SkyDeck, UC Berkeley’s start-up accelerator program, is housed on the top floor of the tallest building in downtown Berkeley. All four walls of the 10,000 square-foot penthouse have floor-to-ceiling windows, offering up a 360-degree view. This is where Cal’s fledgling entrepreneurs come for free office space and guidance while preparing to launch their product or service. They have six months to a year up here with SkyDeck, and then it’s time to jump out of the nest.
Look to the east, through those windows, at the Cal campus. For generations, the world’s top public research university has been know for its tough academic standards and its idealistic youth. But Cal, which has watched its share of state funding shrink over the years, is looking to SkyDeck as perhaps one way to help survive intact into the future.
Look to the west at San Francisco, where over the past several years, venture capital firms have moved up from the Peninsula to the city and surrounding area. Even the system-wide University of California, headquartered in Oakland, recently created a venture fund. Start-ups, accelerators, and incubators are rising throughout the area, creating a powerful hub of entrepreneurial activity.
Right here, between the Cal campus on one side, and a world full of possibilities on the other, lies SkyDeck. An accelerator—unlike an incubator, which aids in the development of an idea—supports an idea already hatched and the team formed around it. At least one member of the team must have a tie to Berkeley, either as a student, alumnus, or faculty. After the group applies and is admitted, SkyDeck gives it free office space and provides mentoring on all aspects of bringing a product or service to market. That might include help with understanding legal restrictions, filing paperwork, learning how to get funding, being introduced to the right people, or getting pointers on crafting the perfect elevator pitch.
Sitting in the SkyDeck boardroom, Austin McGee leans forward and says, “By the year 2050 we are going to need to feed nine billion people, so we really have to figure out and implement the best, most precise way to grow food.” At the same time, Andrew Scheuermann, another of the three co-founders of the SkyDeck start-up WellDone Technology, is searching through his smartphone to find a graphic that easily explains the concept behind “the Internet of Things.”
“Here it is,” he says, and shows me a chart describing how computers have gone from taking up whole rooms, to being on a desktop, to fitting into a person’s pocket, and now, little computers are all over the place, on all sorts of things. For example, farmers put these small computers with sensors throughout their fields to gather data on sunlight, moisture, water flow, temperature, etc., so that appropriate action can be taken, such as putting just the right amount of water at just the right time in a given location.
There are myriad uses for these computers, but the WellDone team found that companies wanting to adapt one to its own needs had to rebuild it. The three young entrepreneurs saw no reason why all these companies had to reinvent the wheel, so they came up with their modular hardware service. They have streamlined a way to mix and match the needed components to quickly and inexpensively adapt them to specific uses. For now, they are focusing on agriculture.
All three members of the WellDone team, McGee, Scheuermann and Tim Burke, were recently named to the 2016 Forbes “30 Under 30” lists. Forbes describes their annual compilation as “the brightest young entrepreneurs, breakout talents and change agents in 20 different sectors.”
Between 2010 and 2012, start-ups associated with Cal spiked dramatically—642 new companies were founded.
So far, SkyDeck has had 10 members named to the lists—not too shabby considering the accelerator was formed in 2012.
In fact, it’s only been in the past five years that UC Berkeley invested in its entrepreneurial ecosystem in earnest. Between 2010 and 2012, start-ups associated with Cal spiked dramatically—642 new companies were founded, which was 77 percent as many as were founded over the entire preceding decade.
Caroline Winnett, SkyDeck executive director, received her MBA from Cal in 1990, and back then, “working at a start-up, being an entrepreneur, was stigmatized,” she says. Most people majoring in business wanted to go on and work for large companies. “Things are much different these days.” After graduating, Winnett was an entrepreneur and then an angel investor. She was in the process of starting her own accelerator when she heard about SkyDeck and “knew right away this was the right place for me.”
She came back to a much different campus than she had left some 20 years before. These days, Cal is a hive of entrepreneurial activity. There’s an endless array of grants and expos and competitions. The College of Engineering recently unveiled Jacobs Hall, a nearly $25 million mecca for makers and tinkerers. Students can take classes or simply go to the hall and play with the 3D printers, saws, laser cutters and other tools. The university is also home to the CITRIS Foundry incubator for start-ups, the biotech incubator QB3 Garage, and the QB3 East Bay Innovation Center, among others. There’s also the Berkeley-Haas Entrepreneurship Program and the Lester Center for Entrepreneurship. The list goes on.
SkyDeck was formed as a joint venture between the College of Engineering, Haas School of Business and the Office of the Vice Chancellor for Research. It also partners with groups across campus, the business and venture community, other University of California campuses, the Lawrence Berkeley National Lab, the City of Berkeley, and others to coordinate efforts for the school’s emerging entrepreneurs.
The annual $1.4 million annual budget for SkyDeck is covered by the university for now, but the goal is for it to become financially self-sufficient within three years. The program takes no equity nor does it charge fees. Although it’s common practice for private accelerators to take equity in exchange for services, many university-affiliated ones do not. Plans are to create a venture fund, at which point SkyDeck will take equity through investment.
Fifty teams have gone through SkyDeck, and there are 17 enrolled currently. A number of success stories have already come out of the accelerator. For example, Ensighta Security, which joined SkyDeck the first year it opened, was later acquired by the cybersecurity firm FireEye. Last year, Eko Devices, which makes digital stethoscope attachments to help doctors better analyze heart conditions, received $2.8 million in its funding round and, soon afterward, FDA approval. The company is now located in Berkeley, not far from the SkyDeck office.
Forbes lists Cal as the third best American university for entrepreneurs after Stanford and MIT, and PitchBook, a leading research firm for private equity and venture capital, ranks Berkeley as the second most successful entrepreneurial school in the world after Stanford.
