Christine Gulbranson, chief innovation officer of University of California, continues her deep-dive into the institution's ecosystem and offers six case studies illustrating how spinouts and startups have grown.
In last month’s article, I discussed how university innovation is changing and what role University of California (UC) is playing in redefining innovation from a process to an ecosystem. In part two of our series, we look at six startups and their journey to commercialisation, growth, and in some cases, successful exits.
For many startups, UC programs, resources and incubators have been instrumental in shaping the development, commercialisation and strategy of young startups, particularly as founders face decisions about committing to entrepreneurship, distinctly new exploration or exploiting existing technologies, investment partner selection and surviving the “valley of death”.
Not all startups have the same timeline for the valley of death, and some depend more heavily than others on UC resources to get off the ground. Regardless, we are interested in looking at examples from across our ecosystem to see what has worked and the impact our ecosystem is having on entrepreneurship and positive outcomes for the economy and society.
Case 1: Soraa – new LED lighting
Soraa is a light-emitting diode (LED) company founded on research that began in 2007. Prof Shuji Nakamura teamed up with Steven DenBaars and James Speck to pursue research on an LED technology platform that most experts at the time considered impossible.
Nakamura had spent over two decades researching and working with LED lighting and invented the first high-brightness gallium nitride (GaN) LED. Nakamura, DenBaars and Speck pursued GaN-on-GaN LED technology, convinced that it would be the future of lighting.
Their bet paid off. GaN-on-GaN LEDs produce more light per area of LED and are more cost-effective, with crystals up to a thousand times purer than any other LED crystal. Nakamura founded Soraa, taking the technology to market.
Nakamura worked with UC Santa Barbara’s office of technology and industry relations to license the intellectual property from University of California. In 2010, Soraa received its first round of funding and, in 2012, it launched the first product for the commercial market. From there, it received another round of funding in 2013 and is making over $24m in revenue annually.
Today, GaN-on-GaN LED lighting is becoming the standard in LED lights, which goes to show the power of exploration and taking on ambitious research endeavours. Soraa and the work of Nakamura and his fellow scientists have fundamentally changed the lighting industry, created over 250 jobs in California and are proving their return on their capital investments.
Case 2: Epygenix Therapeutics – a breakthrough treatment for Dravet syndrome
Epygenix Therapeutics is a UC startup that went through the Catalyst Program at UC San Francisco. UCSF professor Scott Baraban has spent years researching and developing drugs to treat genetic epilepsies including Dravet syndrome, a rare form of intractable epilepsy that begins in infancy. No effective therapeutic treatments existed for Dravet syndrome until Baraban developed a high-throughput drug screenin using a zebrafish model in 2013 following years of research.
In 2012, Baraban received a grant from the US National Institutes of Health to explore an out-of-the-box idea for treating Dravet syndrome. Baraban tested a small mostly repurposed drug library on zebrafish who replicated the same seizures as humans with Dravet syndrome. After testing 320 drugs, Baraban identified a compound called clemizole, an antihistamine from the 1950s and 1960s. Following the discovery, he worked with UCSF’s office of technology management to file a patent application, and in 2013 his lab published a paper on his findings.
Baraban and UCSF began to explore how to commercialise the findings. Baraban was not terribly interested in becoming an entrepreneur, saying: “I like being a professor. I like running my own lab. I do what I am interested in. I am not looking to be a millionaire because of something we do in my lab. I am fairly compensated and do what I love.”
However, Baraban recognised the value of his discovery and went to QB3, the Institute for Quantitative Biosciences, to discuss what options there were to commercialise his findings. QB3 connected Baraban with the Catalyst Program at UCSF. Catalyst’s interim director connected Baraban with two key industry contacts who examined the challenge of developing a successful business model for a drug whose patent had expired.
In an effort to discover the value of clemizole, it was suggested that Baraban seek to understand the compound better and what it could do outside of addressing Dravet syndrome. Thanks to funding from the Catalyst Program, Baraban ultimately worked with a contract research organisation to screen the compound against many drug targets. The results led to additional research and two more serotonin drugs that mimic clemizole. From there, Baraban partnered a paediatric epilepsy specialist in Colorado for a compassionate use exemption trial with five children. The trial was a great success.
