On Not Crossing Donner Pass

Turn anywhere in university technology transfer and you will find the “Valley of Death.” This Valley of Death, goes the argument, is the reason why it is so difficult to license patents to industry to create commercial products. There’s just not enough money (in the rhetoric, money = water, apparently, though in the Psalm, the valley is of the “shadow of death,” at least in the old King James translation, and one is accompanied by the Shepherd, who keeps one safe from evil).

There are numerous depictions of the Valley of Death. Here is an ugly simple one:

There is absolutely no data to back the graph of the line. Here is a more sophisticated one, but just as devoid of data.

Cash flow 'Valley of Death' diagram. The cash flow 'Valley of Death' as...


the Valley of Death PRE-SEED

And even from the National Academies Press:

1 Introduction | An Assessment of the SBIR Program | The National Academies Press

A 2009 dissertation on the “rhetoric” of this “valley of death” calls it a “metaphor” but then assumes that somewhere in the world there is this actual condition, where wonderful inventions die for mere lack of funding. But metaphors do not have to refer to anything in the actual world. I can create a metaphor for a cowardly lion–in fact, the T Rex in Toy Story is just such a metaphor.

Now, with the Valley of Death, it appears that indeed, the condition does exist. It’s just that all these emblems of it make it appear that the condition exists independent of any given invention or technology, and independent of any administrative choice with regard to management of any invention or technology. As rhetoric, the Valley of Death is an assertion made that hides the condition of the technology, its circumstances, and the managerial decisions made with regard to the technology. It is a Mask of Death, not a Valley.

Further, the emblem–showing a technology moving from research funding to little or no funding to major funding–is entirely fictitious. Virtually nothing passes through the Valley. Things go there to die. The decision to enter the Valley is made by managers, not by technologies themselves. Someone forces the technology into the Valley. Otherwise, it would die, if it were to die, before it ever entered the Valley. It is the rare thing that leaves the Valley, and for those rare things, it is the case that there never was a Valley. The technology received funding without difficulty and became successfully developed and used. For such things–maybe one in a thousand–the Valley emblem simply doesn’t apply. It was a Mountain of Interest, got climbed, and then the technology took flight. If folks applied this metaphor instead, they would draw pictures of mountains and set themselves challenges, rather than blaming the government for not providing more money for the bizarre route they have willfully chosen to take.

I wonder how the analysis would change if the construction “Valley of Death” was replaced with “Donner Pass.” In my experience in university technology transfer, “valley of death” arises because a technology owner foolishly attempts to force an invention into a mass market ready form in the hopes that doing so will entice a major company to adopt it and pay royalties. University licensing officers who talk the Valley of Death are the ones who create the Valley of Death. They are, in fact, the Valley of Death. They are the shepherds that lead their flocks into the valley to die. Over and over, year after year.

In practice, this effort to attract a commercial licensee failed repeatedly and often, so universities moved to enticing speculative investors in funding the forced development on the premise that the speculative investors might be better at selling entire companies to the target big companies. In biotech and software, this strategy has worked somewhat better–though still rare. But worse, often the company is acquired for something other than the in-licensed inventions. In one case I know of, Amazon bought a small software firm in the cell phone area strictly for the engineering talent. Dumped their software technology in the trash. About half the university-affiliated software startups I was around ended up developing something other than what they licensed as they started.

The invention owner might make a profit on the equity value of the startup at acquisition, but almost never on an earned royalty from sale of product based on the in-licensed technology. The in-licensed technology doesn’t cross the Valley of Death–it gets consumed so that something else can become valuable, something that has a different origin and apparently is not affected by the Valley of Death syndrome. Thus, the Valley of Death emblem lies in another way–the technology going in is often not the technology coming out. The source technology gets abandoned, not developed. The line breaks. A new line starts. But no Valley of Death emblem shows that.

For a federal government effort to promote widespread use of an invented technology, this outcome is horrible–the invented technology does not get used, gets tied up as failed IP so it can’t be used for any other purpose for two decades, and the technology owners make money (when they rarely do) from this changed situation–the company does well by abandoning development of the licensed technology–not from achieving the original, publicly supported goal.

For all that, universities have found that even getting speculative investors involved is difficult, so they have turned to diverting state economic development funds to startup investments. The universities create paper company startups, and these companies obtain seed money from the state, along with perhaps an SBIR grant, and burn through the money, and then are reabsorbed back into university research operations. The effect, generally, appears to be one in which universities prevent economic development funds from reaching private sector small company/entrepreneur efforts but do so in a way that makes it appear, in terms of economic metrics, to be a source of company startups, innovation, and the like.

It’s sort of like “if you build it, you can fool everyone into thinking that they will come.” But really, it’s more Donner Pass in winter–forcing something through when it is the wrong time, the wrong objective, the wrong path–and so, universities end up eating their own opportunities and vitality. But they call it the Valley of Death with the implication that the problem is under-investment and “market failure” by foolish business people in otherwise successful companies. The problem is rather more often a foolish, impulsive mindset about how new things come about held by university administrators and their favored advisors.

When you see a Valley of Death emblem, you can be sure that the folks behind it are the leaders of another Donner Party in winter, trying to get to the promised land and willing to eat their own technology dead to get there–or at least to keep their own jobs going, so they can attract even more technology to die in their possession.

If universities presented the problem as “Donner Pass in Winter,” the discussion would not be how to push on in the snow but rather how to avoid the pass altogether. That discussion might start with the prospect that the university should not take ownership of every invention, and for those inventions a university does agree to own, that the default effort should not be mass commercialization but rather supporting early adoption and even competitive development. Until then, happy munching on those frozen technology remains!

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