“Our vast, dynamic ecosystem is among the best on the planet,” says Michael Cohen, a director in Berkeley’s Intellectual Property & Industry Research Alliances Office. “Accordingly, our ecosystem attracts top students, faculty, entrepreneurs, investors, and mature companies. That combination contributes to UC Berkeley in many ways that bolster the financial operations of Cal.”
Cohen, who was involved in creating SkyDeck, said the primary goal in launching the accelerator was to create “awesome experiential learning for Cal students.” Making money for Berkeley, he says, was a secondary factor. But it’s Cohen’s opinion that in 2016, people are looking for many ways to put more money in Berkeley’s coffers including by leveraging the university’s incubators and accelerators such as SkyDeck.
Berkeley has seen its percentage of state funding drop dramatically. Last month, in a message to Berkeley students, faculty and staff, Chancellor Nicholas Dirks said the university is facing a $150-million budget deficit, which is about 6 percent of its annual operating budget. If no changes are made, that shortfall is likely to continue and it could transform the institution. “What we are engaged in here is a fundamental defense of the concept of the public university,” Dirks said, “a concept that we must reinvent in order to preserve.”
Every now and then, a patent is a blockbuster: in 2011, Berkeley received millions in licensing fees from a cancer drug that treats melanoma.
Like many universities throughout the country, Berkeley is looking to its intellectual property as a source of revenue. It’s a national trend, and patents play a large role. A recent survey by the Association of University Technology Managers of almost 200 schools, showed an 11 percent increase (to 6,363) in the number of patents issued in 2014 over the year before.
Many schools have opened offices tasked with getting patents for the university-based research and then licensing them out to companies. Every now and then, a patent is a blockbuster. For instance, in 2011, Berkeley received millions in licensing fees from a cancer drug that treats melanoma. (The specific amount is confidential.)
And while a study from Brookings Institution shows that the great majority of licensing deals yield little or no money, a recent fight between Berkeley and MIT over CRISPR-CAS9 demonstrates what a key patent can potentially mean to a university’s bottom line.
University incubators and accelerators like SkyDeck provide another way to generate revenue from intellectual property. In cases where the university owns the intellectual property rights, SkyDeck members license them from the university, and the more successful they are, the more money the school makes. “SkyDeck improves the success rate of our licensees, and thereby increases the revenue generated from those licenses,” Cohen said.
But experts are quick to point out that the only way to plan for intellectual property earnings is as a slow and steady climb, not a get-rich-quick scenario. Currently over $1 million in intellectual property revenue has been generated so far from SkyDeck members, and another $500,000 is imminent, according to Cohen. He also noted that startups, including SkyDeck companies, can take several years before they become profitable.
Blockbuster patents are few and far between, and most of them are tied to pharmaceuticals. Since Berkeley does not have a medical school, research in that field is limited. In 2011, the year of the melanoma drug windfall, Cal’s intellectual property revenue spiked to over $90 million. “In my opinion, in most years it is unlikely that revenue from licensing intellectual property rights will exceed revenue from donations and US Federal funding,” Cohen said.
In 2015, UC Berkeley received about $7.8 million in intellectual property royalities. Cal’s overall budget is about $2.5 billion.
Most of the funding that public universities receive to conduct research comes from the federal government. In 2014 that money amounted to about $38 billion. It supports about 60 percent of university research. In turn, the schools are expected to make discoveries that promote the common good. What ‘‘common good’’ means changes with the times. These days, it seems to be synonymous with economic growth.
The message that academic research should and must be commercialized comes from the top policymakers. For example, President Obama enthusiastically endorsed using university research to drive economic growth in both his 2014 and 2015 State of the Union Addresses.
Not everyone is so enthusiastic. Many scientists are wary of the profit motive behind owning and controlling knowledge. Others believe that funds needed for basic research are being funneled into projects that promise a fast and easy transition to the market.
A 2014 Pew Research Center survey of members of American Association for the Advancement of Science, the world’s largest, general scientific association, found that nearly half (47 percent) believed that the pressure to develop marketable products was having an undue influence on the direction of their research. A majority (69 percent) believed a focus on projects expected to yield rapid results was also influencing their research.
The governmental enthusiasm extends to offering specific grants that promote joint ventures between companies and nonprofit research institutions. The money from these Small Business Technology Transfer (STTR) grants go towards bridging the gap between basic scientific discoveries and marketable products.
SkyDeck is already bringing in some revenue through intellectual property licensing and STTR-type grants. But ultimately, the accelerator’s main financial contribution may come out of its original goal of creating an awesome experience for Cal students.
“Most of the SkyDeck entrepreneurs are affiliated with UC Berkeley as students, alumni and/or faculty,” Cohen pointed out. “When these entrepreneurs have a positive experience with UC Berkeley via SkyDeck, and become successful entrepreneurs with the help of SkyDeck, then they are more likely to give back to Cal in the form of gifting.”
There’s no need to look any further than Stanford to see how well that model works. In 2015, Stanford broke fundraising records by bringing in $1.63 billion in donations. Berkeley brought in $366 million that same year. The fact that Stanford is considered the top entrepreneurial school, and that it broke gifting records, hasn’t escaped notice. (Stanford’s endowment is more than $22 billion, while Berkeley’s is around $4 billion).
But with venture capital’s migration into San Francisco and the East Bay, SkyDeck is poised to mint many more successful entrepreneurs. The school already has a website with the UC Berkeley’s Founder’s Pledge on it, so start-up founders can quickly and easily gift some of their future earnings to Berkeley.
Posted on March 24, 2016 - 4:25pm