Where to find a Multimillion-Dollar Business Idea

BusinessWeek
Viewpoint July 24, 2009, 12:38PM EST text size: TT
Where to Find a Multimillion-Dollar Business Idea
A breakthrough business idea often comes from outside. The successful entrepreneur is one who finds it, refines it, and makes a business plan
By Richard Mammone
Small Business
I can tell you this with great certainty: You will not stumble upon a multimillion-dollar business idea while brainstorming at your local coffee shop during your lunch break.
At least that's the case if you are like most of today's aspiring entrepreneurs who have been working countless hours for their employers, with little time for lunch, let alone for brainstorming. And even if you do have time on your hands because you've been laid off, you're probably still spinning your wheels. Spending hours concocting ideas doesn't mean they are viable. One cardinal rule of entrepreneurship many newbies fail to grasp is that you don't need to generate the idea yourself.
A successful entrepreneur must be a reductionist. She needs to identify her key talents and outsource everything else whenever possible. She must find a way to use the limited set of resources available to her to find the idea, refine it, and then form a viable business plan. That's what I've done multiple times in starting my own businesses based on technology discovered in academia. Today, I sit in both the Rutgers University Office of Technology Transfer and a new center called the Business, Engineering, Science & Technology Institute for Entrepreneurship & Innovation, which is designed to make the technology transition process easier for fellow entrepreneurs by helping to translate university technologies into real world commercial products.
University Gold Mines
Universities are a rich source of ideas. They spend years improving the principles that underlie many of the products and services currently on the market today. They also come up with new ideas that can create entirely new industries in the future. Universities spend nearly $50 billion every year in federal and state funds, corporate and privately sponsored research contracts, and other financial sources solely on university research projects, according to a 2007 survey by the Association of University Technology Managers. The Bayh-Dole Act, passed in 1980, encourages universities to patent and license new technologies to generate additional revenues for the university and also for the greater good of society by disseminating new useful products and services. Research powerhouses such as Columbia, Stanford, Massachusetts Institute of Technology, Harvard, Carnegie Mellon, and Rutgers have been able to take the revenue generated from licenses and royalties and plow it back into further research and innovation to create even more ideas for entrepreneurs to capitalize.
When aspiring entrepreneurs come into my office, I always tell them that university faculty turn money into knowledge via their research projects, but more entrepreneurs are needed to turn the knowledge into money by forming startups. Entrepreneurs can find this knowledge at their local university. There are thousands of patents available for businesses to license, ranging from life sciences to energy to software—you just need to know where to find them.
Of course it's not as easy as walking into a professor's office, picking out what you want from the menu, and then launching a market-ready product. Universities have received mixed reviews on assisting entrepreneurs with commercializing innovation since the Bayh-Dole act. Several observers have noted areas that could stand improvement to help universities better support the commercialization process. One common complaint is that the research is usually too early-stage for a commercially viable product or service, and more analysis is needed to start to shape a business plan.
Communication Breakdowns
Back in the day, technology transfer offices, sometimes called offices of technology commercialization (or offices of development or offices of licensing), were set up to assist faculty in getting patents and licensing their intellectual property. These offices are also responsible for acting as social networks to help connect investors and entrepreneurs with university professors and IP to form startups. But there have been problems figuring out how to express academic jargon in a way that was meaningful to entrepreneurs and others in the business world.
To break this language barrier, over the past few years academics have been launching new and improved practices for entrepreneurship centers and TTOs. Newer entrepreneurship centers such as Stanford's Center for Entrepreneurial Studies, MIT's Entrepreneurship Center, and Rutgers' BEST Institute were designed to help entrepreneurs work better in conjunction with academics. These centers offer resources and business experts, sometimes in exchange for a small equity stake in the venture, to assist both academics and entrepreneurs in transforming rough patent ideas into ideas that can be commercialized in the market.
My advice to aspiring entrepreneurs is to make a list of your friendly neighborhood university entrepreneurship centers or TTOs to find your next great idea. Before you visit them, look yourself in the mirror and psych yourself up. Don't be intimidated by the brainiac who came up with the idea. There's a reason he or she wants to meet with you. As you start to negotiate and plan your startup feel secure in knowing that academics are usually not looking to run the show; they're usually happy to serve as chief technology officers or chief science officers, so they can continue to search for new ideas in their labs and expand on their original findings.
At this point, you're probably wondering about financing. The entrepreneurship centers can also help you make connections with individual angel investors or angel investor groups or small venture capital firms that invest in the specific area you're assessing. The Small Business Administration can also be a source of funding with both Small Business Innovative Research and Small Business Technology Transfer programs. And the university entrepreneurship centers also have a range of educational resources that are particularly useful to aspiring entrepreneurs as well as more sophisticated business owners.
And how much will all of this cost you? Universities often impose license fees, royalties on sales of products or services, annual royalties, and/or milestone payments, which are often seen by entrepreneurs as deal-killers. Remember that universities have already taken the risk in inventing the product, so they obviously want some kind of payout. The good news is they are typically open to taking equity in your new venture. That means if you play your cards right, you can walk out of your meeting with a new technology and a business idea all for equity in something you did not invent yourself.
Mammone, Ph.D., is a Rutgers University professor with a joint appointment in the Business School and the School of Engineering, as well as the Rutgers University associate vice-president of corporate liaison and executive director of the BEST Institute.