OTC News Archive

Arch and UT giving birth to firm

Private equity venture signs deal for UT-backed nanotech startup

By Stacey Higginbotham, Austin Business Journal
January 9, 2004

Arch Venture Partners has financed a nanotechnology deal to launch a startup spawned by the University of Texas’ revamped licensing program.

As if that weren’t enough, the private equity firm is nearly done raising its sixth fund. Clinton Bybee, managing partner of Arch, says he can’t comment on the fundraising.

However, sources say the firm is close to raising $300 million to $350 million, bringing its total capital under management to more than $1 billion. Chicago-based Arch, which has an office in Austin, invests in local companies such as XDI Innovations Inc., Intelligent Reasoning Systems Inc. and Innovalyte Inc.

Although Bybee says he doesn’t know how much Arch will end up investing in Austin, his recent experience with UT means he will look to it for innovative technologies. Arch recently signed a licensing deal with UT to create a startup called Semzyme Inc.

Neil Iscoe, director of UT’s Office of Technology Licensing, says the university will receive an equity stake in Semzyme and royalties associated with the patents. The value of the deal wasn’t disclosed.

For Iscoe and UT, the deal represents a coup of sorts in nanotechnology research.

In 2002, Angela Belcher, a prominent nanotech researcher, left UT for the Massachusetts Institute of Technology. The loss was a blow to UT’s nanotech efforts, but the opportunity to reap economic rewards from Belcher’s patents softens it.

“[Belcher] did some seminal research in nanotechnology, and that resulted in some basic patents. She did that work while at UT, and we have the patents,” Iscoe says. “Although she’s moved to MIT, we are pleased we can work with the patents. This is a real win-win for everyone involved.”

UT might see its licensing revenue grow as a result of this deal, but Austin itself won’t glean the benefits. Semzyme will be based in Cambridge, Mass., where Belcher and MIT are. Bybee says he would have liked for the company to be based in Austin, but it just didn’t make sense with company principal Belcher being in Cambridge.

The deal is one of several licensing and commercialization developments at UT since Iscoe became the technology licensing chief last February. His goal was to make the technology licensing and commercialization process smoother for businesses.

“In business, uncertainty is bad and long-time horizons for contract negotiations aren’t good, so we are trying to shorten the time it takes to execute a contract with the university and trying to make it easy to work with us,” Iscoe says.

Bybee says UT now is willing to take risks on licensing technology rather than worrying about what could go wrong.

“You can’t score unless you take the shots. In order to return money to the university, the licensing office needs to do a lot of shots on goal,” Bybee says. “Sometimes the equity is worth a lot and sometimes it’s worth zero, but it’s really a shots-on-goal game.”

Jay Campion, managing partner in the Austin office of early stage venture fund Access Venture Partners LP, says Iscoe has helped cut the amount of time it takes to reach a deal with UT.

“Neil brings a lot of business experience and startup experience and an understanding of how venture capital firms work to the licensing program,” Campion says. “It was a very smart hire.”

[ ABJ ]