Retiring VP Mulcahy retooled U research

If Tim Mulcahy seems noticeably relaxed these days, that's probably because he is. Like any soon-to-be retiree, Mulcahy, 61, is looking forward to a life of travel, photography and writing after he steps down as University of Minnesota's vice president of research in December.

But more important, Mulcahy walks away from the job confident the university has pumped a steady flow of jobs and innovation into Minnesota's economy. Once an intractable sinkhole for intellectual property, the university has emerged as a credible place to launch startups and develop new technologies.

"We've run a pretty good lead lap," said Mulcahy during an interview in his office Friday.

In fiscal 2012, the university launched a school-record 12 startups compared to just two in fiscal 2008. The companies include everything from a startup that uses carbon dioxide to extract geothermal energy to a firm that developed software to reduce traffic congestion. The university bested all but a half-dozen individual research universities across the country in startup creation last year, according to a recent survey by the Association of University Technology Managers (AUTM).

The university generated $10.1 million in licensing income in fiscal 2012, not a blockbuster amount but much better than the $7.9 million in fiscal 2008. Patent filings and invention disclosures are also up.

More important, the university has earned some respect from the larger business community.

"The University of Minnesota can be a real difficult place to penetrate," said Charlie Weaver, executive director of the Minnesota Business Partnership, a group of the state's most prominent CEOs. "It has got a ways to go, but it has gotten better."

While the university enjoys good relationships with larger corporations such as Medtronic and 3M, the school could do a better job reaching out to younger companies, Weaver said.

Such goodwill between business and higher education was largely absent when Mulcahy first joined the university in 2005. At first, Mulcahy was bit surprised about the degree of antipathy Minnesota political and business leaders held toward the university. After all, Mulcahy had been a top official with the University of Wisconsin-Madison, a school well respected for its ability to create startups and license technologies.

"I basked in the legacy of the University of Wisconsin," Mulcahy said. "I wasn't aware that the sun didn't shine as bright in Minnesota."

Mulcahy soon discovered two major problems with the University of Minnesota. The Office of Technology Commercialization (OTC), which oversees licensing and launching new companies, was staffed by academics with little or no experience in business. In addition, the school had a reputation of demanding steep prices from companies interested in its intellectual property.

In 2007, Mulcahy hired Jay Schrankler, a former Honeywell executive, to run OTC. Schrankler, in turn, recruited industry veterans to vet the school's IP portfolio and determine which, if any, of the university's inventions could be licensed to outside companies or spun out into startups.

"It was a bold step for someone like Tim to not hire another academic but have someone from industry," Schrankler said.

Mulcahy also made it easier for the school to collaborate with industry. In the past, the school's first instinct was to grab as much revenue as it could from a licensing deal, often to the detriment of the company. But in reality, the university only generated less than $1 million a year over the past 20 years from corporate-sponsored research, a number that didn't justify such hardball tactics, Mulcahy said.

In 2010, the university launched Minnesota Innovation Partnerships (MN-IP), a way to simplify how the school collaborates with industry. A company interested in funding university research pre-pays a fee of $15,000 or 10 percent of the research contract's value. In exchange, the school grants the company an exclusive license. If technology generates more than $20 million in annual revenue, the university receives a 1 percent royalty fee.

"I'm sure we left some money on the table," Mulcahy said. "But we put more value on the relationship [with the company] than the low probability of a royalty payment."

Under Mulcahy, the university created a CEO-in-Residence program, which seeks to recruit experienced entrepreneurs and business leaders to run a startup once it spins off from the school.

Over the years, the quality of startups originating from the university has gradually improved. ReconRobotics Inc. has landed major defense contracts and now employs 50 people. Miromatrix Medical Inc. recently attracted $5 million to $6 million from outside investors to develop technology to grow organs.

"You could throw a lot of stuff at the wall and see if it sticks," Mulcahy said. "But we want to pick the startups that will stick and then throw it at the wall."

Although the university has demonstrated solid progress, the school will win more credibility from potential investors if those startups get sold to another company or eventually file for a stock offering, said Joy Lindsay, president of StarTec Investments, a Bloomington-based angel investment firm.

"That has to be the target," Lindsay said. "To create value in a company and have some of the money from a sale or IPO find its way back to the university."

Thomas Lee • 612-673-4113