known as, say, CMU, for robotics, it still has had a top notch program of research. This seems like a wasted opportunity that’s got a company on paper but has made its way on the strength of federal funding to the university. (fwiw, I left UW in 2002, and UCSC in 2008–missed all the fun with Applied Dexterity).
- BluHaptics (January 2013)
BluHaptics is a telerobotics company. In March 2017 GeekWire reported that BluHaptics had raised $1.3m from Seattle Angel Fund (a not for profit) and Alliance of Angels “to launch its first commercial product this summer.” In April 2016, BluHaptics received a $747K SBIR Phase II from the NSF for an underwater piloting system. The PI on the award is Fredrik Ryden, who is also an affiliate professor at UW, formerly a graduate student there.
My take: Seattle Angel Fund is all-in on BluHaptics (since its investment represents a major chunk of the funds it has raised to invest). BluHaptics has operated on federal grants since its formation–NASA and NSF SBIR funding especially. The challenge will be to make a transition from federal funding to product sales. Even with not-for-profit angel funds, it appears that BluHaptics needs an order of magnitude more funding to get off the ground–or a big paying customer (like the US government).
- MarqMetrix (November 2012)
MarqMetrix has developed an “immersion optic with a unique sapphire lens [that] enables the user to acquire Raman samples.” The company also makes other optical sensors and wireless sensing platforms. The original patents were filed in 2002 and 2004 by UW, issuing in 2004 and 2005. By the time the company formed, the patents were a decade old. According to the Seattle Times, Brian Marquart is CEO and also the director of the Center for Process Analysis and Control at the UW’s Applied Physics Lab. MarqMetrix made a deal in 2016 to supply a ball probe for Metrohm’s Raman spectrometer.
According to Manta, the company has about 12 employees and annual revenue of $2.8m. The company received an NSF SBIR Phase I grant for $150K in January 2015. The PI for the grant, Charles Branham lists work at both UW’s APL and Marqmetrix for January 2015 to April 2015, so it appears he split time between APL and the company.
Competitors in the area of Raman immersion probes include Ocean Optics, Kaiser Optical Systems, Horiba Scientific, ThunderOptics, and InPhotonics. According to an article at SPIE’s optics.org web site, the Raman market is expected to grow 10% a year, going from a $1.1B to a $1.8B market by 2021. That means there’s hope–but it also means that the companies that grow with the market will dominate the new business. Life sciences represents the biggest Raman market but the biggest growth potential is in semiconductors.
My take: It’s odd that there’s so little information about the company. But given that the APL is a defense classified shop, perhaps the company follows in a similar path. This would appear to be a bona fide success story–a company formed by an inventor to get his idea into a commercial form.
The UW administrative role, however, isn’t so clear. Yes, the company did spin out of UW, but really it spun out of ideas that Brian Marquart had that UW didn’t do anything with (apparently) for a decade. UW claimed ownership of the inventions, filed patents applications, and sat on the issued patents. Then UW licensed the inventions back the inventor’s company so he could go do something. On the one hand, UW did pay for the patent work early on, when there wasn’t apparently any external interest. No doubt the company has now paid UW for that patent work (a typical provision in exclusive licenses) and then some.
The second UW role is the interesting one–creating an environment in which a UW scientist can also start a company and be involved in UW research and the company in parallel. That’s worth something. But we might ask if that environment would have been even sweeter if UW had followed its patent policy and re-assigned the inventions (and patents) to the inventor after, say, only five years of not licensing to anyone. No license agreement necessary, eat the patenting costs as a sunk cost for not licensing in eight years (about three years patent pending plus five years after issue). So what sort of help was UW’s startup effort? Perhaps the most important thing was making it possible for UW researchers to run companies and also run their UW labs and research projects. That’s a conflict of interest thing, not a new venture dynamics thing–holding back the arguments that UW (state) personnel shouldn’t be involved in commerce related to their UW work beyond consulting.
- Oricula Therapeutics (January 2013)
Oricula aims to prevent “hearing loss in patients undergoing treatment for serious infections.” Here’s the UW blurb about them. Despite UW’s claim, Oricula was started in Jan 2013, not in 2014. Perhaps UW has a special meaning for “launched.” Oricula doesn’t have a product yet, but they are working on it. The UW research was funded by the NIH and Oricula has exclusively licensed the patent rights. The company has been funded by State of Washington Life Science Discovery grants and NIH grants ($169K in 2014; $946K in 2016; $1.1M in 2017). Graham Johnson, listed along with the CEO as a PI on the NIH grants, is the CEO of iCura Vision and President of NuPharmAdvise and is based in the New York area, according to LinkedIn. (A 2016 US patent issued jointly to Oricula, UW, and Fred Hutchinson Cancer Research Center lists his city as Sanbornton, NH). Five of the nine people listed under “Our Team” hold faculty appointments at UW. It appears that Oricula has existed solely on grants. According to Crunchbase, Oricula has 1-10 employees.