Numerous pharmaceutical companies had already approach Baraban since his 2013 paper, but Baraban was not interested in becoming an entrepreneur or in working with big pharmaceutical companies. Baraban eventually met Hahn-Jun Lee, a scientist and successful entrepreneur who focused on repurposing drugs and tackling rare diseases. Baraban and Lee hit it off – in 2016, Epygenix Therapeutics was formed with Baraban as a consulting scientist, allowing him to continue his research and lab work as he wished but at the same time, clinical trials, US Food and Drug Administration (FDA) approval, and a treatment for Dravet syndrome could still be realised.
UCSF’s Catalyst Program proved central to commercialising a treatment, connecting Baraban with industry, and funding the research that led to intellectual property that could be commercialised.
Case 3: Riders Share – AirBNB for motorbikes
Riders Share is a startup out of UC Los Angeles that is like AirBNB for motorbikes. The company was co-founded in February 2018 by Guillermo Cornejo, an MBA candidate at the Anderson School of Management, and has thus far raised more than $300,000, having recently closed a seed round in early October. Riders Share joined the Anderson Venture Accelerator for its six-month immersive program designed to leverage UCLA’s resources to help startups launch.
Riders Share currently boasts 80% month-on-month growth, and after launching in early 2018, had more than 250 monthly rides by August and September, pulling in over $70,000 in monthly revenue. Surprisingly, it spent a grand total of $7,000 on marketing, smartly targeting the motorbike community and boasting strong local and state press coverage.
In its two years, the Anderson Venture Accelerator has helped to launch more than 25 startups which have raised over $1.5m in funding and generated over $2m in sales. Riders Share was one of around 10 teams in a cohort based at the 10,000 square-foot facility.
Case 4: Pinpoint Science – pathogens detector
Pinpoint Science is a startup from UC Santa Cruz and is a great example of how recently added UC resources are helping startups get off the ground. Pinpoint Science is working to commercialise a technology developed by Nader Pourmand at UC Santa Cruz. Pinpoint has developed a small device that rapidly and accurately detects pathogens such as viruses, bacteria and fungi. It uses novel biosensor technology and swappable cartridges for electrical detection of specific biomolecules with precision and at low cost.
Pinpoint Science’s device has a range of potential applications, including detecting Zika and Ebola. Applications could include human infectious disease diagnosis, pathogen surveillance for agriculture, ranching, veterinary medicine, wildlife management, monitoring infectious disease agents among poultry, wildfowl and insect vectors, and detecting microbial contamination in food poisoning. In common terms, it can help reduce the spread of diseases such as Zika and Ebola, alert us and reduce food poisoning, or reduce crop damage through surveillance and timely treatment.
Pinpoint Science joined Startup Sandbox, part of UC Santa Cruz’s new incubator thanks to $22m in funds made available through a California funding law – $2.2m for each of our 10 campuses – to strengthen the entrepreneurial ecosystem in California. Pinpoint Science is using wet lab facilities and one of 40 workstations with essential equipment particularly useful for bioscience companies.
The incubator opened in April 2017 with 13 companies, one of which was Pinpoint. Since then, Pinpoint has been accepted to UC Berkeley’s SkyDeck hot desk program for 2018 and continues to advance product development, commercialisation through market traction and growth.
Pinpoint Science is a great example of how UC startups can leverage our system-wide cross-campus ecosystem to start, develop and grow businesses.
Case 5: Lime – smart mobility
Lime is a smart mobility company, previously known as LimeBike, founded by two UC Berkeley MBA graduates with two other co-founders. Lime combines electric scooters or bikes, software and mobile devices to tackle the last-mile challenge of mobility. The company was founded in late 2016 and after two years is in 17 countries and most US states. Lime joined UC Berkeley’s SkyDeck accelerator in its early stages, benefitting from mentors and advisers, resources and SkyDeck’s network.
After receiving $467m from notable investors such as venture capital firm Andreessen Horowitz, ride-hailing company Uber, technology conglomerate Alphabet’s corporate venturing subsidiary GV, investment management firm Franklin Templeton and more, the company is currently valued at over $1bn and has already passed the 12 million ride mark. It currently employs just under 900 people, not just in California but around the world.
