Notes on meeting of 2/24/04 on UNMCenter for Entrepreneurship and Innovation
The meeting was held at the Manufacuring Technology and TrainingCenter auditorium at 800 Bradford Road, which holds 100 people. There was a standing room only crowd, including about 40 students.
Andy Salazar gave a power point presentation, which was followed by an extemporaneous presentation by Louis Caldera, a five member panel discussion, and open questions from the floor. Louis Caldera made some closing remarks. Then many people in the audience remained for cocktails, hors d’ouevres and further discussion. The formal session ran from 5:30 until almost 7 PM.
Andy’s presentation reviewed the Kauffman grant process and feedback from Kauffman on the UNM proposal. Kauffman said it would give grants to universities that were innovative, had proof of sustainability in their proposal and who could show matching fund commitments. Andy said the Kauffman debrief revealed that UNM had the strongest community support of any of the competitors, that the freshman learning community program was ok but not great, and that the overall program was less focused than desired. The review also pointed out that it was unclear how the connection between the student programs and the community would work. Kauffman also indicated that UNM was not clear about what curriculum we would follow.
Andy said UNM would be seeking funding to continue our work from NSF, EDA, the DOT Office of Small Business Utilization, and the National Collegiate Inventors and InnovationAllianceCenter for Entrepreneurship and Innovation.
Louis then thanked the provost, deans and faculty in attendance (including Provost Foster, Deans Dasenbrock, Scarnecchia, Schluntz, and Smith – note that HSC was not represented, nor were the NM Department of Economic Development, LANL or SNL. There were many local business people, entrepreneurs and investors in the room). He cited the Kauffman grant process as a great experience for UNM, one that released energy and helped UNM focus on entrepreneurship. He said the need for such a program became evident and also the fact that the university’s participation had been the missing link. He said UNM could be both a catalyst and a convener.
Louis then recapped the visit we made to Kansas City and how we told the judges then that we would move forward with or without support from Kauffman. The question now is how to capitalize on the energy created by the Kauffman process to move forward. The first answer to that question is that we will not simply move forward with a downscaled version of our earlier proposal. We will rethink what we can and should do. Our Kauffman proposal was perhaps too ambitious and not clear enough.
One of the questions our proposal addressed was what the right curriculum should be for an entrepreneurship program. Louis explained that Kauffman will now go further into that question itself with the goal of developing a branded curriculum.
Being a resource for small business is a formula that is very different from creating entrepreneurship in technology. Our new proposal for a Center on Entrepreneurship and Innovation (CEI) is focused on the path of creating entrepreneurship in technology. Louis then framed the challenge to develop a program that
- focuses on technology driven entrepreneurship that leverages the technology advantages of New Mexico
- focuses on venture capital backed companies
- with high potential for dramatic growth.
He said we want a focus on preparing students to work in and contribute to such companies, companies that create new products with the potential for gaining market share, and scaling up production in order to earn major dollars. He believes this is the kind of dream that can ignite passion in students. He wants the program to inspire students. We want the community to tell us whether this is the right focus.
Louis said this recapped what he had said in the letter inviting everyone to this meeting. Now the question is how to accomplish this vision. He reviewed UNM’s current resources in entrepreneurship, in the LawSchool, at ASM, in Manufacturing Technology. His point was that we want to complete a thorough review of all our assets. Then we will hire an experienced executive director to run the program. Thirdly, we will tap into community support to create an advisory board that has real ownership in the program. He explained his commitment to funding the program with $500,000 over three years matched by $500,000 in outside funding, and added that a key role for the executive director would be to raise funding beyond that initial $1 million.
Andy then added details on what UNM is doing already, including the work at HSC and the School of Engineering. Then Andy introduced the panel and framed the three questions he had asked the panel to address. Louis asked the panel to also comment on the technology focused program vision he had articulated.
