New IllinoisVentures director to lead push for start-ups

New IllinoisVentures director to lead push for start-ups

Just over a decade since its launch, a University of Illinois subsidiary that invests in start-up businesses with Illinois ties has tapped a new director, brought in additional board members from outside academia and plans to increase funding for start-ups coming out of the Chicago campus.

Nancy Sullivan, director of the Office of Technology Management at UI Chicago, will be co-managing director of IllinoisVentures with John Banta, who has been the CEO and managing director since the fall of 2002.

"We're looking to accomplish a better separation of the public and private components" of IllinoisVentures, said Banta, who will focus his time on managing the Illinois Emerging Technology Funds, two private ventures funds — totaling about $50 million — that IllinoisVentures manages.

IllinoisVentures also directly invests in start-ups with seed and equity funding; the value of its investments currently stands at $7.1 million. Sullivan's time will be split between Ventures and UIC's Office of Technology Management, where she has helped faculty license their inventions. Prior to coming to UIC, she was at Northwestern University helping start-ups there obtain funding.

Banta's salary is $240,098, plus he is eligible to receive a bonus; his most recent bonus was $136,175, putting him at $376,273. Sullivan, who will not receive a bonus, will be paid $233,397.

Since its creation in 2001, IllnoisVentures has invested in and helped raise millions for start-up businesses with Illinois ties. A limited liability company, it is subsidized from the university — $1.4 million for the current fiscal year ending June 30, 2013, plus close to $400,000 for benefits from the state passed through the UI.

In recent years, the income that IllinoisVentures has earned for managing the Illinois Emerging Technology Funds has increased to a projected $716,000 for this year.

About $2 million is budgeted this year for salaries and bonuses for its staff. Currently there are six staff members in two offices: the university's research park in Champaign and the Civic Opera House in Chicago. The UI's lease in Chicago ends later this year, and no decision has been made yet on whether the unit will continue to stay at the opera house, move elsewhere in Chicago or return to one location in Champaign-Urbana.

UIC's start-up fund

On the Chicago campus, IllinoisVentures will establish what's being called the Chancellor's Innovation Fund, a $10 million fund for startups there. Sullivan described it as a reinvestment of money earned through successful commercialization efforts on the campus to "continue the cycle from the labs, from translational research out to commercialization." The Chicago campus, whose researchers have developed several drugs, brought in just over $17 million in royalties for fiscal year 2012, compared with Urbana's $6.4 million.

The money for start-ups will be "proof-of-concept funding," to help very early stage start-ups with about $25,000 to approximately $75,000, and equity funding, about $100,000 to $150,000.

A decade ago, only a handful of universities had entities that focused on commercializing technology being developed on their campuses, said UI Vice President for Research Larry Schook. IllinoisVentures was one of the early pioneers in this area, and since its start, several universities, such as the University of Minnesota, have since followed.

"It's clear the university showed great creativity and wisdom in launching what at the time was a highly unique effort. Ten years later, there are now over 80 examples of university-related funds. We are consistently recognized as one of if not the best in class of those efforts," Sullivan said.

In the IllinoisVentures portfolio, 36 percent is in information technology companies, 36 percent is in life sciences and 28 percent is in physical sciences.

Banta said IllinoisVentures is especially interested when there is overlap between those areas, "where you get unusual collaborations ... that can lead to unique, exciting innovations."

Winners, losers

Among the successes so far, he counts ShareThis, a content sharing program that was ranked 35th on Forbes's "America's Most Promising Companies" list; Semprius, which deals in highly efficient solar cells; iCyt, the cell-measurement company sold to Sony; Chromatin, a feedstock company in the agricultural and renewable fuels market; the lighting company Eden Park Illumination; and more.

Of the $10.6 million IllinoisVentures has invested in 75 different companies, it has so far realized $1.47 million from $930,000 it invested in eight companies.

IllinoisVentures has written off $3.19 million from its investments in 32 different companies, nearly 43 percent of the companies.

That percentage may look "out of whack," but Sullivan insisted it's not and stressed that the written-off investment was just over $3 million.

"We're not talking about $10 million. We still have over $6 million active, and when you look at the time horizon, those are not unacceptable numbers," Sullivan said.

Schook pointed out that when you're working with an early-stage company, in a difficult economic environment, the timelines to success, which can be long, can become even longer.

"It is a seeding phase, and IllinoisVentures seeds new ideas," Schook said. Staff will "figure out early which ones will be commercialized and which ones will not," he said.

The key word is "early."

"It is important to force failure early to focus efforts on projects with prospects of succeeding," Banta added.

"The challenge facing university-related technology transfer investing in general are the inherently long timelines associated with this kind of work. When you combine that with the difficult economic environment, entrepreneurs, investors and universities need to continue to get more creative about how to address the early stage funding gap," Banta said.

New board

In addition to the changes in administration, IllinoisVentures also will see a slight change in its governance.

The board of directors now includes more members, with two additional ones coming from industry. The roster now includes six, rather than four, voting members from business. The new members are Brendan Fox, a former Eli Lilly executive whom Schook called a leader in animal health and in how to license technologies; and Franklyn Prendergast, an M.D.-Ph.D. with Mayo Clinic ties. Schook called Prendergast a "tour de force in health technologies." They join Edward McMillan, current UI trustee also serving on the IllinoisVentures board; James Foght, Warren Holtsberg, William Tai and Michael Tokarz, who have been serving on the board and come from business.

The directors of the Offices from Technology Management now serve on the board as ex officio members along with the vice chancellors for research, the top research administrators for Chicago and the Urbana-Champaign campuses.

"One of our goals is to really engage the campuses more in making these investment decisions," Schook said. The technology directors are now at the table participating in the same discussions — "getting return on investment and stimulating company formation."