Helge Seetzen Launches a Unique Incubator for University Technology Transfer

by NextMontreal on November 1, 2010

Helge Seetzen Potrait 2009Helge Seetzen is a Montreal-based entrepreneur with a number of successes under his belt. His company BrightSide Technologies sold to Dolby for ~$30 million. After a stint with Dolby taking the technology he invented to market, he’s now launched TandemLaunch Technologies, an early stage incubator focused on hardware (in the industries that Helge knows best.) It’s a unique and interesting model, from how it’s funded to the kinds of projects they focus on and the process they use for acquiring technology & founders.

Helge has an interesting point-of-view and a lot to say about university tech transfer, student entrepreneurship and the challenge of building startups focused on intellectual property and “heavy duty” technology. He doesn’t operate in a “Web 2.0″ world where execution is the key differentiator vs. competition. In fact, the startups that Helge incubates in TandemLaunch will most likely never get to commercialization through his program; the goal is to develop and prove that the technology works and then bring in industry partners to acquire the technology for further commercialization.

Helge has started blogging at TechEntrepreneurship.com to share his story and his opinion on what’s going on today in the world of tech entrepreneurship. Definitely worth checking out.

Here’s our interview with Helge Seetzen.

NextMontreal: What’s your background?

Helge: My technical roots are in physics and computer science but I got involved in entrepreneurship very early on. During my undergrad in physics I co-founded a university start-up developing electronic paper and high dynamic range display technologies (Sunnybrook Technologies). Around the start of my Masters we spun out the latter concept into a new company (BrightSide Technologies). In that entity I also broadened our scope to include video encoding, image processing and camera technologies through in-licensing of inventions from other universities. We sold the company to Dolby Labs in 2007 and I worked for them as Director of Technology during my PhD in physics and computer science. I left Dolby earlier this year to move to Montreal and set up TandemLaunch Technologies.

NextMontreal: Can you explain in a bit more detail how BrightSide started?

Helge: BrightSide had a classic university origin. I worked in an applied physics lab as a research assistant during my undergrad. The professor had previously invented a high contrast display using two serial LCD layers. I built prototypes for this and the images just looked too good to leave the technology in the lab. So my professor sent me out to McGill and York for a year to gather collaborators and grant money. During that time we also invented a variant of the technology using controlled LED arrays rather than the second LCD. This effectively gave birth to local dimming LED TV.

We started the company when the limits of our NSERC grant became apparent. We had over $1M in research funding but couldn’t use it for customer interaction, feedback or industrial prototype development. BrightSide eventually grew to over 35 staff but the origin was just the need for a little “free” cash.

NextMontreal: Briefly explain TandemLaunch Technologies.

Helge: TandemLaunch is a “turn-key” accelerator for university innovation in the multi-media space. We provide inventors with seed financing ($100k-$1M), engineering and business staff, facilities, corporate infrastructure and industry relationships. This turn-key approach eliminates a lot of the early failure risks such as hiring, bad legal/financial structures, and the myriad of other growth pains. Instead, we can focus on making the business successful from day one.

The idea came from my own experiences as well as the university collaborations that I set up at BrightSide and Dolby. I remember writing my comprehensive PhD exam literally in between red-eye flights to San Francisco to close the acquisition while my wife was in bed with a difficult pregnancy. It all worked out with a solid $30M from Dolby, a wonderful little boy born within hours of the acquisition signature, and a PhD receiving the NSERC Innovation Challenge award. I wouldn’t wish this experience on anybody though! TandemLaunch makes it just a little bit easier for university inventors to bring their ideas to market.

NextMontreal: In a nutshell, how does the TandemLaunch model work?

Helge: The TandemLaunch model is designed to bridge the university-industry technology transfer gap. The fundamental idea is very similar to that of conventional accelerators like Y Combinator: money matters, but mentorship matters even more. The differences result from the unique requirements of university tech transfer. Conventional Web 2.0 startups tend to be heavy on business founders, light on technology and fairly low cost. None of this is true for university projects! So we structured our program accordingly: more hands-on business support, deeper technical capacity, and more funding. There are a lot of other differences based on the needs of universities but those are the big ones.

Working with the university, we put together a plan to go from their idea to a viable business exit. Depending on the technology this could be a license to the broader consumer electronics industry, a patent sale to a licensing company, or the spin-out of a stand-alone product business. The latter is usually less likely in our field: You can run a website business out of Montreal, you can’t build LCD TVs.

