Redefining University Innovation in the 21st Century Part 2: 6 Short Case Studies from UC Startups

In my last article, I discussed how university innovation is changing and what role the University of California is playing in redefining innovation from a process to an ecosystem. In part 2 of our series, we look at six startups and their journey to commercialization, growth, and in some cases, successful exits. For many startups, UC programs, resources, and incubators have been instrumental in shaping the development, commercialization, and strategy of young startups, particularly as founders face decisions about committing to entrepreneurship, distinctly new exploration or exploiting existing technologies, investment partner selection, and surviving the valley of death. Not all startups have the same timeline for the valley of death, and some depend more heavily than others on UC resources to get off the ground. Regardless, we’re interested in looking at examples from across our ecosystem to see what’s worked and the impact our ecosystem is having on entrepreneurship and positive outcomes for the economy and society.

Case 1: Soraa – New LED Lighting

Soraa is an LED lighting company founded on research that began in 2007. Professor Shuji Nakamura teamed up with Dr. Steven DenBaars and Dr. James Speck to pursue research on an LED technology platform that most experts at the time considered impossible. Dr. Nakamura had spent over two decades researching and working with LED lighting and invented the first high brightness gallium nitride (GaN) LED. Nakamura, DenBaars, and Speck pursued GaN-on-GaN LED technology, convinced that it would be the future of lighting.

Their bet paid off: GaN-on-GaN LEDs produce more light per area of LED and are more cost-effective with crystals up to a thousand times purer than any other LED crystal. Nakamura founded Soraa, taking the technology to market. Nakamura worked with UC Santa Barbara’s Office of Technology and Industry relations to license the IP from the University of California. In 2010, Soraa received their first round of funding and in 2012, they launched their first product for the commercial market. From there, they received another round of funding in 2013 and are making over $24 million in revenue annually.

Today, GaN-on-GaN LED lighting is becoming the standard in LED lights, which goes to show the power of exploration and taking on ambitious research endeavors. Soraa and the work of Dr. Nakamura and his fellow scientists have fundamentally changed the lighting industry, created over 250 jobs in California, and are proving their return on their capital investments.

Case 2: Epygenix Therapeutics – Breakthrough Treatment for Dravet’s Syndrome

Epygenix Therapeutics is a UC startup that went through the Catalyst Program at UC San Francisco. UCSF Professor Scott Baraban has spent years researching and developing drugs to treat genetic epilepsies including Dravet syndrome, a rare form of intractable epilepsy that begins in infancy. No effective therapeutic treatments existed for Dravet syndrome, until Dr. Baraban developed a high-throughput drug screening using a zebrafish model in 2013 following years of research.

In 2012, Dr. Baraban received a National Institutes of Health (NIH) grant to explore an out-of-the-box idea for treating Dravet syndrome. Dr. Baraban tested a small, mostly repurposed drug library on zebrafish who replicated the same seizures as humans with Dravet syndrome. After testing 320 drugs, Dr. Baraban identified a compound called clemizole, an antihistamine from the 1950s and 60s. Following the discovery, he worked with UCSF Office of Technology Management to file a patent application then in 2013, his lab published a paper on his findings.

Dr. Baraban and UCSF began to explore how to commercialize the findings. Dr. Baraban was not terribly interested in becoming an entrepreneur: “I like being a professor. I like running my own lab. I do what I’m interested in…I’m not looking to be a millionaire because of something we do in my lab. I am fairly compensated and do what I love,” he said. However, Dr. Baraban recognized the value of his discovery and went to QB3, the Institute for Quantitative Biosciences, to discuss what options lay before him to commercialize his findings. QB3 connected Dr. Baraban with the Catalyst Program at UCSF. Catalyst’s interim director connected Baraban with two key industry contacts who examined the challenge of developing a successful business model for a drug whose patent had expired.

In an effort to discover the value of clemizole, it was suggested that Dr. Baraban seek to better understand the compound and what it could do outside of addressing Dravet’s syndrome. Thanks to funding from the Catalyst Program, Dr. Baraban ultimately worked with a CRO (contract research organization) to screen the compound against many drug targets. The results led to additional research and two more serotonin drugs that mimic clemizole. From there, Dr. Baraban partnered with a pediatric epilepsy specialist in Colorado for a compassionate use exemption trial with five children: the trial was a great success.

