12.14.17 | Xconomy | Jeff Buchanan | Original Publication

[Updated 12/15/17 2:51 p.m. See below.] Since its launch four years ago, a University of Wisconsin-Madison program has been working with students, faculty, and staff at the school to turn their ideas into startup companies.

But now the program, known as Discovery to Product (D2P) has nearly exhausted the $2.4 million “Igniter” fund D2P has used to invest in entrepreneurs in recent years, said interim director Andy Richards. He said there’s some “concern” that fewer people will come to D2P for help advancing their ideas because, at least for now, they won’t be able to get funding from the organization. However, Richards said, D2P will continue to provide entrepreneurs hands-on support, while also focusing on coordinating entrepreneurship-related activities across the university. [This paragraph has been updated to more accurately describe how D2P will work with entrepreneurs in 2018 and future years.]

“The Igniter funds are going away,” but D2P is not, Richards said Tuesday during a presentation at the Wisconsin Institutes for Discovery. D2P will continue to function as a “portal, the starting place for campus entrepreneurs,” he said, and will now seek to do more to “help facilitate the coordination of resources and planning with [those] resources in our community and on campus.”

D2P plans to accomplish this in part through a new coordinating council, which will meet for the first time on Friday, Richards said. Numerous groups at UW-Madison, as well as ones affiliated with the school, will be represented on the council, he said. They include the Wisconsin Alumni Research Foundation (WARF), an independent organization that manages patents and licensing of intellectual property for the university; the UW Foundation; UW-Madison’s Office of Corporate Relations; and its business, engineering, and medical schools.

D2P was created in late 2013, with commitments from UW-Madison and WARF to each provide $1.6 million over a three-year period. Not long after, the school brought on John Biondi to run the program. He left D2P in August, which led to UW-Madison putting Richards in charge of the program on an interim basis.

(The combined $3.2 million from the university and WARF is meant to fund D2P’s operations—things like staff salaries and overhead costs—and not for funding entrepreneurs.)

The program then received $2.4 million from the University of Wisconsin System—a statewide organization which has functions that include awarding gifts and grants to UW campuses—to create the Igniter fund.

D2P staff have used the Igniter money to lead groups of UW-Madison entrepreneurs selected for the program through an intensive five-week regimen aimed at evaluating the potential market for a new product idea, developing prototypes, and other tasks. These ideas, which D2P calls “projects,” are not eligible for Igniter funding if the entrepreneur or team behind them has already formed a business entity to commercialize the product.

Richards said that from 2014 to 2017, D2P has helped entrepreneurs evaluate about 60 projects, 17 of which turned into startups. They include Stem Pharm, Xemex, and Spectrom, which New York-based MakerBot acquired for an undisclosed sum in 2015.

D2P plans to spend what’s left of the Igniter fund by June 2018, when the current fiscal year ends, Richards said.

“We are looking at … continuing to provide the Igniter program, but don’t have resources to actually fund the prototyping and market research at this time,” Richards said. The work the Igniter fund helped support can be key for startups seeking to position themselves to raise venture capital and other forms of outside investment, he added.

In an interview, Richards said he was not sure what D2P’s total operating costs have been over the program’s life span. But he said the total is less than the $3.2 million UW-Madison and WARF committed to launch D2P in 2013.

Richards said being able to secure enough money to finance D2P’s operations in 2018 and future years is something he’s “not really worried about” at the moment. WARF, which recently announced plans to invest $60 million in startups affiliated with UW-Madison by 2025, continues to be a key backer of D2P, Richards said.

UW-Madison is known as a research powerhouse, particularly in the life sciences and engineering. According to the National Science Foundation, the school had the sixth-highest research and development expenditures among U.S. universities in 2016.

Some of the schools that UW-Madison trails in the NSF ranking are investing significantly in startups and new technology development. In 2015, top-ranked Johns Hopkins University said it planned to invest $40 million over five years in innovation initiatives. Later that year the University of Michigan, which had the second-highest R&D expenditures in 2016, said it planned to create a $10 million seed fund to invest in student-led startups.

Two years ago, there was talk of creating a $2 million seed fund to support the commercialization efforts of UW-Madison students, faculty, and staff, Richards said. The state’s job-creation agency, the Wisconsin Economic Development Corp. (WEDC), was involved in the discussions, along with the UW Foundation, according to a WEDC spokesperson. Under the proposed plan, the foundation would’ve managed the fund and worked with D2P to make investment decisions. [Updated to clarify D2P’s role in a proposal to create a seed fund supporting UW-Madison entrepreneurs.]

The proposed seed fund did not come to fruition. During negotiations, WEDC committed to providing $1 million, but that was contingent upon a group affiliated with UW-Madison matching the amount, Richards said. According to WEDC, “the [UW] Foundation withdrew from consideration and a contract was not executed.”

Richards said continuing to provide funding to help people on campus advance their discoveries and ideas toward commercialization, as D2P did through its Igniter fund, is a worthy goal. But he pointed out that WEDC is focused on supporting commercial entities, and the majority of the projects D2P has funded have not yet turned into businesses. WEDC also would’ve required that the money it committed to the seed fund be re-invested in startups within 18 months of the initial award date, Richards said, and that companies receiving capital regularly provide the agency with hiring, salary, and follow-on investment data.

“At the time, we weren’t sure we were going to be able to meet all the requirements,” he said. “We would have [had] to make sure that we have enough deal flow.”

And in terms of WEDC’s reporting requirements, Richards said: “We don’t have data on that, even the companies that we have right now that we’ve been working with [through D2P]. We would need to have structures in place in order to collect and report those figures.”