How Southeast Ohio is becoming a hotspot for technology commercialization and entrepreneurs
(This article appeared in the Autumn/Winter 2012 issue of Ohio University's Perspectives magazine.)
By Karen Sottosanti and Andrea Gibson
Kyle Perkins could relocate to the West Coast and join a major video game design company, but he’s stayed in Athens, Ohio, and launched his own digital media firm. His company, Lightborne Lore, already has released one game, Cracked, and is getting ready to unveil a demo of an ambitious visual novel for mobile phones in November. The alumnus of Ohio University’s media arts and studies program has assembled a creative team of current and former students who write the stories and musical score, design the graphics, program the code, and market the products.
Perkins, a native of Maineville near Cincinnati, says the choice was easy to stay in Southeast Ohio: “There are great people here, and I don’t really want to leave,” he says. “The cost of living is low, and a lot of people at the university are excited to help in any way they can.”
He’s among a growing number of entrepreneurs—from faculty and student inventors to regional business professionals—who have been supported by the entrepreneurial ecosystem at Ohio University and in Athens. Here in the traditionally underserved region of Appalachia, those with an idea or invention who want to be their own bosses and grow their own companies are finding it easier than ever to do so.
Over the past decade, with a boost from the state of Ohio’s Third Frontier program, longtime university programs that support faculty research, technology commercialization, and business startups have partnered with government entities and private venture capital firms to create a pipeline for new high-tech companies in the region.
Have a business idea? The ecosystem can provide help with developing a business plan, gauging a market for the product, patenting and protecting intellectual property, providing seed money and investments, connecting entrepreneurs with seasoned business advisors, setting them up with office or laboratory space, offering networking, and finally connecting them to advanced sources of funding such as angel funds or venture capital firms that can boost a startup into the bigger leagues of business.
(Click to view a graphic that explains how the ecosystem works.)
Though that path from cool idea to thriving business with clients and a payroll may be well known in the business community, until recently, the support network to make it happen didn’t exist in Southeast Ohio. And while many major research universities boast technology commercialization programs to take faculty inventions from the lab to the marketplace, and also may sponsor business incubators, few universities are home to all of the pieces of the entrepreneurial ecosystem.
The system is paying off. TechGROWTH Ohio, an entrepreneurial support program supported by Third Frontier funding to Ohio University and several regional public and private sector partners, reports that for every $1 of state money spent to date, entrepreneurs have been able to leverage more than $10 in support from outside funding sources to grow their businesses in Southeast Ohio. As of June 2012, that translates into $110 million that’s flowed into the region since the program launched five years ago.
TechGROWTH reports that it’s assisted more than 420 business clients, about 80 percent of which come from outside of Ohio University, says John Glazer, director of the program. Examples include a Marietta company that’s developed a lightweight blind for hunters, as well as an Athens firm that plans to manufacture a new medical device that can help those with hearing loss and tinnitus (persistent ringing in the ears). Third Sun Solar, a solar panel installation firm founded by Ohio University alums, recently graduated from the Innovation Center, the university’s small business incubator. They’ve moved to new headquarters in the city of Athens, where they employ 22 people. For the last four years, they’ve made the Inc. 5000 list of the top startups to watch in the United States.
“Southeast Ohio is not barren of ideas. It is not barren of technology. The stumbling block is building on those ideas, executing those ideas,” says Glazer, whose program is focused on overcoming those obstacles.
Lisa Delp, executive director of the Ohio Third Frontier program, says that the Ohio University administration’s prioritization of technology commercialization and entrepreneurship activities, as well as the ecosystem’s ability to unite and energize existing regional programs—without duplicating efforts—has led to progress.
“What Southeast Ohio has done has really been transformational,” she says. “Ohio University has focused not only on reaching the local community in Athens, but reaching into the whole region and making sure that different organizations and stakeholders are included. That mission to help advance economic growth and development in Southeast Ohio really shines through in the things that they do.”
One company, Diagnostic Hybrids, Inc., a medical testing kit company developed from faculty research in the 1980s, is a case study of what can happen in the ecosystem in the long run. After it graduated from the Innovation Center, it set up shop in an old manufacturing plant in Athens, hired 200 people, and then was bought by a California firm for $130 million in 2010. The Ohio University Foundation, an original investor, received $35 million from the sale, which it’s now investing in university academic programs.
The system not only has provided a boost to the regional economy, but has moved some faculty, staff, and local innovations to the marketplace for the benefit of consumers. A laboratory discovery by scientist John Kopchick and graduate student Wen Chen in 1987 led to the development of a drug, SOMAVERT®, for people with acromegaly, a form of gigantism in adults that can lead to medical complications and early death. The license for the drug discovery to the Pfizer corporation has generated more than $73 million for the inventors and the university, which has invested the royalty income back into research, academics, and the entrepreneurial ecosystem itself.
Those in the business of university technology commercialization will be quick to point out, though, that it took 15 years to go from the initial lab discovery to FDA approval, which is not uncommon in the pharmaceutical field. The average technology takes eight years of development to reach the marketplace, says Bob Silva, director of the university’s Technology Transfer Office. At Ohio University, Silva and colleagues aren’t just looking to patent great ideas, but to file patents on inventions that have real commercialization potential. Is the technology truly different from other products in the marketplace? Is there a real market for it?