Owler lists nine competitors to Auris Medical in the area of treating hearing loss, with Oricula ranked third. But all the companies in the list but one have more annual revenue than Oricula.
My take: Oricula is a company that fronts UW research. It appears to be a virtual company, with a CEO retired from a successful startup, a second PI living on the east coast and involved as a principal in two other companies. Here’s a street view of the company address listed with Crunchbase, a house fronting Lake Washington. The NIH-sponsored research may involve a subcontract back to UW and/or FHCRC. For all that UW has a press release about Oricula obtaining an NIH grant. Why would that be unless UW considers Oricula to be, essentially, an extension of UW research activity? I would expect that Oricula takes its research work to an FDA IND finding, and at that point sells its IP assets. The company package would then disappear.
- Polydrop (April 2013)
Polydrop makes conductive polymer additives. The company started with a $10,000 prize at a UW region-wide “Environment Innovation Challenge” business plan competition. As the Polydrop web site explains, “Initially, PolyDrop was just a product, but in 2013, the development team branded both the product and the company as PolyDrop.” That’s the basic pattern for a student-led company formed by a university. Polydrop has an exclusive license to a UW patent–perhaps this one, which issued in April 2017. Competitors include Novatic, Vampire Optical Coatings, and United Static Control Products. The market for static control coatings appears to be growing–over $5B now.
In 2014, Polydrop received a Phase I NSF SBIR grant ($225K). In 2016, Polydrop received a Phase II NSF SBIR grant for $830K. Also in 2016, PolyDrop received a State of Washington Department of Commerce “matching grant” to purchase equipment–perhaps matching the NSF SBIR work.
The address listed with the NSF for the Phase II SBIR appears to be a private residence. Here’s the street view. The company has a “research facility” in Bellevue, WA. Both Buzzfile and Manta give the employee count as 1. Perhaps that has changed with the NSF SBIR award–or perhaps Polydrop is subcontracting the work back to UW.
My take: Polydrop is funded by SBIR awards. It appears to be a research extension of the UW, fronted by a UW graduate and holding an exclusive license to a UW-owned invention. The basic story is a neat one–students win various business plan competitions and then set to work getting grant money to “commercialize” the invention. According to their pitch, the technology they had in 2014 “requires no additional equipment or capital investment for the production line.” And yet here we are three years later and still in a Phase II SBIR. I expect if there’s something useful, Boeing will acquire it, as it has other inventions by the UW inventors behind the work. If that happens, expect a renegotiation of the exclusive license from UW to Polydrop.
There are three paths going here. First, there’s the discovery at UW–that takes the form of technology. Published, anyone could use that discovery if they chose, for research, for DIY work, for products. There’s no competition, just an effort to inform and perhaps to instruct. Second, there’s the idea of a product form for the technology–applying the technology for a specific purpose. That’s where licensing comes in–building the product at UW and licensing it and rights to one or more companies to manufacture. Both non-exclusive licensing (to control quality and safety) and exclusive licensing (to shift the cost of development to a single player/payer) are classic licensing approaches. Third, there’s the idea of a startup. This is a variation on the second approach, but where there’s no companies interested in making the product themselves. The startup, if it takes an exclusive license, then becomes a competitor to any other company in the market, and the university by extension becomes interested in that competition for financial and reputational reasons.
As we move through these pathways from publication/assistance to licensing/exclusive licensing to startup with exclusive licensing, we push the university into deeper competitive positions with regard to the broader community that the university might otherwise be expected to serve. As licenses move from non-exclusive to exclusive, the university creates the conditions in which companies become bona fide competitors, the university’s patent positions become barriers if not threats, and there’s a great incentive to undermine or circumvent or render obsolete the technology developed at the university. This “great incentive” runs against almost everything championed about technology transfer, university research, and public service.
- Stasys Medical Corp (Nov 2012)
Stasys is developing a device that tests blood for clotting. They received an SBIR Phase I NSF grant in 2014 ($150K) and a Phase II in 2015 ($510K). The PI on the grants is Ari Karchin, who was a “commercialization fellow” at UW (2012-13) and then a post-doc (2013-15)–overlapping with the Phase I SBIR. UW has filed at least five patent applications, with two of these issuing as US patents. The applications all cite federal funding. (One grant cited, a training grant, should not have been cited–another instance of over-claiming subject inventions; a second NIH grant cited lists a grant number that’s not in the NIH database; and a third grant from DARPA that appears to be a young faculty investigator award). Stasys also has a $599K grant from the State of Washington Life Sciences Discovery Grant program.
