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$500M Endowment Aims To Back NC University Innovation

By Audrey Elsberry, posted Jan 15, 2024
Dean of UNCW's College of Science and Engineering, Ron Vetter, said the university will apply for one of NCInnovation's grants in its inaugural 2024 grant cycle. (File photo)
A North Carolina organization is using $500 million to rescue university research innovations from “the valley of death.”
 
Innovations that don't make it out of the research and development (R&D) phase often fail in the "valley of death" — the period after the product is developed but before it's on the market. Projects in this phase are often too risky for private investment, but the process of maturing them is too costly for university funding, said Patrick Ryan, a representative of NCInnovation.

Durham-based NCInnovation plans to use a $500 million endowment granted by the state legislature in October to help North Carolina universities commercialize the finished product of their research. The mission stems from a disconnect between the state’s academic research distinctions and the commercialization of that research. 

"We're below our peer states in some of those major commercialization metrics," Ryan said. "So the question then became, 'Okay, why is that and most importantly, how can we help solve that?"

The state ranks second nationally in research development dollars allotted to the university system, but 20th in the output of those dollars in things like startups and patents, according to NCInnovation.

The organization points to four challenges that contribute to those statistics, including uneven success in rural areas, lack of applied research, insufficient commercialization funding and little regional collaboration across industries.

While the University of North Carolina Wilmington has a healthy research department, NCInnovation can help improve the connections between research being done in Wilmington and other parts of the state, said Heather McWhorter, director of UNCW's Center of Innovation and Entrepreneurship.

The new funding possibilities could result in more startups coming out of UNCW, she said, making startups like Lapetus Solutions, which spun out of UNCW around 2015, the norm. She added that she has seen potential startups fall victim to the valley of death in her time at the university. 

"Whenever you innovate, from a university point of view, there's research dollars, and then there's a gap until you really have traction and you're making it. And then there's venture funding," McWhorter said. "(NCInnovation) will be able to carry the baton in between R&D funding and venture capital."

Ryan said four NCInnovation regional directors are meeting with their university counterparts to see what kinds of projects are in each university’s portfolio. McWhorter and Dean of UNCW's College of Science and Engineering, Ron Vetter, have met with NCInnovation’s Eastern Regional Network Director Derrick Welch. 

“It's a way for startups and universities to say what space they want to play in,” Vetter said. “For example, in UNCW’s case, this whole Blue Economy is something we're very interested in.”
 
As this is the first year the group has published an open call, NCInnovation officials are tight-lipped on when results will be published. Grants will most likely span six- to low seven-figure amounts, Ryan said. Grantees will not likely get the full amount up-front, but funds will be deployed in phases based on reaching certain research milestones, he said.

Universities that can commercialize products born from their researchers get a cut of the revenue, an average of 40%, Ryan said. So the more successful startups or licensed products that come from a university's research, the more money flows back through the university. 

A lag in innovations coming out of the U.S. has been discussed since the 1940s, McWhorter said. In the past couple of years, several organizations have been established, like the National Science Foundation's Regional Innovation Engines and the Economic Development Administration's Regional Technology and Innovation Hubs have come along to bolster the country's innovation economy. 

"I view this as North Carolina's way to get our state back on track as well," she said.

NCInnovation was founded in 2020, in part by Kelly King, former CEO of Truist Financial. The General Assembly granted the $500 million in an endowment, to let it accumulate interest. That interest will be used to fund the grants, creating a replenishable pool of money to pull from. 

"If properly done," Ryan said, "this funding should be available forever."
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