We then figure out what resources the university has available. For example, a grad student might fill the role of lead developer for the project. A more entrepreneurially inclined student might want a Biz Dev role. The professor might be in an actively involved CTO-like role or just a technical advisor. The university might also have specialised equipment or grant funding suitable for some aspect of the plan. Once the university resources are assigned, we look at the remaining holes and fill them from our in-house team. Usually this means adding some more development engineers, some admin and senior business talent but the mix varies a lot by project and university. At that point the new venture is ready to go and operates essentially like a regular tech startup.

Structurally all this happens like a regular common share investment. The university and inventors receive some equity in the new venture based on the valuation of their invention, TandemLaunch based on its investment, and the staff based on their sweat contribution (where “staff” now means the people from the TandemLaunch team, the university contributors and everybody else involved with that particular venture). There are a few minor differences due to the business model but the net dynamics are fairly simple (e.g. individual ventures achieve lower dilution due to the economy of scale benefits such as shared admin).

NextMontreal: How is TandemLaunch financed?

Helge: TandemLaunch is privately held and doesn’t have any investors or limited partners. We are running on revenue from two sources: investment return from successful ventures in the long term and industry preview payments for future ventures today. For the latter we maintain close industry relationships to place our projects as efficiently and profitably as possible. These time limited previews do not involve discounts, fixed price purchasing rights or any control over the venture. Think of it as the technology equivalent to a paid subscription to MacWorld. You pay to see what is happening at Apple but you don’t get your iPad any cheaper or the mythical white iPhone any faster.

Customer development for core technology startups is very challenging because you can’t use online metrics, run user studies or any other Web 2.0 tools to get information quickly. Our preview model is a solution to this problem. It creates a symbiotic relationship where we get visibility into the near term industry roadmap and they get a look at next generation opportunities. It doesn’t limit our ability to get the best deal for our ventures, but allows us to optimize for success with customer feedback.

NextMontreal: You believe that there’s a huge untapped potential within university technology, right?

Helge: Absolutely! I will give you the example of my alma mater UBC. They are recognised as one of the top 10 public technology transfer universities in North America. Pretty impressive but now look at the actual numbers. There are upward of 800 faculty members in the science and engineering area, using around half a billion in research funding each year. Just in multi-media technology there are about 60 faculty members. That’s 60 world-class researchers each supported by around $1M in research money each year. There are plenty of very successful multi-media companies with a lot less PhD’s.

So what’s the output? Even though UBC is truly on the top of the game, they only get annual tech transfer revenues around $20M per year if you include the value of non-liquid equity. For a university that’s actually pretty impressive but think about it from an investment perspective: ~$500M in, $20M out. Even the VC industry can do better than that…

Of course the university system also provides indirect benefits such as student training but there is definitely room for improvement – and consequently plenty of opportunity for TandemLaunch.

NextMontreal: And what do you think of previous efforts in university transfer? Good? Bad? And why?

Helge: Technology transfer is intrinsically difficult. You need to convince somebody to pay you money in exchange for some vaguely defined future value. Having to do it across a major culture barrier only makes this harder. Your only hope is to apply a lot of energy, focus and risk-money to the process. That’s what entrepreneurship is all about.

Unfortunately, university tech transfer offices have never been properly equipped to do this. Most of them grew out of administrative efforts related to the management of research funding and that’s just the wrong culture for entrepreneurship. This is not the fault of the people, some incredible people work in tech transfer, but a problem of the system. You can get multiple millions on government research grants by filling out forms, nudging dozens of open files simultaneously and eventually administer the distribution of funds. Try getting millions of revenue that way…

The average tech transfer officer has 20-30 projects on her desk (applying to at least a dozen industries), no risk-money (or any funding for that matter), and very few incentive tools at her disposal. They are usually very good at getting inventors to the first stage of patent filing but have very few tools for the next step. I have yet to meet a tech transfer officer who isn’t fully conscious of these limits. Consequently, I have also yet to meet one who doesn’t have a positive response to the TandemLaunch model. Our goal isn’t to replace the tech transfer offices; it’s to provide them with the missing tools to make their job successful.

NextMontreal: How much great technology is sitting in university labs right now that may never see the light of day (i.e. commercialization)? Why is that?