Numerous pharmaceutical companies had already approach Dr. Baraban since his 2013 paper, but Dr. Baraban wasn’t interested in becoming an entrepreneur or in working with big pharmaceutical companies. Baraban eventually met Hahn-Jun Lee, a scientist and successful entrepreneur who focused on repurposing drugs and tackling rare diseases. Dr. Baraban and Dr. Lee hit it off: in 2016, Epygenix Therapeutics was formed with Dr. Baraban as a consulting scientist, allowing him to continue his research and lab work as he wished but at the same time, clinical trials, FDA approval, and a treatment for Dravet’s syndrome could still be realized.

UCSF’s Catalyst program proved central to commercializing a treatment, connecting Dr. Baraban with industry, and funding the research that led to intellectual property that could be commercialized.

Case 3: Riders Share – AirBnB for Motorbikes

Riders Share is a startup out of UCLA that’s like AirBnB for motorbikes. The company was co-founded in early 2018 by Guillermo Cornejo, an MBA candidate at the Anderson School of Management and has thus far raised over $300,000, having recently closed a seed round in early October, 2018. Riders Share joined the Anderson Venture Accelerator for their 6-month immersive program designed to leverage UCLA’s resources to help startups launch.

Riders Share currently boasts 80% month-over-month growth, and after launching in February, 2018, had over 250 monthly “rides” by August and September, pulling in over $70K in monthly revenue. Surprisingly, they spent a grand total of $7,000 on marketing, smartly targeting the motorbike community and boasting strong local and state press coverage.

In its two years, the Anderson Venture Accelerator has helped to launch over 25 startups who’ve raised over $1.5M in funding and generated over $2M in sales. Riders Share was one of around ten teams in their cohort based at the 10,000 ft2 facility.

Case 4: Pinpoint Science – Pathogens Detector

Pinpoint Science is a startup from UC Santa Cruz and is a great example of how recently added UC resources are helping startups get up off the ground. Pinpoint Science is working to commercialize a technology developed by Dr. Nader Pourmand at UC Santa Cruz. Pinpoint has developed a small device that rapidly and accurately detects pathogens such as viruses, bacteria and fungi. It uses novel biosensor technology and swappable cartridges for electrical detection of specific biomolecules with precision and at low cost.

Pinpoint Science’s device has a range of potential applications, including detecting Zika and Ebola. Applications could include human infectious disease diagnosis, pathogen surveillance for agriculture, ranching, veterinary medicine, wildlife management, monitoring infectious disease agents among poultry, wildfowl and insect vectors, and detecting microbial contamination in food poisoning. In common terms, it can help reduce the spread of diseases such as Zika and Ebola, alert us and reduce food poisoning, or reduce crop damage through surveillance and timely treatment.

Pinpoint Science joined Startup Sandbox, part of UC Santa Cruz’s new incubator thanks to AB-2664 funds, funding support from the state legislature of $22 million($2.2 million for each of our 10 campuses) to strengthen the entrepreneurial ecosystem in California. Pinpoint Science is using wet lab facilities and one of 40 workstations with essential equipment particularly useful for bioscience companies. The incubator opened in April 2017 with 13 companies, one of which was Pinpoint. Since then, Pinpoint has been accepted to UC Berkeley’s SkyDeck hot desk program for 2018 and continues to advance product development, commercialization through market traction, and growth.

Pinpoint Science is a great example of how UC startups can leverage our system-wide, cross-campus ecosystem to start, develop, and grow their businesses.

Case 5: Lime – Smart Mobility

Lime is a smart mobility company, previously known as LimeBike, founded by two UC Berkeley MBA graduates with two other co-founders. Lime combines electric scooters or bikes, software, and mobile devices to tackle the last mile challenge of mobility. The company was founded in late 2016 and after two years is in 17 countries and most US states. LimeBike joined UC Berkeley’s SkyDeck accelerator in its early stages, benefitting from the mentors and advisors, resources, and SkyDeck network.

After receiving $467 million in funding from notable investors such as Andeersen Horowitz, Uber, GV, Franklin Templeton and more, the company is currently valued at over $1 billion and has already passed the 12 million ride mark. They currently employ just under 900 people, not just in California but around the world.

