December 1, 2011

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Utah Business Staff

December 1, 2011

BHASKAR: How much of the money you have now is invested in in-state companies versus out-of-state companies?

ROBERTS: Within our portfolio, we have eight in-state VCs out of 28.

BHASKAR: And how much is actually invested in the state?

ROBERTS: About $270 million has gone to Utah companies from our portfolio. So that’s not just Utah, that’s our entire portfolio. And I guess as a return you can say let’s take $300 million in tax credits. What’s been our return to the state? We’ve used a lot of different numbers. We’ve used the $270 from Utah companies, or syndicated dollars has been over a billion, or we can say we used no tax dollars and brought in 1,200 jobs. We are also working on parameters, one of those metrics of how to actually measure what we have done.

Another comment I wanted to throw is that I have questioned what the role of government is. As we’re looking at a cash-poor state, the pressure that Utah Fund of Funds has received, I wanted to say: you want a seed fund, go back to the legislature, get yourself a fiscal note on a bill and get some money out of the coffers. Don’t undermine the Utah Fund of Funds by having us invest in risky investments that will end up shaming us later.

Discuss the roles of the local universities regarding commercializing university-based technology.

BHASKAR: The state has modified their COE program. They used to give $300,000+ to entrepreneurs to get started with a university idea. We moved away from that to $40,000 plus a grant. The thing that we find is that professors don’t want to leave the university, they just want to come up with the next incremental creation, and we can’t get them to take that idea to go outside and get it started.

Another thing we find is lack of mentorship. We talked about how we can do some mentoring to help them prepare a proper proposal. A lot of the problem is we can’t get them to give up their ideas to outside companies, number one. Number two, they want to do it themselves. They don’t want to leave the university and go start something. It’s tough.

JACKSON: I was formerly on the faculty at the university when I left to start NPS Pharmaceuticals. That was in 1986. It’s a very different environment now. As we have all talked about, capital is a problem, but I’d like to draw a very bright line between capital that’s required for tech deals and capital that’s required for life science deals, be they device deals or pharmaceutical deals. Both of those are longer, riskier, more capital intensive. Other than that, they are extremely attractive. The punch line of course is that the potential payoff is huge.

But it is a real challenge in this environment to get people to take the risks associated with those kinds of deals. We need more of a public-private partnership in Utah, because the life science industry in Utah has stagnated, and the pharmaceutical industry in Utah is virtually nonexistent. There are some ways to try to foster that, but those policies and those resources are currently not in place.

I just have to make a quick comment: if the government in Washington goes away, the life science industry in Utah will go away. The University of Utah brings in something on the order of $350 million a year in federal funding. Tech ventures bring in license and royalty income something on the order of $10 million a year. So when you think of the emphasis that’s put on the tech ventures effort– and I have been a part of that effort, so I’m not trying to disparage it—but in terms of economic impact, in terms of the University of Utah as a driver for Utah’s economy, federal government dollars coming in dwarf what’s accomplished in terms of revenue or royalty in licensing dollars through tech ventures.

As a USTAR board member, I think USTAR has been tremendously successful in the first part of its mission to provide funds to the University of Utah and Utah State University to hire extraordinarily bright and productive people who work in areas where there is very strong commercial potential. Those people are now on the ground. They are bringing in lots of federal dollars for every state dollar that’s been invested in hiring them.

But are they creating companies that in turn are creating jobs, that in turn are creating tax revenue for the state? The answer is no. And that’s a problem that we are all going to have to face up to and think about what USTAR 2.0 is going to look like, where those dollars need to go to actually move technologies into companies that actually make and sell products.

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