Greg Heileman, Elisar founder, serial entrepreneur and engineering professor was the first to respond. He said that the lack of infrastructure in New Mexico holds back entrepreneurs, and by infrastructure, he mentioned the difficulty of hiring the right people as a key factor. He said this is changing through the state’s efforts to bootstrap. He commented on the levels of venture capital available and added that the time to exit for many vc firms has gone from 7 years to a quicker in and out cycle of five years or less. That speeded up cycle is out of synch with the way the university works through issues of intellectual property, with a cycle of at least a year for critical decisions. He also cited university policies on conflicts of interest as a negative influence on the formation of companies. Greg said that if the role of a university is to create and disseminate knowledge, than it should not get hung up on the “ownership” of that knowledge. The chief problem is that UNM appears to be more interested in making money than in disseminating knowledge. The university needs to decide as a matter of policy which is more important.
He also suggested that the university adjust its faculty leave policy to encourage faculty to leave to start companies and return later with no penalties. Finally, he said that we need to focus on what is good for New Mexico, not what is good for UNM. He believes the Technology Ventures Corporation model (matching entrepreneurs with the moneymen) works well and added that one of the fundamental things entrepreneurs need is networking possibilities.
John Warner of Technology Ventures Corporation and a former professor at ASM then commented, beginning with an endorsement of Greg’s last point. He said our goal should be the economic development of the state, not the university. He advised partnerships with other institutions of higher education. UNM needs to create an ongoing community discussion with other campuses. He feels the Center for Entrepreneurship and Innovation is an intriguing new initiative by UNM and the criterion for success should be if we leverage existing resources without creating another university bureaucracy. He feels this kind of forum is very important and continuous input from the business community is a good idea. He suggested we not limit input to the board of directors but continue with wider forums like this one. Regarding Andy’s third question, that is, who are the successful technology entrepreneurs in New Mexico, he said many were in this room, but overall the answer is that there are not enough of them (he suggested engaging Juanita Tuttle). He said this is part of the infrastructure problem Greg cited. Regarding Andy’s first question, that is what are the challenges in developing technology entrepreneurs, John said that we need to create ways for students and faculty to meet real entrepreneurs. One way to do that would be to invite “Executives in Residence” to visit for a week or more at a time, walk the campus, visit twenty different classes, work with faculty to teach those classes. This kind of interaction with faculty and students would be very helpful.
John then commented on the term “venture capital.” He prefers “equity capital” because it includes many different financing models. He urged a business plan competition with various equity capital players as judges. He thinks such a competition could be expanded to NMSU and Tech.
John Brown then spoke. He said a vibrant technology community feeds on itself. His experience with just a few months at Invest New Mexico is that there are plenty of good opportunities but those aren’t matched by enough capital or enough people. But he optimistic that New Mexico can develop both quickly, since we are a small state and it wouldn’t take much to reach a scale that would support more success. Currently, not enough transactions are being done. We need to get 6 or 8 or 12 transactions done in the next 12 months. That would give us a small group of companies to act as an engine for the economy in the state. There is about 140 million dollars in venture capital committed today in the state, of which 70 million is available this year.
He talked about his experience recruiting business students over the years on a national basis and said that ASM students neither have the opportunities in finance and investment nor are they aware of such opportunities. UNM should make those opportunities. UNM can stimulate deals by getting students involved in the capital investment process.
He pointed our that unsuccessful ventures still create learning and knowledge. He said that New Mexico needs more early stage capital and that there is a gap between the new venture capital money that is available and the demand for early stage financing. Most VC’s don’t focus on the early stage.
Trevor Loy of Flywheel Ventures then spoke. He said they are the first seed and early stage capital firm located in New Mexico. He said his funders are mostly from the two coasts and they invested because they recognize the potential of New Mexico. He said NM is not likely to become a Silicon Valley but it could be the next ResearchTrianglePark or San Diego.
Trevor reviewed his experiences at Stanford, including their creation of an umbrella group called the Entrepreneurship Task Force and the university’s Gap fund, which gives funding in the range from $20,000 to $250,000 to university researchers who are not yet ready for venture capital.
Trevor uses the term “ecosystem” to describe all the various factors that need to be present to start and grow successful high tech ventures. He says the New Mexico ecosystem is immature but can be changed in the short term. He also pointed out that financial markets are now global in nature and money will chase the best deals, anywhere. Because of this, New Mexico and UNM need to move fast to attract financing for more deals before the money goes elsewhere. He validated New Mexico’s ability to compete for such funding and said that wealth creation is ultimate measure of success. UNM needs to make the community understand that wealth creation is about making the community rich, not just the individual. The goal is to raise up the average salary levels in the state. He said their own stretch goal at Flywheel is to hit a home run with an company that exits to liquidity at the $1 billion level.