With multiple UC MBA graduates on their team, Lime has clearly benefited from the education and training afforded by an MBA. The team pursued the path of entrepreneurship and didn’t face the same tensions as researchers such as Dr. Baraban. Arguably, good business schools and a culture of entrepreneurship are fundamentally helpful for building an innovation ecosystem.

What’s interesting about Lime is the timeline for their valley of death compared to that of other UC startups. While going from 0 to $1 billion valuation in two years is extraordinary, there is still a significant difference between the time for product development and go-to-market for Lime than there was for Kyprolis. Quick growth is also not without its problems: the scooter industry now faces challenges as legislation catches up and has to figure out challenges such as reverse supply chains and how to fix product bugs with millions of product and users worldwide.

Case 6: Kyprolis® - Multiple Myeloma Drug

Kyprolis® is a drug for multiple myeloma (cancer of plasma cells) developed by biotech startup Proteolix, a UC startup founded by four doctors, two of whom earned their PhD at UC Berkeley and UCLA. Phil Whitcome, a UCLA grad with a PhD in Molecular Biology and an MBA from Wharton, teamed up with Ray Deshaies (PhD in Biochemistry from UC Berkeley) and Craig Crews who were seeking funding for a platform called PROTAC. PROTAC (Proteolysis-Targeting Chimeras) was a project to develop a platform capable of targeting specific proteins for degradation, which, in short, could be used to treat cancer and tackle tumor cells. However, Crews and Deshaies, both associate professors at the time, were struggling to get funding for PROTAC as venture capital investors were looking for ways to maximize and accelerate returns on investment, notably through the development of small, close-to-clinic molecules rather than a large investment in a significant platform such as PROTAC.

UCLA grad Phil Whitcome introduced Crews and Deshaies to a key industry contact who had extensive experience in the biotech industry, particularly from the commercialization and pharmaceuticals side. The four formed Proteolix in 2003 following news that Millennium Pharmaceuticals had received FDA approval for Velcade®, a proteasome inhibitor for multiple myeloma. PROTAC was originally based on YU-101, a proteasome inhibitor. The team immediately saw an opportunity to develop a “me-too” drug for Velcade® using YU-101 which had the potential to be more potent than Velcade®. Pivoting from pitching PROTAC to pitching YU-101, Proteolix received $18.3 million in funding in December, 2003.

Following additional research, small molecular adjustments, and new patent filings, Proteolix developed carfilzomib which was later named Kyprolis®. Phase I clinical trials began in August, 2005, and in May, 2006, Proteolix received a second round of funding of $45 million. Proteolix continued into phase II clinical trials in August 2007, and in September, 2008, Proteolix received a third round of funding of $79 million. Shortly afterwards, Proteolix was acquired by Onyx Pharmaceuticals for $851 million, Kyprolis received FDA approval in 2012, became Onyx’s most valuable asset, and sales of the drug netted $331 million in 2014 with projected revenue set at $3 billion for 2021.

Kyprolis® is a good example of having an impactful medical discovery and product in a lab, but needed to pivot until industry was interested in providing funding: a classical tech translation challenge.

You Need an Ecosystem to Fuel Innovation

These six case studies are examples of different startups with different needs and pathways through the UC innovation and entrepreneurship ecosystem and out into the commercial world. Startup journeys varied by the needs for people, space and facilities, advice and expertise, and development of business models, strategies, and products. All of them needed funding and UC played sometimes highly significant roles in facilitating ongoing funding success.

At times, innovation within universities can be structured, predictable, and straightforward such as licensing IP to a commercial company. At other times, startups pop up and grow to international scale in 24 months. Further still, some need a push and the right resources to even get off the ground. My point is that in order to foster the establishment, development, and growth of all such startups, you need an ecosystem capable of supporting the variety of needs from startups. It is our ecosystem with its increasingly collaborative and innovative culture that is leading to outcomes such as creating thousands of jobs, solving transport challenges, finding treatments for rare diseases, or tackling Ebola and Zika.

At the O

ffice of Innovation & Entrepreneurship, our goal is to continue to develop the ecosystem across the University of California, investing where necessary, facilitating cross-campus collaborations, and fostering deeper and wider industry relations. Building and maintaining an ecosystem is a huge collaborative effort amongst our campuses and I’m grateful for the manpower and work UC campuses are doing to make the University of California a recognized force of innovation across the state and around the world.