The mythic image of a lone entrepreneur toiling away at a new business idea in his or her garage, home office or living room is a common one. But the reality is that all new ventures need cold, hard cash to see the light of day.
At ASU, budding entrepreneurs looking for funding are in an enviable position. The university has developed a series of support options for startup ventures—be they faculty researchers with a scientific application that can be commercialized, students promoting their own businesses, or cross-functional teams using entrepreneurship to enact social change—that provide them with the opportunity to compete for the funds they need to further their startups.
Case in point: Pollen-Tech, an ASU startup whose technology allows farmers and growers much greater control over pollination. When the company nabbed a $10,000 prize from ASU’s Edson Student Entrepreneur Initiative in 2012, it was “all the money we had,” says COO Adam Brown ’11 B.A., ’11 B.A., ’11 B.S., who founded the company with Trevor Ray ’05 B.S., ’13 M.B.A., the organization’s chief strategist.
“We used the funding to apply for our first provisional patent, to fund our supplies, to conduct our field trial with growers, and later, to do additional patent research,” Brown explains.
The value of entrepreneurship
Valuing entrepreneurship is one of ASU President Michael Crow’s eight design aspirations, guiding the institution’s transformation into a “New American University,” and it is clear that the university is putting its money where its mouth is. Through a combination of ASU-secured private donors, endowments, and joint ventures with area government and business institutions, $650,000 in startup funding flowed across ASU’s four campuses in 2013.
And because of President Crow’s emphasis on infusing entrepreneurship into the very fabric of the university, it’s not surprising that the various funding opportunities designed to support ASU startup ventures are multidisciplinary and crossfunctional in nature.
“President Crow has democratized the teaching of entrepreneurship inside the university, and we are doing that now in the wider funding ecosystem,” says Gordon McConnell, assistant vice president of the Entrepreneurship and Innovation Group (EIG) at ASU (formerly known as ASU Venture Catalyst). EIG helps coordinate entrepreneurship across the university and manages ASU’s startup incubation and accelerator initiatives.
“We are agnostic when it comes to sector, and we make it easy for anyone from any discipline to activate these resources,” adds Brent Sebold, a senior venture manager with EIG.
A short list of recently funded ASU ventures clearly illustrates this point. The 2013-2014 cohort of the Edson Student Entrepreneur Initiative includes, among other ventures, a brewery; a designer of kitchen utilities for the disabled; and a mobile app that helps restaurants donate leftover food. And ASU faculty research commercialized through the Arizona Furnace Technology Transfer Accelerator is spawning ventures around such diverse technologies as an improved concrete mixture; ultrasound-based preventative diagnostic tools for cardiovascular disease; and mobile e-learning technologies. ASU also sponsors a $5,000 arts-related funding challenge through its Pave Program in Arts Entrepreneurship, which is overseen by the Herberger Institute for Design and the Arts.
Hitting the sweet spot with “just enough grease”
Just what are these programs funding? The university’s sweet spot, says Sebold, is in very early stage ventures.
“Our focus is seed funding. We know that students and professors are not going to be the experienced, serial entrepreneurs that might fit with a laterstage accelerator,” he explains. “What we provide is just enough grease to get these teams’ wheels moving.”
That “grease” comes from a variety of different sources. For ASU students with the entrepreneurial itch, there is a pipeline of programs that support budding ventures from ideation all the way to execution.
Many students start ventures through Changemaker Central @ASU, a group that seeks to promote an entrepreneurial culture across the university. To support students at the inception of the entrepreneurial process, Changemaker Central runs 10,000 Solutions, an experimental online problem-solving platform that acts as an “ideation hub where students can begin exploring their entrepreneurial ideas for social change,” says Michelle Lyons-Mayer, assistant director for Changemaker Central.
In 2012, its first year, 10,000 Solutions awarded a $10,000 funding prize to SafeSIPP, a social venture that provides clean water in developing communities. The company, founded by 2013 ASU graduates Jared Schoepf, Taylor Barker, Lindsay Fleming, and Jacob Arredondo, has won more than $50,000 in funding through grants and pitch competitions, and now is working to finalize its product, a three-phase water purification system integrated into a barrel. SafeSIPP was also a finalist in Entrepreneur magazine’s 2013 College Entrepreneur of the Year competition.
