Investing in startup technology reaps rewards for UT

Nick Spiller

Recently, Longhorn Startup Company M87 received a $500,000 seed investment from the UT System’s Horizon Fund to help commercialize the technology it has developed, a software solution that allows telecommunications companies to improve cellular coverage and capacity without making multi-million dollar changes or modifications to their existing infrastructure.

Sriram Vishwanath, an electrical and computer engineering professor, and his graduate students Vidur Bhargava and Jubin Jose developed this technology, which they then licensed through the UT-Austin Office of Technology Commercialization.  

The UT-Austin Office of Technology Commercialization (OTC) manages the transfer of UT’s intellectual property to outside entities. 

The UT System OTC, a separate office, houses UT’s Horizon Fund, an investment fund that attempts to help commercialize technology developed by UT researchers, including the technology used by M87, while providing the system with a positive return on investment. The fund has $22.5 million of capital under management that can be used to invest in any startup company with licensed UT intellectual property. These companies can be managed by students, staff, faculty or non-UT-affiliated entrepreneurs, as long as they properly license the intellectual property with the OTC office at the institution where the intellectually property was developed. 

This type of investment fund is innovative in itself, in that it abandons the traditional, conservative notion that government investment in startups is too risky. Usually, this kind of investing is left to venture capitalists, whose main job is risking large amounts of capital on new companies that they believe have the potential to provide returns five to 10 times the initial investment. 

But as the fund aims to prove, it makes little sense to fund a research project up until the results are ready to be extracted from the university environment and applied in real markets. 

Universities receive significant royalty payments from the intellectual property they license to outside entities. In 2010, the UT System raised $2.34 billion in research funding but only generated $42 million in royalty payments. The Horizon Fund is meant to provide the final leg of funding to get the technologies out of the lab and into the real world. Often, the investments made by the Horizon Fund are bridge investments that enable startups to progress far enough to secure larger rounds of funds from off-campus investors like venture capitalists. 

Within the UT System, there is a significant need to accelerate the commercialization of technologies we invent. The Horizon Fund, if administered properly, will do just this. 

Bryan Allinson, executive director of the Horizon Fund, says the nine investments the fund has already made are growing at the expected pace. His long-term vision for the fund is that it will be “a sustainable enterprise for commercializing technology out of UT System institutions.” 

If the Horizon Fund concept is proven sustainable, we will need to create more funds like it, possibly one at each individual UT System institution, seeded by surplus cash generated by the Horizon Fund. This would only further encourage an entrepreneurial culture, creating opportunities for students to manage the innovation process.  

Investing financial capital in startups involves risk, but I believe risk is necessary for entrepreneurship to be a sustainable, growing enterprise on campus. And should the fund fail to provide bottom-line financial returns, it still encourages entrepreneurship across the UT System, and entrepreneurship in itself is inherently virtuous and valuable. 

Spiller is a rhetoric and writing senior from Michigan and the director of the Longhorn Entrepreneurship Agency. You can follow Spiller on twitter @nick_spiller.

Editor's note: A previous version of this column did not distinguish between the UT System Office of Technology Commercialization and the UT-Austin Office of Technology Commercialization. Changes have been made to reflect this distinction.