Incubating Student-Run Startups > PennVention 2010

Last Friday, I had the pleasure of attending PennVention’s mini-mentoring session at the University of Pennsylvania.  PennVention is an annual business plan competition for undergraduate students held at the Weiss Tech House in the School of Engineering.  The competition has three phases: first, a mini mentoring program to offer students ideas on how to execute their business plans; second, submission of business plans and grading by judges to select the 10 best business plans; and third, a presentation day where finalists present their business ideas to a group of judges and compete for $60K worth of cash and prizes. 

PROGRAM OVERVIEW 

The Weiss Tech House is a student-run hub of technological innovation at the University of Pennsylvania that encourages and supports students in the creation, development and commercialization of innovative technologies. Class of ‘65 graduate George Weiss - whose $1.5 million gift made the house possible - and Professor William Hamilton, the director of the Penn’s renowned undergraduate Management and Technology (M&T) program, together generated the idea for the house.  While the generous gift certainly helped the incubator get off the ground, it is the students who really make the place hum and in the center of it all is Anne Stamer, the Weiss Tech House Director. 

In her capacity as Director, Anne wears multiple hats, including mentor, cheerleader, and even mother, in guiding the students’ activities and startups.  Most importantly, Anne is the glue that holds together the six student-run committees – community relations, marketing, PennVention, mentoring, marketing, IT - that form the core of the Weiss Tech House.  Those six committees function to ensure that students are actively involved in the program, there is consistent university and alumni support and interaction, and that the fledgling startups are receiving as much help as needed. 

There are two really cool programs at the Weiss Tech House that I want to point out.

First, PennVention is a student run invention competition that receives over 60+ applicants per year.  I met with 7 companies last week during PennVention’s mini-mentoring marathon and was thoroughly impressed with the quality of ideas and the students’ incredible enthusiasm.  The event was a round-robin format where students rotated around mentors every 15 minutes for 4 hours (there was a 30 minute snack break in the middle).  What I loved about the event was the diversity of students who were pitching their companies.  Within a 30 minute stretch, I listened to two engineering students pitch a device to ease bathroom accessibility for quadriplegic children, followed by two sorority girls with fashionista aspirations pitch me on their fashion themed website.  

The second program that I really like is the Innovation Fund.  The Innovation Fund is an in-house, mini-venture capital fund that provides cash without equity to student projects. If accepted, student teams receive $1,000 grants and access to the Tech House’s technical, legal, and business mentoring resources.  This is really a win-win for aspiring VCs, as students get to evaluate investment opportunities, and for aspiring entrepreneurs who get to pitch their business ideas.  Too cool!

IS IT REPLICABLE?

Absolutely.  While the Weiss Tech House has a considerable amount of financial backing, money alone is not what drives its success.  Student and alumni involvement in the program is the most critical factor in driving the program’s continued success, but getting students and alumni involved is no easy feat.

College students are bombarded with various forms of media that vie for their attention.  Despite the success of social media, I still believe the best way to reach a college student is through college newspapers.  When I was an undergraduate at Penn, there was not a single day in college that I failed to pick up the Daily Pennsylvanian.  If you want to drum up student enthusiasm for creating startup companies then there is no better place to advertise than the college newspaper.

The Weiss Tech House has a very systematic approach to getting alumni involved.  At its launch, the Tech House recruited several prominent alumni with significant venture capital and corporate connections.  Those alumni have then recruited additional members of their companies and friends to participate in PennVention and other Weiss Tech House events.  Getting great mentors then dovetails into keeping students involved, as students will continue to be attracted to the program if they receive exceptional mentorship and get to interact with industry leaders. 

MC10 Featured in MIT Technology Review

In the current Tech Review issue (Link), there is a nice piece by Katherine Bourzac on our portfolio company, MC10. MC10 is an advanced materials company commercializing conformal, high performance CMOS (complementary metal–oxide–semiconductor) electronics. The company’s competitive advantage stems from its ability to transform rigid, planar electronics into new types of systems that can bend, stretch and wrap into novel form factors. MC10 uses the existing semiconductor industry infrastructure to make these systems, thereby leveraging proven performance and cost competitive economics. The comapny works with partners in a joint development model to prototype and manufacture novel applications for consumer, military, medical and industrial applications.

Insider Trading + Expert Witnesses

Over the last month there has been a rash of insider trading news involving the use of expert witnesses by hedge and mutual fund managers to gain insider knowledge about publicly traded tech and life science companies.  The SEC has issued a series of subpoenas to top tier investors, including SAC Capital, Citadel, Janus, and Wellington, to learn more about their use of expert witnesses.

To gain insight into highly technical companies such as tech and life science companies, institutional investors use expert witnesses, typically supplied by specialist firms such as Gerson Lehman Group and Primary Global Research, to support their own diligence work.  In theory, the guidance that an expert witnesses provides should be limited to publicly available information; however, recent reports by the Wall Street Journal suggest that many expert witnesses have been leaking sensitive information to investors who then used the information to jump ahead of the stock market.  The most egregious accusation was uncovered by the WSJ that the scientific advisory board of a biotech company divulged results from a key clinical trial to an investor before publicly presenting the data. 

