April 8, 2004
UW startups do well, report shows
The economic slowdown that began in 2000 has had very little effect on startup companies with close ties to research at the UW, according to a recent study.
UW-related startup formations have continued to be strong over the past four years, according to a report titled, “Creating the Future: University of Washington-related Startup Companies (1974–2003)” by Kenneth Walters, professor of business at UW Bothell.
“Even in this tight financial environment, a stream of UW-related companies was started, utilizing UW-licensed technologies, research and creative talent. Even since the high-tech ‘bubble’ burst in 2000, the rate of startup formation has been slightly higher than one company a month,” his report states.
“This report provides highly encouraging news,” says Jim Severson, UW vice provost for intellectual property and technology transfer. “While businesses throughout the Puget Sound region were laying off employees, and some even were closing, the UW-related startups have proven to be resilient. The report underscores the importance of the University of Washington in helping to stabilize the regional economy and in creating the industries of the future.”
The report identifies 195 UW-related startups, with about three-fourths of these created since 1990. Of these, 156 were still active in mid 2003, either operating on their own, acquired by another company, or with technology transferred to an active company. From 2000 to mid-2003 alone, there were 40 UW-related startups.
In that same time span, UW-related companies were able to raise more than $2 billion in capital, mostly for research and development. These funds came from a variety of sources, such as federal research grants, venture capitalists, new stock issues, business angels and other private investors.
“Business angels are important in the Pacific Northwest,” Walters says. “What I call the ‘quiet money’ of wealthy individuals has continued to flow into interesting technology investments in the region. This money, along with federal sources, has been critically important during the recent recession.”
Walters’ definition of a UW-related company is broad. It includes companies founded on technology licensed from the UW; companies founded by UW faculty, staff or students based on their research; new companies established near the UW because of the desire to have access to UW research programs; new companies that have UW faculty in prominent positions; enterprises that have involved UW faculty in initial product development; and companies that have been reconstituted based on UW technology.
Despite the sour economy, these companies have added jobs over the past four years. Exact figures are impossible to calculate, but Walters states that “UW-related firms have continued to add hundreds and hundreds of new high- paying jobs, both in Washington and the nation.” Many of those who are hired first at the startups are UW graduates. And most of those companies that end up being purchased have maintained a strong operational presence in Washington.
While many people assume that UW-related companies emanate solely from the work of faculty, Walters has learned that more than 40 companies have been founded by UW students based on their own research at the UW. “Students in engineering, computer science and medicine now are as likely to take an interest in entrepreneurship as business students,” the report says. “Engineering and medicine brim with students working on technology frontiers who see opportunities for new applications and startups.” Walters has found that one-third of student–created companies have started since 1999.
Wa1ters sees a clear relationship between the strength of UW graduate programs and entrepreneurship: “Building and maintaining the best possible graduate programs to attract the strongest students and faculty is critical to the continual enhancement of student-based entrepreneurship.”
The effects of the recession on UW-related companies were slight for three reasons, Walters says. First, the economic picture today is a product of the growth and development of companies started 10, 20, or even 30 years ago, some of whose research is just starting to or continues to pay dividends. Second, government-funded research at the UW and the launch of technology startups stayed strong even as the economy slowed. “The pipeline for new ideas and potential new enterprises continued to be robust,” he says, so businesses continued to be formed.
Also, even in the midst of a recession, people have continued to invest in promising technologies. “Recessions or slowdowns don’t last forever. People continue to make investments in innovations and new opportunities. Recessions cause pain, but sophisticated investors are always planning for tomorrow.”
Walters concludes that the UW’s record for entrepreneurship should accelerate. “While it is far too soon to know which ‘winners’ will emerge from the newest UW-related startups, many new enterprises of the past 10 years involve promising technologies and businesses built around materials science, biotechnology, medical devices, capital equipment, software and educational technologies.” He predicts that some of these companies will become “brand names” in the state’s economic future.
“The state of Washington has become both a research center and an entrepreneurial center. UW faculty, staff and students deserve more than a little credit for both,” Walters states.
“One thing is sure: If the UW and the state of Washington do indeed keep faith and remain leaders in technology entrepreneurship, our children and grandchildren will work for companies that are just now being born, and they will have rewarding and challenging jobs.”
