University Entrepreneurship

Slide 1: University Entrepreneurship The Blue Line Entrepreneur Center at Penn State

Slide 2: Historical Precedence and Need  Each of these well known and successful companies were founded by university entrepreneurs at Stanford (Cisco, Sun, Yahoo, Google), Harvard (Facebook, Microsoft) and Texas (Dell).  Weebly was founded by Penn State undergraduates who then moved to Silicon Valley during their senior year. I-Conserve’ s IP was sold to a Silicon Valley company.

Slide 3: Sand Hill Road  It is not a coincidence that the largest concentration of VC firms in the World are across the street from the Stanford campus.

Slide 4: Sand Hill Road vs. College Avenue Palo Alto State College Population 57,809* 45,638 Spending per K-12 Student $7,606* $7,303* Adults with College Degrees 74%** 69%** Adults with Graduate Degrees 43%** 40%** University Research Expenditures $694 Million $607 Million College of Engineering Enrollment 5157 6949 Venture Capital Firms 85 0 Cost of Living (U.S. Average=100) 234.42* 99.08* Average Commute (Minutes) 27.7 14.1 Median Home Cost $1,415,100* $324,900* Penn State/State College compares favorably with Stanford/Palo Alto in every measure except risk capital sources SOURCES: *Sperling’s Best Places, **Simply Hired

Slide 5: Happy Valley twice as cheap as the Silicon Valley

Slide 6: Importance of University Entrepreneurs  8% of all university startups go public, in comparison to a going public rate of 0.07% for other U.S. companies. A 114X difference!  Over 400 university startups have been created from nationally based on federally funded R&D.  University start-ups have twice the survival rate of other U.S. companies. SOURCE: National Council of Entrepreneurial Tech Transfer

Slide 7: University-Entrepreneurs  UE’s have access to world class facilities and advice.  UE’s have low costs of living, healthcare and access to talent.  PSU UE’s have access to the Blue Line for free office space and equipment.  What they don’t have is access to capital and time.

Slide 8: Time in the BIGGEST Enemy for University Entrepreneurs  University-Entrepreneurs have a short time on campus with access to facilities and experts.  Upperclassmen will likely start ventures more often than underclassmen, cutting their opportunity to two years or less.  Seniors and recent graduates have the lure of being recruited for high paying corporate jobs.  Business Plans take an average of 400 hours (six months) to write.  Due Diligence from VC’s or Angels could take many months more.  Business Plan contests usually have only one winner and come around only once a year.

Slide 9: VC’s Only Swing for the Fences  VC’s do not like to invest less than $5 Million in a company.  $5 Million VC investment would require a $100 Million Exit to be deemed a home run.  Only 0.3% of companies achieve the $100 Million level in the United States.  VC’s have a regional bias, not wanting to travel further than one hour by plane or car.  Therefore, the odds of a $100M venture-funded start-up coming out of State College are 600,000 to 1. SOURCE: U.S. Census Statistics on Business Size

Slide 10: 94% of Venture Capital Investments are in Just 12 Metro Areas SOURCE: PriceWaterhouse Coopers MoneyTree Report

Slide 11: Swing Only at Strikes  90% of the companies in the U.S. have 20 or fewer employee companies (0.3% vs. 90%).  Focus on creating <20 employee companies.  Mitigate as much risk as possible.  Provide only the funding they need, only when they need it, to reach sustainability.  Provide access and resources for the few breakthrough companies.  Step One: Create the Blue Line SOURCE: U.S. Census Statistics on Business Size

Slide 12: Venture Capital IS NOT the Answer for Local Economic Development  The odds of a successful venture-funded company in State College are 1 in 600,000!  Even if that should happen, Venture Capital firms and Angel Groups who operate like VC’s seek and return on their invested capital within 5 years.  Today exits occur largely from mergers and acquisitions, not IPO’s.  M&A usually result in the acquired company moving or being consolidated.

Slide 13: Schools in Top 12 Venture Capital Areas Research Expenditures Licensing Revenue ROI NYU $ 210,804,000 $ 147,412,824 69.93% Florida $ 459,114,540 $ 42,900,000 9.34% Stanford $ 699,211,807 $ 61,310,739 8.77% Northwestern $ 348,439,588 $ 29,990,550 8.61% UMass $ 404,962,000 $ 27,183,583 6.71% UC System $ 3,035,949,000 $ 193,499,879 6.37% Georgia $ 323,843,000 $ 16,805,484 5.19% Georgetown $ 197,683,529 $ 8,478,309 4.29% Washington $ 936,360,325 $ 36,199,485 3.87% MIT $ 1,212,800,000 $ 43,500,000 3.59% Colorado $ 632,973,484 $ 21,233,214 3.35% Harvard $ 623,958,100 $ 20,849,993 3.34% CalTech $ 411,126,907 $ 13,234,235 3.22% Arizona State $ 131,814,265 $ 3,349,612 2.54% Texas $ 445,585,000 $ 8,431,700 1.89%

Slide 14: Underperforming Schools Research Expenditures Licensing Revenue ROI Cornell $ 605,341,000 $ 6,125,000 1.01% Purdue $ 388,500,000 $ 3,823,581 0.98% Duke $ 589,637,000 $ 4,124,547 0.70% Maryland $ 313,826,837 $ 1,873,489 0.60% Tennessee $ 240,280,186 $ 1,282,913 0.53% North Carolina $ 583,996,531 $ 2,400,184 0.41% Nebraska $ 323,861,560 $ 1,277,420 0.39% Georgia Tech $ 467,724,048 $ 1,817,319 0.39% Arizona $ 535,846,792 $ 1,688,857 0.32% Penn State $ 656,634,000 $ 1,879,542 0.29% Ohio State $ 652,328,819 $ 947,000 0.15%

Slide 15: Economic Impact on Region Current U.S. Companies Employees Percentage Average Revenue  We incubate 200 companies in a 10 year period, reaching the U.S. 1 to 4 60.82% $0.348M averages in size (shown in the 5 to 9 17.74% $0.879M table at the left). 10 to 19 10.77% $1.768M  87% of the incubated companies 20 to 99 8.92% $5.676M survive. 100 to 499 1.45% $30.940M  Total employment, including spin- 500 to 749 0.10% $105.395M off jobs, would exceed 4000. 750+ 0.21% $105.395M +  Total economic impact would be $1.4 Billion.  Tax revenue would total $160 Million. SOURCES: Kentucky Cabinet for Economic Development U.S. Census Bureau