The investor listing for Stasys Medical indicates that the company exists on grant and government funding:
Pitchbook reports that an “early stage VC Series B” investment round of $6M was cancelled in 2015. According to Owler, Stasys has 43 employees and estimated annual revenue of $2.7M. It’s not clear, however, what the source of that revenue is, as Stasys doesn’t appear to have any products for sale. According to Stasys’s web site, the company is headquartered on the UW campus.
My take: This company has been adept at obtaining funding for research and development through the UW. As with other companies started in 2013, it appears that Staysis repackages UW research in company form, gaining access to state funding, to foundation funding, and to semi-private investment via the Washington Research Foundation and the W Fund, a proxy fund that the WRF set up and UW has invested in. It’s not clear whether Stays has nearly enough money raised to create a viable commercial product. Pitchbook back in 2013 reported average money raised prior to acquisition was $11M, for buyouts, nearly $20M, and for IPO, over $76M. Staysis has a ways to go. So far, it has not even gotten off the UW campus. It would be great to see it develop its products, but for that to happen the company needs to raise 10x what it has raised so far. If, by contrast, it doesn’t get profitable product on the market, then there’s a few millions in state and federal money that will have been lost. The difference between those funds and the funds of private investors, however, is that private investors, in general, pay attention when their money is put at risk.
- Universal Cells (January 2013)
Universal Cells is working on “nuclease-free genome editing technologies.” The idea is to create stem cells that are “universally compatible,” according to Bioinformant. The company has $300K in seed funding (source not identified), and a Phase II SBIR from the NIH ($793K in 2015), with Claudia Mitchell as PI. (Oddly, the grant does not show up readily in the NIH grants database). In 2014, Universal Cells announced that they had “secure[d] laboratory space at the Institute for Stem Cell and Regenerative Medicine at the University of Washington.” Currently the company has an address in downtown Seattle. The company has an exclusive license to UW patent(s), including perhaps this one, or this one, or this one. The patents recite federal funding. More patent applications may be pending, but none have been published listing Universal Cells as the assignee.
The company has no products on the market but has entered into at least two collaboration agreements, one with Healios.
My take: This is neat stuff, from top biotech researchers at UW. The company is funded through federal grants on the UW side as well as via SBIR on the company side. According to the story in Bioinformant, there’s also some income from the research collaboration deals. This is expensive stuff, and one might expect venture investment of north of $50M to get anywhere–even to an exit. For instance, Seattle startup Nohla Therapeutics, also in “universal donor cell therapy” developed at Fred Hutch, raised $43.5M in 2016. Total financing at that time for the company was $64.6M. Compare that with Universal Cells, poking along on subsistence grants from the federal government. There’s not much comparison–and that’s a big disappointment.
- Medical Models (April 2013)
Medical Models makes medical models using Segvue, 3d printing software developed at UW (though there doesn’t appear to be any easy way to find Segvue on the web). Its company space appears to be Michael Fassbind’s garage. So it is truly a garage startup. The basic business is to create custom 3d printed objects for the medical industry. There doesn’t appear to be any investment financing for the company, no SBIRs, no state grants or seed funds from anonymous sources. This company appears to make its way by providing expert services for good value–that is, it has made money from the get-go. That’s rather interesting, in the context of the other companies in this cohort from FY2013.
My take: This is a company that provides a niche service. It won’t be of interest to the investment community. It’s hardly a UW spin out–it’s a guy who took a license (non-exclusively) to some UW software. There are hundreds of such companies around that have licensed UW software in some fashion. The company uses the software and does not appear to be trying to make the software into a commercial product for re-sale. I don’t expect the company to be acquired or go public. But there’s this sense that Fassbind will nose his way into an interesting 3d print biomedical project that will produce something that will become a product. Maybe Medical Models will stay a services organization–but it may be a platform for developing other things that will become useful products. The thing here is–those products may be not that far away. Adjacent possibles. Low cost to develop, potentially large markets. This may be the company with the nose for the most profitable and beneficial technologies waiting to be identified of the whole bunch. But Medical Models doesn’t have the pizzazz or the sunk investments or the neat credentialing of the other companies in the FY2013 cohort.
Part 2 of this article is here.