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University of Utah
The Park Building is headquarters for University of Utah administrators.

SALT LAKE CITY — Imagine being able to tell if someone is lying based on their eye movement, or how about being able to rid children of head lice without using any chemicals, or using a small device to pinpoint electrical shorts in vehicles.

Students, professors and investors are doing just that through the University of Utah, making the school the largest university generator of startups in the U.S. after tying the Massachusetts Institute of Technology for the previous two years.

Even more notable is that the university creates startup companies at a fraction of the cost compared to other top universities.

In 2009, the U. created 19 startup companies based on technology research, surpassing MIT and the California Institute of Technology, according to the Association of University Technology Managers. The report ranked 181 public and private U.S. research institutions.

This fertile field of new, innovative, companies has created thousands of new jobs in Utah, has hauled in millions in revenue, and has generated millions more in tax dollars.

The U. has 98 startup companies in operation and has created 5,937 direct jobs with another 9,830 indirect jobs created through local spin-off contracts and services, according to the Utah Bureau of Economic and Business Research.

All those employees earned about $359 million in 2009.

Campus startups and research licensees (individual research) also generated about $77 million in state and local tax revenue in 2009.

"It's not just that they're jobs, but they're good jobs," Jack Brittain, the U.'s vice president of technology venture development, said.

The average Utah worker earns $38,000 annually, according to Utah Workforce Services. By comparison, the average technology venture job pays nearly $60,000, Brittain said.

So what is the University of Utah doing right? Since 1970 technology startups at the university averaged five a year. For decades, the U. was handling technology properties the way most universities traditionally have: focusing on securing patents and collecting income without offering any real help for commercial development, Brittain said.

"The commercialization office invests in patents and then they try to go and collect money from licenses, and that's all they do; just patent and then try to sell the patent. That's a faulty business model," Brittain said, adding that many universities end up losing money, rather than making any.

Then in 2005, former U. President Michael Young reorganized the commercialization program. Brittain, who was dean of the U.'s business school, was given a new position as vice president of technology venture development. A new investment model was created, setting up a system of progressive development grants that allowed researchers to improve upon their technology, with the goal of creating a commercially viable product.

The second significant change was involving graduate business school students and having them create business plans for new companies.

The result was an immediate explosion of new technology companies since 2005. The "survival" rate of these companies is near 80 percent, including new technology companies that have been purchased by larger entities.

"By improving the capacity of the university to produce technologies that are commercially viable we also become more attractive to partners for commercial-sponsored research," Brittain said.

Over the recent years, the jump in startups has caught the attention of venture capital investment groups, many that now work closely with the young companies. But catching the eye of investors takes some work.

Brittain said scientists with a product idea are given small micro-grants of around $5,000 to help develop their idea. His office reviews their research and larger grants are then awarded to develop a prototype. If the research scientist can prove the technology is commercially viable, they can then apply directly to the state for an innovation grant of up to $50,000. The state's return on its investment, Brittain said, comes in the form of royalty revenue, federal grants, quality local jobs and increased tax revenues.

From lice to lies

Brittain holds a clear plastic square, the size of a sugar cube. Embedded in it is a tiny microchip with even tinier micro-prongs. The chip is designed to be implanted in the brain to help patients with bladder incontinence. The researcher had trouble tuning the chip, but given a state grant he's been able to work toward creating a commercially viable version, Brittain said.

Elsewhere in the U.'s Research Park, the new startup LouseBuster has developed a new way to rid kids of head lice without using any chemicals. The device looks like a small vacuum cleaner with a comb attachment. Warmed air is used to dehydrate lice and eggs.

The idea was actually the brainchild of a bird expert, said LouseBuster CEO Larry Rigby. Dale Clayton was already familiar with lice that inhabit birds.

"One day his two elementary school-age kids came down with lice and he had to do the shampoo and whole treatment," Rigby said. But recently, many strains of lice have begun to develop a resistance to the chemicals commonly used in over-the-counter products. Clayton knew that lice do not survive long outside of their host, mainly due to dehydration. What if one could accelerate the process?

Clayton played with hair dryers, but found them too harsh. Still, his published scientific study of 350 kids showed his idea had promise. Using grant money, Clayton developed a prototype LouseBuster. The company recently received FDA clearance and is ready to set up manufacturing.

Rigby said with support from the U. and the state, his company has managed to grow, selling units in 12 countries and more than 25 states in the U.S. In exchange for the state's $300,000 investment, the U. will receive 5 percent of the company's royalties.

"It's a very, very friendly environment for a startup company to come in," said Donald Sanborn, president of Credibility Assessment Technologies. Sanborn, a venture capital investor himself, stepped in to head the business end of Credibility Assessment Technologies. The device was invented by John Kircher, who helped develop the technology used in traditional lie detectors.

The company has developed a new form of lie detection, using eye movements as an indicator of deception. In addition to several state grants, Sanborn said the U. has provided help with legal issues, marketing, expert mentoring and creating a business plan.

"If we were on the outside, none of that would be available to us," he said.

The company has drawn interest from federal government agencies, such as the U.S. State Department, as well as foreign groups, which want to use the technology to screen prospective employees.

It looks like their first customers may be the Mexican government, who want to screen government officials in an effort to combat corruption in that country.

Succeeding in business

The second part of the U.'s rise as a technology venture powerhouse comes via its business support for startups, Brittain said, adding it typically takes two and a half years to transition to a new company, and another four years for that company to begin generating revenue. A detailed business plan is needed to keep things on track and in perspective.

The Lassonde New Venture Development Center was started at the U.'s David Eccles School of Business in 2002, with a $13.2 million endowment from U. alumni, Pierre Lassonde, the former president of Newmont Mining Corp. The center has been integral in the U.'s new venture development success, said Lassonde Center director Troy D'Ambrosio.

The center uses scholarships to entice promising graduate students from various colleges of study to come together and build businesses around budding technologies.

"The idea was to bring science and engineering school students and business school students together and have them do something," D'Ambrosio said.

While other universities hire a small staff to help startups with business development, resources are usually stretched too thin. Each year the center chooses eight to 12 master's students and another eight to 12 Ph.D. students to work on technology research projects. "We started with this core idea of having students help the university commercialize technologies, but more importantly, this could be used as a learning vehicle for students," D'Ambrosio said.

The students work on creating business plans, conducting financial analysis and setting up pitches for investors. D'Ambrosio said students end up graduating with valuable business experience, where they can walk into an interview and throw down a copy of the business plan they worked on.

That's what Ryan Murri did. Murri graduated last May with an MBA from the U. "I used the business plan that we wrote and I showed it to them and said, 'This is what I've done,' " Murri said.

Immediately, Murri said he had three job offers. He credits his experience at the Lassonde Center with giving him the competitive edge above other graduates.

And that's the other factor to the U.'s growing influence: creating successful alumni, like Pierre Lassonde, who then give back to the university and invest in future success, Brittain said.

It's that crucial bridge between crude concept and final product development that the U. has decided to invest in.

"Most of the technologies we have are ideas, maybe crude prototypes, but they're not commercial-ready products. So, how do we get them there? What we do is write a business plan that says this is one we think you should invest in, here's why: we understand the market, we understand the business model around it, we understand the regulatory issues, we understand the costs," D'Ambrosio said.