Helge: I don’t know any formal statistics but the number must be huge. Taking UBC as an example again, the UBC tech transfer office receives around 150 invention disclosures per year. The total number of licensed technologies at UBC since 1980 is around 300. Just over the last decade this means that roughly 1500 inventions were made (and patented) and a lot less than 300 of those were actually commercialised. That’s just one university. Lists of available university technology such as FlintBox have thousands of entries from just the small number of universities that participate. And those are almost all unique concepts that have gone through substantial development.

And that’s just the tip of the iceberg. The vast majority of university innovation doesn’t even reach the tech transfer offices. Most universities are struggling to create awareness for their tech transfer programs because universities emphasize publication, not patenting. Modern universities have ritualized the publication process and coupled it to all important aspects of university activity (i.e. tenure, promotions, graduation, grant funding, etc.). Often this leads to absolutely crazy sub-systems where entire fields of research become self-sustaining publication circles all referencing themselves with no link to any actual experimental data. The mistake here is that publications are a tool, not the end goal. That end goal is to create benefit to society. It just so happens that publications are a good way to convert knowledge into social benefit and that the traditional social and theoretical sciences have knowledge as their primary output. Published knowledge can usually be read and used immediately. Applied sciences on the other hand tend to create technological innovation which requires implementation before it benefits anybody. That implementation requires considerable investment which only happens if there is an economic upside for the investor. Why would anybody invest millions into a new idea if their competitor can just copy their final product at the end.

Some technology fields are further along on this issue. For example, researchers in medicine usually understand that patent coverage is critical. I am pretty sure that you could invent a cure for cancer tomorrow, only to find that without patent coverage nobody is going to invest the billions needed to develop and test it. And without that investment the cure will be worth just as much as the 3 liter car engine – a brilliant theoretical piece of work that hasn’t change a single life. Other fields are only slowly moving into this direction. Some universities for example are starting to recognise patents in their tenure process. But in general you will find that for every idea that has gone through the tech transfer commercialisation process, there are hundreds that were published and forgotten (by the authors and the rest of the world…)

NextMontreal: In your opinion, how entrepreneurial are university students in general? What can be done to make students more entrepreneurial?

Helge: University students statistically represent the brightest portion of our society between the ages of 18 to maybe 25. They have more free time than they will ever have again until they retire, are surrounded by technology and have easy access to funding and mentorship. As a group, that should make them the biggest source of entrepreneurial energy on the planet. Except that’s not what we see at all. Student entrepreneurship is actually rare, particularly in the technology space.

So what’s wrong? It can’t be the people themselves as they go on to become successful workers and often even entrepreneurs after they graduate. The education system needs to certainly shoulder some of the blame, but I think the biggest problem is cultural. Every few weeks I have a variant of the following dialog:

Student: “Hey, I am grad student in engineering and really interested in entrepreneurship.”

Me: “Great! What is your research about?”

Student: “Oh, I am working on a new kind of solar cell … but I really want to do entrepreneurship and have this great idea: I am going to make a website that allows people to share photos of their pets for free!”

Me: “… … … Do you know how screwed up this is? You just spent years of your life becoming an expert in the area of solar cells under the mentorship of a world expert. You have access to research funding and supporting resources. Your technology is probably peer reviewed by other world experts and possibly protected by patents. And yet you want to enter a field where the barrier of entry is low enough that a PhP-literate teenager can crawl over it…”

I am usually more polite but I really hear this all the time. A lot of university students are interested in entrepreneurship but think of it as something completely decoupled from their studies. Or at least they think that doing it in their field is impossible. The Web 2.0 world has probably actually made this situation worse. You can read a dozen blogs and find that the “magic ingredients” for entrepreneurship are focus, multiple founders, pivoting and so forth. Think about that list from the perspective of a university student. They can’t focus exclusively on a startup because they still want to get a degree. They can’t easily get multiple founders due to the fundamental structure of university (e.g. disciplinary boundaries keep potential tech and business founder apart; graduate research is intrinsically individual since you cannot “collaborate” on your thesis; etc.). And don’t even think about “pivoting” in your PhD. There are solutions to all these issues but they create truly formidable barriers in people’s minds.

Students are very entrepreneurial, we just need to educate them about the process and give them a bit of a help to get started. I am hoping that the TandemLaunch program can make the plunge into entrepreneurship just a little bit easier for students.

