University Spin Game

Success is rare and slow for spinoff companies, but the potential rewards - visibility and income - keep schools playing.

A decade ago, University of Florida professor Jamie Grooms and partner Richard Allen formed Regeneration Technologies, licensing Grooms’ UF research on bone tissue grafts as a mechanism to help patients regenerate their own natural tissue. As typically occurs when a university spins off a company, the school receives ongoing royalties and, in UF’s case, got an equity stake in the firm in exchange for allowing the company to use the technology. Since the company went into business, the university has reaped $70 million from RTI, including $25 million of the $75 million the company raised in its initial public offering in 2000.

That level of success is rare, however. Profitability figures aren’t available for the 133 companies spun off by Florida universities between 2000 and 2006, but university officials estimate that at least 20% of the firms are no longer operating.

The biggest issue aside from the inherent value of the research? David L. Day, director of the Office of Technology Licensing for UF, says the companies need what he calls “serial entrepreneurs” to lead them, and the research professors who developed the technology and initially run the company need to be willing to accept roles as part-time consultants. “Management is the choke point,” says Day, whose school spins off 10 to 12 companies a year.

Currently, UF, Florida State University, the University of South Florida and the University of Central Florida are the most active in the spinoff game, collectively generating some 20-plus spinoffs each year for the past five. Tom O’Neal, associate vice president for research and commercialization at UCF, says more of his school’s faculty have become interested in commercializing their technological and scientific research. Spinoffs, he says, are “where more real wealth is created.”