ASU students also can compete in Changemaker Central’s annual Innovation Challenge, which, Lyons-Mayer explains, “enables students to begin the process of refining and cultivating their idea into a sustainable platform for action.” International law firm Perkins-Coie sponsored the 2012-2013 $10,000 grand prize, which was awarded to Late Living, a company founded by alums Chris Wilson ’06 B.S., ’06 B.S. and Ammon Curtis ’13 M.B.A. that offers an online directory of video tours of senior living facilities.
The ways in which the student teams use the Innovation Challenge funding varies nearly as much as the ventures themselves, Lyons-Mayer notes. “The funds assist the teams in their quest to transform their idea into reality,” she says. The 2013 winner BLU Biosensors used its $6,500 prize to purchase lab equipment and materials to further its mission of testing for pathogens in rural areas; while fellow awardee BetR-block, which manufactures sustainable, recyclable building materials, put its $3,500 toward independent testing and certification.
The varsity team
The next step in the pipeline for ASU students is the Edson Student Entrepreneurship Initiative, an EIG program that is funded through a $5.4 million endowment from the Edson family, founders of the Bayliner boating company. Considered the “varsity” of funding challenges at ASU, Edson teams are selected as high-potential startups and participate in a comprehensive accelerator program that includes funding, dedicated workspace, mentorship and training.
More than 350 teams each year vie for the 20 Edson spots, with each team receiving $10,000 to $20,000 in funding. Each startup team also gets potential access to additional funding through two new funds in the Edson endowment: a $60,000 patent/copyright/trademark fund and $30,000 customer engagement/business development travel fund. Also new this year is the Great Little Companies Network (GLC), a program that awards micro-grants of $3,000 each, as well as workspace from Changemaker Central and access to Edson mentoring, to the 30 runner-up companies from the Edson competition. GLC is funded by a private donor who gifted $2 million over five years for the initiative.
“The addition of GLC allows us to support 48 student startups each year through private funding,” McConnell notes.
Edson funding generally helps with three basic aspects that are crucial to any startup venture, notes Sebold: intellectual property protection (via copyrights, trademarks, patents); a prototype of the company’s product or service; and setting up operations and legal structures.
Pollen-Tech has used its funding for all of those concerns. The company — whose new CEO David Wade ’13 M.B.A. is also an ASU alum — was awarded $20,000 as part of the 2013 Edson cohort, which is funding its high-tech pollination lab. Pollen-Tech also received $15,000 from a private ASU donor, which it has used for customer engagement travel, to file an additional provisional patent, as well as an international PCT patent application.
“Without ASU’s financial support and confidence in us, this company would not be where it is today,” Brown notes.
The startup also received $10,000 in March 2013 when it won the first-ever Arizona Student Startup Demo Day, a competition developed by EIG in collaboration with Northern Arizona University and the University of Arizona. Funds were provided by sponsors, Phoenix firm Hool Law Group and MAC6, a startup incubator in Tempe. The company has used those funds largely for salaries, which is prohibited in all the ASU-funded challenges.
Supporting ASU’s in-house entrepreneurs
Students aren’t alone in taking advantage of entrepreneurial funding opportunities at ASU. Students, faculty, staff and alumni can partner together on early-stage ventures through initiatives like the ASU Obesity Solutions Funding Challenge. The challenge, which debuted in 2013, brought together transdisciplinary teams to tackle the obesity problem from an entrepreneurial perspective.
The grand prize winner — Learning Sciences Institute Associate Research Professor Mina Johnson-Glenberg and graduate students Hue Henry, Ken Koontz, and Chris Dean — received $12,000 to develop an educational game that uses body gestures for learning. Alien Health Game, the first in what Johnson-Glenberg hopes will be a suite of products from her company, Embodied Games for Learning LLC, teaches elementary-school children about nutrition and “gets them up out of their seats while learning,” she explains.