NextMontreal: I noticed on your site in the FAQ the first question is, “Is TandemLaunch a patent troll?” Do you get that feedback or concern a lot?

Helge: I got that question a lot when I was putting together the TandemLaunch business model and funding. The whole tech transfer issue was new to a lot of people and the only visible player was Intellectual Ventures. Intellectual Ventures, a brain child of Bill Gates & his former CTO, buys up university IP and then licenses it. The lack of actual technical or product activity in that business model causes a lot of people grief (a “patent troll” is a derogatory name for a business accused of essentially blackmailing product companies with obscure IP). Once we started operating it became pretty clear that our model is very different. We have signed up over a dozen in-house staff with more positions still open – and none of them are lawyers.

NextMontreal: How many projects do you have in TandemLaunch right now? How many are you planning to do?

Helge: We are gearing up to support four core projects per year. Full scale projects usually use a technical team of 3-6 people, some leadership, and require a moderate investment in materials or hardware. We also have a few additional smaller initiatives that cost a lot less. Usually those are software-only inventions that have already been developed to a significant level at the university and only need business assistance.

We are getting the first projects off the ground now and are going through due diligence on enough open deals to bring us to capacity by the end of the year. Deal flow has frankly been overwhelming, with projects coming in from across Canada, US and several European countries. I would like to think that’s because our program is very attractive, but I think in part it is simply because universities have so few alternatives to turn to.

NextMontreal: What are the top 3 areas of most interest for you right now in technology?

Helge: I am obviously biased because I spent years of my life evangelising LED TV and particular its high dynamic range (HDR) variant. Anybody who saw the BrightSide demo just knew that displays should ultimately look like this (like a window into the world – with brightness, contrast and colours matching anything available in the real world).

Another big area for the next few years will be interactivity with media devices. We are starting to see this a bit with touch screens but that’s really just scratching the surface (forgive the pun). Your device should know who you are, and what you want from it based purely on human-centric interactions. That means recognizing speech, gestures, eye gaze and any of the other cues that make our human-to-human interaction so efficient.

I think the third major trend is going to be ubiquity. Computing devices should be like ball point pens. Those are lying around everywhere in my office, at home and in public areas. Anybody can pick them up and use them. Even mobile devices are currently still high cost personal tools and we treat them accordingly. Imagine a world where everything is in the cloud and you just grab devices as you need them.

NextMontreal: What’s the #1 thing you want people to know about TandemLaunch?

Helge: We help really smart innovators turn their ideas into reality – even if they don’t meet the criteria on a VC checklist.

Addendum – Additional Questions

Helged told me that there’s been a lot of positive feedback around this article, which is great to hear. But he also asked that we clarify a few things and go into a bit more detail on TandemLaunch’s program. So here are some additional questions we asked Helge to answer:

NextMontreal: Is your program limited to hardware inventions?

Helge: No. It doesn’t matter whether the invention comes in the form of hardware or software as long as it solves a fundamental technical problem in the consumer electronics space. Software-only concepts such as video encoding, image processing, mobile interfaces, and so forth are all fair game. Our current mix of projects is about a 50/50 mix of hardware and software (active and in due diligence). The only area that we do not invest into are business models that use rather than invent software algorithms. In other words, we would invest in the development of MPEG codecs but not in the YouTube business.

NextMontreal: Is your program limited to display technology?

Helge: No. Broadly speaking we invest in multi-media technology. More practical, we invest in projects were we can contribute significant value. We invest money and people, so we need to offer more than the traditional VC rolodex. The litmus test is whether the inventor would hire the TandemLaunch-assigned staff on the open market (e.g. would a technical founder hire me as a business executive independent of our investment). The abilities of the TandemLaunch staff thus impose the limits of our investment area. In my case I hold patents in the area of displays, projection, video encoding, image processing, and camera technologies. In past start-ups I have had commercial deals with companies such as Samsung, Sharp, Philips, Hitachi, Adobe, Dolby and Thomson/Technicolor, and of course pre-deal interactions with a lot more. Our technical staff spans a similar range with experience in multi-media hardware and software. We can therefore support and invest in anything in that technical and customer space.

NextMontreal: Is your program limited to universities?

Helge: No. Independent inventors are very welcome to apply. Universities are simply more likely to develop core innovation so we look there first (they have the funding, infrastructure and concentration of minds necessary for most core innovation).