Capital. Laboratory facilities. Talent pipeline. Scientific collaboration. Innovation.

These elements are most commonly cited by business leaders in talking about what San Antonio needs to build a thriving technology and science ecosystem.

The Rivard Report recently visited the University of Texas at San Antonio to learn about the data-driven assessment of what it takes to build a healthy STEM (science, technology, engineering, and math) ecosystem.

The UTSA Institute for Economic Development has 10 programs that offer comprehensive resources for business and community development in the region and emphasize scale-up growth industry clusters and technology commercialization. The newest is the Small Business Development Center (SBDC) Technology Commercialization Center.

Dedicated to creating a globally competitive economy in Texas, the Technology Commercialization Center provides technical assistance services to science and technology-based small business owners, researchers, and startup entrepreneurs looking to advance their innovations to the marketplace. Established in February 2016, the center focuses on aerospace and defense, biotechnology, life sciences, electronics, medical devices, petroleum refining and chemical products, energy, and computer/information technology.

Technology Commercialization Center Director Bijo Mathew and program manager J. Bruce Hughes both recognized the need for early support for local businesses developing STEM services or products – specifically, to help them successfully commercialize their innovations.

Mathew and Hughes rely on data-driven approaches to assess the state of the tech and science ecosystems in San Antonio. They discovered that mentorship and funding at crucial stages in an entrepreneur’s journey help ensure success.

‘The founding of science and tech businesses are different, especially startups,” Mathew said. “Because the tech or science proposition is speculative at its genesis, entrepreneurs must perform the due diligence to validate the science, context, competitive advantage, team competencies, market pathways, and potential valuation. The iterative and disciplined process is necessary to refine the value proposition to the commercial market and investors.”

Mathew first explained why many startups fail.

These are the top 20 reasons why startups fail, according to CB Insights, a tech market intelligence platform.
Many startups fail because their product or service simply isn’t needed, according to CB Insights, a tech market intelligence platform.

CB Insights is a tech market intelligence platform that analyzes data on venture capital, startups, patents, and partnerships. Based on its case studies, the No. 1 reason startups are unsuccessful is entrepreneurs’ failure to target a market need. Tackling problems that are interesting to solve rather than those driven by customer need was cited in 42% of cases. The No. 2 reason is running out of cash to complete commercialization.

“Typically startups spend lots of their scarce early resources on an idea that they have not properly vetted,” Mathew said. “The danger is that they run out of cash before they are able to commercialize. We need to help them understand the priority of early value proposition analysis for their innovative product or service and develop a pathway to market for that.”

A crucial service Mathew’s center provides entrepreneurs is free, personalized counseling. The center worked with Bianca Cerqueira and Lauren Cornell, co-founders of NovoThelium, a startup biotechnology company in San Antonio that works on tissue-engineered nipples for breast reconstruction.

“[Techniques for] nipple reconstructions have not been updated in over 40 years, so we wanted to provide women an updated option,” Cornell said. “We’re still in the research and development phase. We have not yet reached the human trial phase.”

From left to right: Lauren Cornell and Bianca Cerqueira are co-founders of NovoThelium, a San Antonio-based biotechnology startup company. The $5,000 check is an award from the 2016 Women's Startup Pitch Competition hosted by Texas Woman's University and the Governor's Business Forum for Women provided by a donation from the Houston J. and Florence A. Doswell Foundation.
Lauren Cornell (left) and Bianca Cerqueira, co-founders of NovoThelium, are winners of $5,000 from the 2016 Women’s Startup Pitch Competition hosted by Texas Woman’s University and the Governor’s Business Forum for Women. Credit: Courtesy photo.

Cornell and Cerqueira appreciated being able to share proprietary aspects of their proposed technology with a scientist like Mathew who also could advise them on commercialization.

“We both have science backgrounds, but now we have a better understanding of the business aspects also,” Cerqueira and Cornell agreed.

Essential to STEM entrepreneurial success is developing a product that has a readily identifiable market.

“Proof of concept behind the science or technology is not enough – to succeed, an entrepreneur also needs a justifiable business rationale for that tech or science proposition,” Mathew said.

Growing the Ecosystem: Funding Gaps

The commercialization center also helps entrepreneurs access capital at crucial stages in the commercialization process.

It is difficult to raise capital for high-risk technology or scientific propositions. The Government Accountability Office (GAO) charted the funding flows at various stages in the innovation process and found that the largest gap in available funding is between proof of concept and production.

The Government Accountability Officee (GAO) found that the largest gap in available funding for innovators is in the span from proof of concept to production.
The Government Accountability Office (GAO) found that the largest gap in available funding for innovators is in the span from proof of concept to production.

The Small Business Innovation Research (SBIR) program is a highly competitive federal program that encourages small businesses to engage in federally funded research or research and development that has the potential for commercialization.

In Phase I, startup founders explore the technical feasibility of the proposition. Founders then evaluate the commercialization potential of the innovation in Phase II. However, no SBIR funds are provided for Phase III work, when the innovation transitions from the laboratory to the marketplace.

The commercialization center helps entrepreneurs match their technological innovations with available funding opportunities from grant programs such as SBIR and Small Technology Transfer Research (STTR), as well as other federal, state, and local granting agencies, private foundations, and philanthropic institutions.

Mathew helped Cornell and Cerqueira with their application for the SBIR grant, which is awaiting approval.

“[With Mathew’s help], we’ve developed a series of business plans and an awareness of the product need,” Cornell said.

“With [the center’s] institutional knowledge in submitting SBIR grants, it’s so helpful to have advice from someone who has done this and who is also a scientist,” Cerqueira said. “Since we’re an early company, we couldn’t have afforded consulting fees, so we’re glad to get this help for free.”

Mathew tells startup entrepreneurs to save their money for the business-related work needed for commercialization, since that’s the phase where federal funding is not readily available.

By working with the SBDC, entrepreneurs can resolve the commercial and business risks early and pursue high-risk funding resources for the technical aspects of the project. A successful SBIR or STTR award in conjunction with a vetted business model also builds the company’s credibility with potential investors.

Texas Innovation Funding Levels

Universities are fertile testing ground for discovery, invention and new knowledge, spurring innovation needed to fuel the ecosystem.  However, little STTR and SBIR federal funding is received for innovative research in Texas. Texas is below the national trend line for STTR and SBIR federal award funding per capita.

Texas is below the national trend line in federal award amounts per capita from 2010-2014.
Texas is below the national trend line in federal award amounts per capita from 2010-2014. Credit: State Technology and Science Index

Mathew explained there may not be enough research-driven scientific innovation generated, or perhaps Texas may not be sufficiently competitive in supporting tech and science businesses pursuing these awards.

“To build a sustainable ecosystem, it is necessary to foster and cultivate an environment that encourages university graduates to stay in San Antonio, thereby amplifying the intellectual capital of the ecosystem,” Mathew said.

He said that a complex and self-sustaining local ecosystem develops quickly when communities form pathways among universities, community resources, SBDCs, economic development organizations, companies and relevant stakeholders to foster ties with start-up entrepreneurs.

“Researchers who pursue their innovations locally will naturally continue to work with the community, industries, and the universities to birth innovative ideas that would attract further research and corporate dollars, jobs, incubators, and new investment opportunities for the region,” Mathew said.

As the center celebrates its first year of operations, Mathew is looking to double its busy staff from two to five. With over 25 clients mentored in just its first year, the center is off to a promising start.

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Iris Gonzalez

Iris Gonzalez writes about technology, life science and veteran affairs.