“If you’re going to invest in a patent and want to commercialize something for a worldwide market—Europe, Japan, China, the United States—you better be ready to spend $150,000 over the life of the patent just to cover the cost of patent protection,” Silva says. “And if you want to expand to South America, other parts of Asia, you’re talking $250,000. Can you recoup that?”
It’s a good question: Once a technology is licensed to a company for manufacturing and sales, it doesn’t always make it into the marketplace or provide a big windfall if the company experiences obstacles along the path. Silva notes that recent reports suggest that only about a third of licensed inventions provide a return on investment.
But those who have watched the Diagnostic Hybrids, Third Suns, and SOMAVERTs of the world take off argue that the payoff—new drugs and technologies, companies, jobs—is worth the pursuit. And some innovations, from alternative energy products and new hearing aid devices to mobile apps, can beat a much quicker path to the marketplace while the ecosystem nurtures long-term products such as new antibiotics that might thwart superbugs.
The promise of the technology commercialization and entrepreneur support system led to a major new partnership between Ohio State University and Ohio University last spring. The Innovation Fund is a new venture-capital fund that will provide seed money to start-up companies in the critical early stages of their existence. Ohio State has pledged $20 million and Ohio University is kicking in $15 million.
“We hope to move more innovations to the marketplace to cure disease, produce healthier food, and advance alternative energy solutions,” Ohio University President Roderick McDavis said at the fund’s Columbus launch in April. “And in doing so, we want to create jobs, keep talented people in Ohio, and attract more people and businesses to a state that clearly values research and innovation. And that is good for all Ohioans.”
Back in Athens, Perkins and his creative team are gearing up for the long days of developing the next phases of their mobile novel for the marketplace. In addition to funds from a successful Kickstarter campaign, Lightborne Lore has benefited from a TechGROWTH growth grant and the funding and mentoring that came with participating in the university’s Innovation Engine Accelerator program, a digital boot camp for startup firms. After toiling over the game project on their own for two years, Perkins says that it was a huge validation to have seasoned business executives tell him when his team was on the right path.
“When you hear someone you respect say, ‘That could work,’” he says, “it’s a great feeling.”
Read about seven businesses aided by the entrepreneurial ecosystem.
The development of the entrepreneurial ecosystem: A timeline
• 1980: Congress passes the Patent and Trademark Law Amendments Act, better known as the Bayh-Dole Act for its legislative sponsors. The law allows universities and other government-backed research entities to commercialize discoveries themselves, rather than having to turn the intellectual property rights over to the federal government.
• 1981: Ohio University professor Thomas Wagner makes worldwide headlines for successfully producing the first transgenic animal.
• 1983: With investment from the Ohio University Foundation, Wagner, Joseph Jollick, and Wilfred Konneker launch Diagnostic Hybrids, Inc., to develop and market diagnostic kits for various diseases.
• 1983: Ohio University creates the Innovation Center, the first university-based business incubator in Ohio and the 12th such program in the nation.
• 1984: Ohio University establishes the Edison Biotechnology Institute to pursue interdisciplinary biotechnology research that has commercialization potential.
• 1987: EBI researcher John Kopchick and graduate student Wen Chen discover growth hormone receptor antagonists. With Ohio University alumnus Rick Hawkins, Kopchick works to develop a drug that alleviates symptoms of acromegaly, a form of gigantism that can cause organ enlargement and premature death.
• 1997: Athenian Venture Partners, an Athens-based venture capital firm, launches with a $500,000 loan from the Ohio University Foundation.
• 1998: Several existing programs merge as the Ohio University George V. Voinovich Center for Leadership and Public Affairs. (In 2007, it became the university’s first interdisciplinary school.)
• 1999: Ohio University alumnus David Wilhelm launches Adena Ventures to invest in start-up businesses in Appalachia and the Great Lakes.
• 2003: The drug based on the Kopchick/Chen discovery receives U.S. Food and Drug Administration approval. Pfizer, which has licensed the technology from Ohio University, markets the drug as SOMAVERT® (pegvisomant for injection) to patients worldwide.
• 2007: The Voinovich School and Edison Biotechnology Institute partner to form TechGROWTH Ohio with a $10 million grant from the state of Ohio’s Third Frontier economic development initiative. Woodland Ventures (parent company of Adena Ventures) and Ohio State University South Centers are initial partners. The program later expands to include the Innovation Center and Technology Transfer Office, the Muskingum County Business Incubator, and WesBanco, Inc., which provides a $1 million match.
• 2008: Forbes magazine ranks Ohio University first in the state and fourth in the nation for returns on research investment.
• 2010: Quidel Corp. acquires Diagnostic Hybrids for $130 million. The sale yields $35 million for the Ohio University Foundation. The company remains in Athens, retaining more than 200 jobs.
• 2012: Ohio University and Ohio State University announce the formation of a joint $35 million venture fund to invest in start-ups emerging from discoveries at Ohio universities.
• 2012: By the second quarter, TechGROWTH has attracted a five-year total of $13 million from the state and $8 million from regional partners to invest in new companies.
(Compiled by Corinne Colbert)