Goal: Accelerate the introduction and growth of new technologies and products derived from research in Virginia.
Commercialization is the process of taking intellectual property (IP) resulting from research and development to market and generating financial value through licensing and sales. Products and services based on new technologies are introduced to the market to determine if they meet a market demand or otherwise add value to the company. Commercialization here refers specifically to licensing, startup, industry collaboration, and consulting connected to university research and development (R&D).
The number of licenses issued by Virginia’s universities and licensing income received increased in 2016. The number of startup businesses based on university intellectual property decreased. These numbers do not include other university startup activity, including faculty and student business startups that are not based on the institution’s intellectual property. Virginia universities support commercialization through other avenues as well, including research sponsored by business, financial support for seed and proof-of-concept funds, incentives for faculty to engage in entrepreneurship and commercialization activities, and provision of makerspaces and incubator/accelerator facilities and services.
Why is commercialization important?
Colleges and universities are increasingly being called upon to commercialize their discoveries in order to boost economic development. One method is through nurturing university startups, which account for a relatively small but growing number of high-growth, entrepreneurial ventures. Technology transfer from universities also boosts the growth of firms in the state through new commercial products and innovative business production processes based on licensed technologies. Commercialization provides revenue that helps support university R&D activities and incentivizes faculty production of translational research. Universities also forge closer links with business and industry that establish mechanisms for sharing knowledge, foster future research collaboration, and create internship and career opportunities for students and graduates.
How has Virginia performed over the last five years?
The number of licenses has increased each year since 2012, when 103 university licenses were issued. In 2016, 145 licenses were issued. The cumulative number of active licenses issued by Virginia’s universities jumped was 787 in 2014. In 2015, total active licenses decreased to 732. In 2016, total active licenses increased to 815.
Licensing revenue often results from licenses executed several years earlier, and a small number of licenses may disproportionately affect revenue. Total licensing revenue reported by Virginia’s research universities declined from $9.8 million in 2012 to $6.2 million in 2013 before rebounding to $8.2 million in 2014. Licensing revenue fell, in 2015 to $7.3 million, and increased once again to $12.1 million in 2016. On a per capita basis, Virginia raised an average of $1.44 of licensing revenue per capita in 2016, compared to a national average of $6.58 per capita, ranking it 32nd among U.S. states. This per capita revenue was lower than all benchmark states. The nation’s leader was Illinois at $22.44 per capita.
The number of university startups that begin operations based on licensed technology each year increased from 16 startups in 2012, to 17 startups in 2013 and 2014. In 2015, 24 university startups resulted. This dropped to 17 startups reported in 2016. The cumulative total number of active startups from current and previously issued licenses increased steadily from 74 in 2011 to 110 in 2016. Virginia universities produced 1.90 startups per one million residents in 2016. This is lower than the national average of 2.99 per million; Virginia ranked 32nd among states. It was also lower than all benchmark states. The nation’s leader was Maryland at 8.64 startups per million residents.
Many university commercialization and technology transfer activities are unrelated to licensed technology. For example, Virginia institutions reported that there were 96 startups by students; some of these were based on university-licensed technology. In addition, Virginia colleges and universities work closely with business and industry to foster innovation. Virginia institutions had sponsored research relationships with an estimated 927 companies in FY2016. These numbers are likely under-reported, as reporting these activities is not always required.
Virginia’s higher education institutions have increased institutional support for innovation and commercialization. Most public research universities have tenure policies that recognize faculty accomplishments in entrepreneurship and commercialization. Eight Virginia public universities reported in their Six-Year Academic and Financial Plans that they have established makerspaces that provide technology and equipment and collaboration/learning space for students, faculty, and the public to experiment and invent products for commercial use. At least seven institutions offer incubation/accelerator programs for startups, including the College of William and Mary, George Mason University, James Madison University, Old Dominion University, the University of Virginia, Virginia Commonwealth University, and Virginia Tech. In addition, three institutions – James Madison University, the University of Virginia, and Virginia State University – reported seed and/or proof-of-concept funds that provided a total of $3.3 million in available funding during FY2017.
What are the implications?
Virginia’s universities are an important resource for sustaining and growing an innovation-based economy. The number of licenses issued and licensing revenue increased in 2016, although the Commonwealth was significantly lower than the nation and benchmark states on a per capita basis for licensing revenue in 2016. Virginia’s startup rate lags behind benchmark states and the nation, and the number of business startups decreased from 2015 to 2016. However, Virginia’s universities continued their increasingly support for entrepreneurship and commercialization through incubator and accelerator startup programs, seed and proof-of-concept funds, numerous sponsored research relationships, and additional entrepreneurial activities of faculty, staff, and students.
Data Sources and Definitions:
Each IEMS indicator reports data available as of June 22, 2018 and provides a description of trends for five years of historical data when available.
University Licenses and Startups: Data from the Association of University Technology Managers (AUTM) Statistics Access for Tech Transfer (STATT) Database: https://www.autm.net/resources-surveys/research-reports-databases/statt-database-(1)/ Released in September. Virginia public university data for 2014-2016 was supplemented with information from individual institutions, including those who did not report to AUTM. A license is a contract that allows the purchaser of the licensed technology to share the rights to use of the technology. Also included in the license total are options on licenses. Licensed income includes “license issue fees, payments under options, annual minimums, running royalties, termination payments, the amount of equity received when cashed-in, and software and biological material end-user license fees equal to $1,000 or more.” University startups are companies that depended on the institution’s licensed technology to begin operations. For state and national comparison purposes, only AUTM data was used.
Population: U.S. Census Bureau, Population Estimates (legacy estimates): https://www.census.gov/programs-surveys/popest.html. Released in December.
Other University Commercialization Information: Data obtained from the State Council of Higher Education for Virginia (SCHEV), Current Six-Year Plans-2017. Based on responses from Christopher Newport University, the College of William and Mary, George Mason University, James Madison University, Longwood University, Norfolk State University, Old Dominion University, Radford University, the University of Virginia, Virginia Commonwealth University, Virginia State University, and Virginia Tech. http://www.schev.edu/index/institutional/planning-and-performance/current-six-year-plans---2017.