While insider trading amongst high-flying hedge and mutual funds doesn’t directly affect the university startup ecosystem, it does have repercussions.  

Tech and life science companies are incredibly capital intensive.  The public equity markets provide an exit opportunity for VCs as well as capital to support the long-term growth of venture-backed companies.  The economic downturn effectively shutdown capital markets for venture-backed companies from 2008 to early 2010.  This put incredible stress on VC funds, which were forced to bridge many of their investments to exits for 2-3 years longer than anticipated.  Many funds are now running low on capital and do not have enough exits in current funds to justify raising new funds. 

The health of the venture ecosystem relies on having a well functioning capital markets system - without it, VCs become overly reliant on M&A and are open to price pressure from acquirers.  Only recently have the capital markets begun to thaw.  The news of insider trading amongst leading tech and life science companies, including Advanced Micro Devices, Human Genome Sciences, MedImmune, and Merck, will undoubtedly once again shut down capital markets, leaving VCs in the lurch.

Let’s hope that the SEC’s expert witness inquiry gets quickly sorted out and IPOs once again start flowing for venture-backed companies.  If not, VCs will continue to be capital constrained and there will be little money flowing into university startups.

Lab on a Chip > Circulating Tumor Cells

There is no doubt that lab on a chip technologies are hot right now in the venture capital community and I would like to highlight one application that has caught my attention. The identification and isolation of rare cell populations from whole blood samples has been a persistent challenge for researchers and clinicians.  Lab on a chip technologies offer a solution to this challenge because of their miniaturization and incredible sensitivity.

Tumor cells circulate in human blood at incredibly low frequencies (1-10 CTC per ml of whole blood) relative to other cell populations, making it quite challenging for researchers to sift out a few CTCs from a heterogeneous pool of other cells.   To put this in context, only 10-20 cc (=10-20 ml) of blood is drawn during a normal physical.  Therefore, in any given blood sample there is likely to be no more than 10-200 CTCs amongst 50 million plus white blood cells and several billion red blood cells. 

In the past, quantification of CTCs was almost impossible.  Previous technologies focused on isolating and amplifying CTCs so that lab tests could be run.  Amplification of primary cancer cells through passaging could result in additional mutations, making the older CTC isolation technologies rather ineffective.  The ideal technology would be one that was so sensitive that CTC binding events could be quantified without the need for cell amplification.  But with so few cells available, isolation becomes a daunting task.  Add in a high risk for false negatives, and CTC isolation becomes all the more challenging.      

Lab on a chip startups are attempting to leverage the sensitivity and specificity of microfluidic chips to address the CTC identification challenge.  Below is a list of some university startups that have novel lab on a chip technologies to identify CTCs: 

• Biocept was spunout of Peter Kuhn’s lab at The Scripps and is commercializing the CEE™ Cell Enrichment and Extraction platform.  The CEE technology is a microfluidic device that uses a chip coated with upright polymer fibers that are of different heights and widths.  Blood travels at variable speeds – slow closer to posts and faster away from posts – which enhances the probability of a CTC binding to an antibody attached to the post. 
• On-Q-Ity was spunout of Mehmet Toner’s lab at Mass General / Harvard and is commercializing a microfluidic based technology that is similar to the Biocept technology.  On-Q-Ity uses a process similar to Biocept’s to isolate CTCs, and then uses a second proprietary process to separate CTCs from other bound cells through cell size exclusion (CTCs are typically larger than leukocytes).
• Vitatex was spunout of the State University of New York at Stony Brook. The Vitatex technology uses a substrate coated with cell adhesion matrix (CAM, a porous layer of extracellular matrix polymer coated with blood-borne adhesion molecules) that mimics the interstitial microenvironment, in which tumor cells invade.  CTCs naturally adhere to CAM allowing for their isolation and enrichment from whole blood samples.

I am still undecided if I believe CTC isolation technologies will actually work on a commercial scale.  Application-wise, the low hanging fruit is to go after solid tumors that are hard to biopsy (lung, pancreas, etc.) and therefore could benefit from a “liquid biopsy” via CTC isolation.  After the low hanging fruit is picked, I am not sure what role lab on the chip tests will play in a clinician’s arsenal. 

My guess is that clinical validation studies through retrospective analysis will look quite convincing, but most technologies won’t hold up in prospective trials.  CTCs are so rare that there is a very high probability of false negatives, which could be rather disastrous for patients that actually do have cancer.  Clinicians will most likely want to see lots of data, requiring expensive trials, before they start using lab on a chip technologies to indentify malignancies.  I look forward to tracking the progress of Biocept, On-Q-Ity, and Vitatex, with the hope that my pessimism will be converted to optimism.

Update on January 5, 2011 by Martin Lehr

Even if a diagnostic is capable of identifying CTCs, what does that really mean to the patient?  To be honest, I am not entirely sure.  Some thoughts:

• There is a strong chance that any two people with the same number of CTCs and similar cancer subtypes could have wildly different clinical outcomes (one patient gets cancer while the other does not).
• Just because CTCs are there does not mean a person will get cancer.  A strong immune systems most likely renders most of the CTCs.
• A floating CTC could end up anywhere.  
• Are these CTCs progenitors or fully determined cancer cells?  Does that matter if they are floating around?