The challenge funding, part of a $10-million donation to ASU from the Virginia G. Piper Trust, also helped three additional winning teams further their obesity fighting solutions. For Johnson-Glenberg, the cash helped to flesh out the prototype for Alien Health and prompted her to apply for a $2 million grant from the National Institutes of Health (NIH). “The Obesity Solutions Challenge money has been a springboard that will hopefully help me get the NIH grant and be able to commercialize this application,” says Johnson-Glenberg, who calls the atmosphere for would-be entrepreneurs at ASU “far more supportive than at other major universities.”
ASU also brings faculty and staff technologies to the marketplace through Arizona Science and Technology Enterprises (AzTE), the university’s exclusive intellectual property management and technology transfer organization.
“We assist faculty innovators with patent protection; finding potential partners, investors, and licensing opportunities; and with seed funding to help them further develop their ventures,” explains Augustine Cheng, AzTE’s CEO and chief legal officer. Through the ASU Catalyst Fund (a partnership between the university and the ASU Research Park), AzTE loans seed money to high-potential ASU ventures; the loans are paid back to the fund through revenue dollars if the technology is successfully commercialized — creating an “evergreen” fund for technology transfer.
Over the last 10 years, AzTE has helped launch 70 spinout companies based on ASU intellectual property. Collectively, start-up companies that have licensed ASU intellectual property (or their sublicensees) have raised close to $400 million through various funding sources.
In fiscal year 2013, venture funding for companies licensing ASU intellectual property totaled $68 million. Standouts include $28 million raised by algae-based company Heliae, a 2008 ASU spinout based in Gilbert that develops nutraceutical and personal care products; and Chandler-based health diagnostics company HealthTell, founded by Stephen Johnston, director of the Center for Innovations in Medicine at the ASU Biodesign Institute, which received $4 million to help commercialize a new test for lung, breast, prostate, and colorectal cancer.
“These funding success stories are testimony to the fact ASU faculty are producing high-quality research capable of attracting private funding,” Cheng notes.
Heating up faculty spinoffs
To help increase the number of ASU technologies that are spun off into commercial ventures, EIG runs the Arizona Furnace Technology Transfer Accelerator. By aggressively marketing nonlicensed ASU technologies to the investor and entrepreneurial community, and providing an accelerator experience complete with seed funding, office space, and access to top industry mentors, Furnace seeks to launch 10-15 companies per year.
With $25,000 each — from Furnace funding sources the Arizona Commerce Authority and BioAccel — these spinoff ventures work to improve their prototypes, put their legal structures in place, and seek sales or additional funding opportunities, notes Sebold, who runs the Furnace program.
“It helps them move the ball as far down the field as they can in a nine-month period,” he says.
Furnace helped spur spinoff SiO2 Nanotech from “an idea we thought had commercial potential to an actual business,” says chemical engineering graduate student Clarizza Watson ’08 M.B.A., who founded the venture with Professor Emerita Nicole Herbots of the Department of Physics. “Before we got into Furnace, we were bootstrapping with our own money just to get into development,” Watson says.
With the $25,000 from Furnace, Watson and Herbots were able to move into a commercial lab, purchase needed materials, and improve the commercial prototypes for their patent-pending anti-fogging solution.
SiO2 Nanotech reached it first revenue stream this fall, is working to expand its customer base, and received an additional $13,000 as part of the current Edson cohort. “As a result of exposure we received through Furnace, we are also in negotiations with two private investors for additional funding,” Watson notes.
Failure is part of the game
While the examples of entrepreneurial funding triumphs at ASU are numerous, of course, not every funded venture will go on to achieve longterm commercial success.
“Failure is part of the game in the startup world,” says EIG’s McConnell, noting that 50 percent of all startups fail in the first year. EIG is working to lower that percentage as much as possible, and cites its failure rate as an excellent 5 to 10 percent.
“But even those that fail have value,” McConnell says. “It is a form of experiential learning—when our students and faculty try a startup, whether its successful or not, they learn from the process.”
“We know that every student at ASU is not going to start a business or a non-profit,” adds Lyons- Mayer. “We want them to leave the university with both the capacity and the commitment to innovative, entrepreneurial problem-solving. And those that participate in our entrepreneurial challenges leave ASU with an enhanced set of those skills.”
That, she notes, can be considered money in the bank.