VIC Develops Own Startup ‘Venture Ecosystem'

by Mark Carter  on Monday, Aug. 25, 2014 12:00 am  

A unique technology transfer model is helping a Fayetteville company incubate early-stage, high-tech startups and place them on a path to market success.

VIC Technology Venture Development has a portfolio of 15 firms, 11 of them based out of its Arkansas Research & Technology Park headquarters and two each from branch offices in suburban Boston (Waltham, Massachusetts) and Annapolis, Maryland. A fourth VIC branch office is planned for the West Coast within the next year.

VIC’s first company, Springdale’s NanoMech, was launched in 2002 and licensed from University of Arkansas technology. It’s now a fully independent, major manufacturer of nano-based particles and lubricants with Department of Defense contracts among its portfolio of work.

VIC’s portfolio companies represent a diversified range of industries and products: Medical diagnostics (Ascendant Dx, CardioWise); medical devices (SFC Fluidics, OsteoVantage, Vixiar Medical); pharmaceuticals (BiologicsMD); environmental (BlueInGreen); food safety (BioDetection Instruments); manufacturing and materials (NanoMech, TiFiber); nutrition (Nutraceutical Innovations, Sevo Nutraceuticals); computing (NanoWatt Design); life sciences instrumentation and research tools (Minotaur Technologies); and silk technology (Akeso Biomedical).

Akeso and Sevo are based out of VIC’s Boston regional office, OsteoVantage and Vixiar out of the Maryland regional office. The remaining firms operate with VIC out of the research park in Fayetteville.

VIC employs 13 full-time workers including managing directors at each branch office and has an eight-member board of directors. Calvin Goforth, VIC founder, CEO and board chair and a former UA researcher, believes the scope of VIC’s hands-on approach makes its venture development model unique.

VIC created a “venture development ecosystem” that includes the VIC Investor Network, the VIC Growth Fund and the VIC Venture Fund, currently in development, each of which supports portfolio firms through different stages of development (see graph).

“There are a wide variety of technology transfer models and organizations across the country. However, I do not know of any quite like VIC,” he said. “The distinguishing features of VIC include the breadth of the support team that is shared across the portfolio companies in their early stages of development.”

VIC maintains a “central administrative backbone” in Arkansas and executive-level “feet on the ground” at each of VIC’s branch offices.

“Unlike a typical accelerator, we are founders or co-founders of each company that is in our portfolio and we have an ongoing process of reviewing technologies that could comprise our next startup,” Goforth said.

Here’s how it works:

  • Each year, VIC reviews roughly 1,500 technologies from research universities and labs across the globe. Its intellectual property assessment team then selects a handful — perhaps just a couple, perhaps as many as four — for which to negotiate.
  • Once VIC obtains an exclusive license for the technology, it forms a new startup for commercialization of that technology.
  • The new firm receives $250,000 in seed money from the VIC Investor Network, whose members retain an equity stake based on individual investments.
  • An internal VIC business development team and a CEO are assigned, and an initial research-and-development team is hired.
  • VIC staff based at the Fayetteville headquarters provides administrative support in the areas of corporate records, finance/accounting, graphic design/communications, grant writing, human resources, IT support, engineering and more.
  • The VIC business development team oversees product development strategies, funding activities including grants and private investment rounds and begins recruitment of a permanent executive team for the appropriate time in a company’s growth. VIC then maintains a board presence in portfolio companies that become operationally independent.

While early VIC companies based on UA tech such as NanoMech and SFC Fluidics had great promise, Goforth said their foundational technologies took many years of intensive development to create the high-value products they produce today. VIC’s focus now is on high-impact technology with a potentially quicker return on investment.

“Ultimately, those early companies came to thrive,” Goforth said. “However, it was a very long process to get those companies to where they are today. Today, VIC searches nationwide for technologies and looks for high-impact technologies that have a faster path to market.”

So far, VIC has identified and licensed technology from some of the country’s top research universities and two universities outside the U.S.: the University of Arkansas, the University of Arkansas for Medical Sciences, Johns Hopkins University, Massachusetts Institute of Technology, Stanford University, Tufts University, the University of Pennsylvania, the University of Texas, Washington University in St. Louis, the University of Colorado, the University of Massachusetts at Lowell, the University of Nebraska, Kagawa University in Japan and the University of Auckland in New Zealand.

Phil Stafford calls VIC a “model corporate partner.” He is president of the UA Technology Development Foundation, which oversees the UA’s research park. “I think of the VIC business model as a ‘just-in-time’ management system that assures that each technology company under development has the essential management services available at precisely the right time,” Stafford said. “Delivering the overarching management services in this fashion is not only cost effective, but it allows the technical team to remain focused on product development. Over the years, it has been very gratifying to see the growth and expansion of their portfolio companies into thriving enterprises.”

VIC’s startups owe much of their growth to the venture ecosystem created by Goforth and his colleagues.

The VIC Investor Network provides seed money typically used for completing proof-of-concept work, Goforth said, while the VIC Venture Fund was created to bring first products to market and achieve other “significant value-enhancing milestones.” The VIC Growth Fund was a much smaller precursor to the Venture Fund, he said.

VIC makes available a limited number of “slots” in its investor network. A slot is represented by a $25,000 investment commitment.

“The Venture Fund is being developed to invest in companies with strong intellectual property foundations and technologies that address societally important health problems,” Goforth said. “The fund focuses on the underserved gap between initial seed funding and revenue-growth stage investments. Although we are just beginning to put this fund together, the addition of the fund to the VIC venture development ecosystem will help drive more rapid and efficient growth.”

SFC Fluidics CEO Tony Cruz said VIC’s model allowed his firm to focus on getting its disposable insulin pump patch to market, which it expects to do early next year.

“VIC put in place the core technology licenses, financial processes and initial leadership at SFC Fluidics,” he said. “With the early-stage infrastructure in place, SFC was able to focus on strategic partnerships and technology and product development. In startup companies, it is important to be able to focus on the areas that matter.”

 

 

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