Saturday, July 30, 2011

University Enterprise Laboratories (UEL)

Declared Dead by MedCity News

The fiasco that is University Enterprise Labortories has been discussed before on this blog.  For background, please see:  University Enerprise Laboratories - A Wild Success or a Failure?

Finally time to stick a fork in it?

Minnesota ‘biotech incubator’ UEL has failed. It’s time to admit it

During the past six years, UEL has portrayed itself as a biotech incubator helping the University of Minnesota’s technology transfer efforts. But, for the most part, the university has been propping up what is a textbook case of how not to start an incubator.
UEL picked too big of a space in the wrong kind of building. It carried large debt from inception. And when the university didn’t create enough startups, UEL gave space to anyone in order to stay afloat. What’s more, UEL never tracked key metrics, like job creation, from startups that did flourish under its care.

It failed from the start 

UEL started in 2004 with $13.8 million in debt and an expectation that companies created from University of Minnesota’s technology would rent much of its 126,000 square feet.

But the university didn’t produce enough startups. So there were few renters and little revenue. In fact, in 2008, as UEL’s very survival became a question, it laid off its general manager and an administrative employee. It saved itself by renting to whatever company would take space.

“We were left scrambling to fill this building in one way or another so as to service the debt that we were up against,” said Anthony Carideo, UEL’s chairman.

Now, many of UEL’s roughly 30 tenants have nothing to do with biotech or life sciences.

It’s on welfare

... cash on hand ($378,806 as of December 2010) would be wiped out if the university enforced a requirement for UEL to pay a fine if it did not provide space to school startups. The university has waived that every year since 2006 — the first year the payment was due.

The cumulative tab to date? $500,000.

“At a time when that whole operation was just getting off to a start, it would have been I think (unfair) for us to say we hold you responsible for the fact that we didn’t spin out enough companies to locate there,” said Tim Mulcahy, vice president of research at the University of Minnesota.

Over the years, the university and its foundation provided $3.75 million to UEL, with the foundation also extending a $750,000 line of credit, Carideo said.

It didn’t do the math

George also said the success of an incubator shouldn’t be defined by operational cash flow. That’s because the goal of the incubator is to provide subsidized facilities and services to startups — not in generating profit.

Instead, success should be defined by the number of jobs the incubator has helped to create, George said.
UEL has had four graduates — Segetis, Twin Star Medical, Harland Medical Systems and OrthoCor Medical — but it has never tracked jobs it helped create.

University support is inconsistent

Last year, the school’s Medical Devices Center was teaming up with UEL to create what would be tentatively known as the Medical Devices Center Launch Pad. The space would house early stage companies created through a fellowship program at the Medical Devices Center.

But the head of the university’s technology commercialization office apparently shot the idea down. “It was an innovative, collaborative idea developed by good-hearted folks, implemented in start-up speed, without buy-in from U of Minnesota leadership,” stated Marie Johnson, the former director of the Medical Devices Center’s Innovation Fellows program.

In the future, could it become a biotech incubator? Yes. If it manages to lower its rent, kick out some tenants and bring in someone with tech transfer expertise to run it. But Carideo did not seem particularly open to the idea of throwing tenants out even though Mulcahy, a supporter of UEL, said that having an exit strategy for tenants is important for any incubator.

In the end it was Mulcahy who best captured the essence of UEL.

“UEL was a great experiment in public-private partnership,” he said. “I think it has fulfilled some of its promise. I think it’s a different entity than it had been originally intended to be.

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