Trevor gave kudos to Greg Heileman for his efforts. According to Trevor, the best deals are those that are the third try, with one success and one failure behind them, preferably with the failure the immediate past experience. He says failure is a better teacher than success. He added that UNM needs to create a culture that is more tolerant of risk and failure. He pointed our the portfolio nature of venture investing, 6 out of 10 deals will fail and two out of the remaining four won’t make your money back, yet the overall return is positive. UNM needs to cultivate a culture that allows for individual failure. Students are the most important element of this trial and failure process.
Trevor said that the focus on students is good, because students don’t care about the turf battles so typical of universities and in fact, their active participation ensures that time is not wasted on such battles. He added that UNM has an academic and knoweldge-based agenda. That means we should support Ph.D. research in technology. These doctoral students and professors also can be useful to the business community as honest brokers. Finally, he advised us to focus on growing the pie and gave the example of his contacting V-Spring capital, a competitor. He said Flywheel will not have the resources to finance that $1 billion company. We need to grow the number of players.
Chris Wiggins of Zia Laser then spoke. He is a 1999 UNM graduate, in biology and Spanish. He recounted his experience trying to land a job in an entrepreneurial company and thanked Tom Brennan for taking a chance on him. He said there was no place to go when he graduated from UNM. He hopes this program will create centralized resources for students as well as a place where students can talk with real life entrepreneurs. He said that he is thinking of getting his MBA from Harvard or Stanford, but UNM is not on his list in part because it doesn’t offer the curriculum he needs. He said internships and job placements must be parts of the program.
Lisa, an MBA student at ASM then asked what steps are being taken to involve students in the creation of the program. Louis made a commitment to involve students.
Louis invited Paul Shirley of NextGen to speak. Paul reiterated the need to get students involved and commented on the phenomenal showing of people at this forum. He urged an aggressive mentoring program be part of the program and said that we are still looking for all the pieces that will provide a serious place at the table for the community. Louis said that is something we want to think through.
Trevor then told an anecdote about Steve Horrerning, who raised $30 million from Seven Rosen and moved to California, where his company is one of the top start ups. We didn’t manage to keep him in New Mexico but we can keep others, like Chris Wiggins.
Chuck Wellborn raised a question about whether $300,000 a year would be enough to fund the program. He wondered if we needed an executive director and suggested we might do better to put more money into existing programs, like Peter Rachor’s work at STC.
Tony Maketha, who identified himself as a product of the New Mexico educational system and a successful entrepreneur, endorsed the metrics Trevor gave for success as well as the rifle shot approach to focusing. Throughout his business career, people always talked about investments in other states, never New Mexico. John Brown commented that this program will generate the kind of momentum to change that.
Trevor cautioned that we not try to achieve the five year vision in year one. He advised a laser focus. John Brown added that we need to generate visible accomplishments, like starting two companies and placing ten interns. He said there are dozens of programs; what we need are not more programs but more accomplishments. These comments captured an underlying skepticism that did not completely surface at the meeting but that came out in the after meeting conversations.
Adam Brown said that he would like the program focus to extend beyond technology and cited the 21% of the general fund that comes from the oil and gas industry.
Steve Walsh thanked his students for coming, commented on the successes of the MOT program, especially through internships at start up companies, and introduced one of the students, Jennifer, who furthered the testimonial.
Roberto Corvo, a graduate student in mechanical engineering, said that the University put up some roadblocks when he tried to bring the NASA DEVELOP program to campus.
Louis Caldera then made some closing remarks. He said we want to take the program to the next level by getting more students involved, inspiring them with more passion for entrepreneurship, and helping more faculty leave to start businesses. He said we would identify the accomplishments we would like to achieve over the next 6 months and the next year, and he thanked everyone for coming. Paul Shirley then thanked Louis for his leadership and commitment.