With multiple UC MBA graduates on their team, Lime has clearly benefited from the education and training afforded by an MBA. The team pursued the path of entrepreneurship and did not face the same tensions as researchers such as Baraban. Arguably, good business schools and a culture of entrepreneurship are fundamentally helpful for building an innovation ecosystem.
What is interesting about Lime is the timeline for its valley of death compared with that of other UC startups. While going from zero to a $1bn valuation in two years is extraordinary, there is still a significant difference between the time for product development and go-to-market for Lime than there was for Kyprolis (see below). Quick growth is also not without its problems – the scooter industry now faces challenges as legislation catches up and it has to figure out challenges such as reverse supply chains and how to fix product bugs with millions of product and users worldwide.
Case 6: Kyprolis – multiple myeloma drug
Kyprolis is a drug for multiple myeloma – cancer of plasma cells – developed by biotech startup Proteolix, a UC startup founded by four doctors, two of whom earned their PhD at UC Berkeley and UCLA. Phil Whitcome, a UCLA grad with a PhD in molecular biology and an MBA from Wharton Business School, teamed up with Ray Deshaies, who has a PhD in biochemistry from UC Berkeley, and Craig Crews, who were seeking funding for a platform called Protac – an acronym for proteolysis-targeting chimeras.
Protac was a project to develop a platform capable of targeting specific proteins for degradation, which, in short, could be used to treat cancer and tackle tumour cells. However, Crews and Deshaies, both associate professors at the time, were struggling to get funding for Protac as venture capital investors were looking for ways to maximise and accelerate returns on investment, notably through the development of small close-to-clinic molecules rather than a large investment in a significant platform such as Protac.
UCLA gradudate Phil Whitcome introduced Crews and Deshaies to a key industry contact who had extensive experience in the biotech industry, particularly from the commercialisation and pharmaceuticals side. The four formed Proteolix in 2003 following news that Millennium Pharmaceuticals had received FDA approval for Velcade, a proteasome inhibitor for multiple myeloma.
Protac was originally based on YU-101, a proteasome inhibitor. The team immediately saw an opportunity to develop a “me-too” drug for Velcade using YU-101, which had the potential to be more potent than Velcade. Pivoting from pitching Protac to pitching YU-101, Proteolix received $18.3m in funding in December 2003.
Following additional research, small molecular adjustments and new patent filings, Proteolix developed carfilzomib which was later named Kyprolis. Phase 1 clinical trials began in August 2005, and in May 2006 Proteolix received a second round of funding of $45m. Proteolix continued to phase 2 clinical trials in August 2007, and in September 2008, it received a third round of funding of $79m.
Shortly afterwards, Proteolix was acquired by drug developer Onyx Pharmaceuticals for $851m, Kyprolis received FDA approval in 2012, became Onyx’s most valuable asset, and sales of the drug netted $331m in 2014 with projected revenue set at $3bn for 2021.
Kyprolis is a good example of having an impactful medical discovery and product in a lab, but needed to pivot until industry was interested in providing funding – a classical tech translation challenge.
You need an ecosystem to fuel innovation
These six case studies are examples of different startups with different needs and pathways through the UC innovation and entrepreneurship ecosystem and into the commercial world. Startup journeys varied according to the needs for people, space and facilities, advice and expertise, and development of business models, strategies and products. All of them needed funding and UC played sometimes highly significant roles in facilitating funding success.
At times, innovation within universities can be structured, predictable and straightforward such as licensing intellectual property to a commercial company. At other times, startups pop up and grow to international scale in 24 months. Further still, some need a push and the right resources even to get off the ground.
My point is that in order to foster the establishment, development and growth of all such startups, you need an ecosystem capable of supporting the variety of startup needs. Our ecosystem, with its increasingly collaborative and innovative culture, is leading to outcomes such as creating thousands of jobs, solving transport challenges, finding treatments for rare diseases, and tackling Ebola and Zika.
At the office of innovation and entrepreneurship, our goal is to continue to develop the ecosystem across University of California, investing where necessary, facilitating cross-campus collaborations, and fostering deeper and wider industry relations. Building and maintaining an ecosystem is a huge collaborative effort among our campuses and I am grateful for the manpower and work our campuses are doing to make University of California a recognised force of innovation across the state and around the world.
– This article first appeared on LinkedIn. It has been edited for style and republished with permission from the author.