Virginia Tech
Entrepreneurial Profs
At Virginia Tech, entrepreneurship is flourishing. Professors and students share profits along with the joy of discovery.

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• Brain Drain

by Su Clausen-Wicker

Rappaport has played yet another critical role in the quest to help Virginia Tech as it competes head-to-head with the private sector for brains and ideas. To clear the way for many faculty and student start-ups, Tech needed clear and detailed rules about how to handle conflicts of interest in moonlighting jobs. Since he had so much experience as an entrepreneur, Rappaport was instrumental in writing Tech’s guidelines, which took effect this June. "I am one of the guinea pigs to see whether it works," says Rappaport. "I sure hope it does. We are one of the most (physically) isolated of all our peer institution’s companies."

Ph.D. candidate Roger Skidmore is an officer in Prof. Ted Rappaport's Wireless Valley company, which they hope to take public. Photo courtesy of Virginia Tech

Rappaport is a pioneer. Thirty years ago it was almost sacrilege for professors at major research universities to pair the joy of learning with the joy of earning. But today, professors like Rappaport are creating companies that transform their research into profitable products. So far, about 30 of Tech’s 265 engineering professors have declared ownership in start-up companies in fields ranging from wireless telecommunications to fiber optics to mechanical engineering.

Doing so has many pluses for Virginia Tech, just as it does for the Massachusetts Institute of Technology, Stanford, Carnegie-Mellon, and other top-ranked research schools. Entrepreneurial professors strengthen the economy, facilitate technology transfer, create jobs for graduate students, augment funding for university research, and bring prestige to the university. Allowing hotshots the latitude to run their own businesses also helps with retention. "Some of the entrepreneurial faculty are our teaching stars," says Leonard Ferrari, head of the electrical and computer engineering department.

There’s a dilemma with university entrepreneurship, however. While solving one set of problems, the marriage of business and academe creates issues. What happens, for example, if faculty become so engrossed with their businesses that they lose sight of their teaching missions? How do schools protect their graduate researchers from being unfairly used for a faculty member’s personal gain? How do you make sure that the university gets its fair share from invention royalties?

Tech administrators are acutely aware of the issues, says Malcolm McPherson, engineering associate dean for research and graduate studies. "Faculty members are paid by the state for teaching, research, advising students and service duties; we want to protect ... them against the perception of conflict of interest."

The new rules laid out this June help faculty avoid problems of commitment and conflict of interest. The rules underscore state restrictions on uncompensated use of university equipment, employees and graduate students for personal gain. They also spell out conditions under which faculty-owned businesses can contract with the university, employ students and relate to graduate students working at the university on company-sponsored research. Faculty engaged in outside activities must file annual disclosures with the department chair and dean. Where the possibility of a conflict seems great, a faculty member must file a memorandum of understanding proposing how the relevant activities will be monitored.

Meanwhile, Tech has put into place systems to vet ideas, make sure royalties are distributed fairly and keep things clean. VTIP, Tech’s intellectual properties division, for example, determines whether the results of Tech research are patentable and marketable. If so, it pursues licensing. Royalties are divided 50/40/10 among inventors, VTIP and the department, respectively, after costs are recouped. Relatively few inventions make much money, but the examples of Qualcomm at the University of Illinois, Amati at Stanford, Bose at MIT and other companies emerging from university research attest to the wealth that can be generated for both the inventor and the institution. "We don’t make money from intellectual property unless someone is using it," McPherson says. "While manufacturing is not part of Virginia Tech’s educational mission, who is better suited to advance the commercial development of an idea or product than the team that originated the concept?"

Tech faculty members seem glad to have guidelines. One is Wing Ng, an endowed professor of mechanical engineering. He has a 2-year-old research development business called Technology in Blacksburg — Techsburg for short — that employs 15 people, mostly students and former students. It’s best known for the miniature remote control airplane he developed for military and rescue reconnaissance. "I feel that my business adds depth and credibility to my teaching role. I am a practicing engineer as well as a researcher," Ng says.

Another endowed professor, Demetri Telionis, says the paperwork and monitoring requirements of the conflict-of-interest policy "could be a bit of a hindrance." But Telionis, who operates his scientific instrument company, Aeroprobe, in both Blacksburg and in College Station, Texas, says having clear conflict guidelines lets the community know that the entrepreneurial faculty is behaving. He hopes his company will expand rapidly under a new distribution system and says it provides good experience and temporary jobs for students. "My manager runs the company, so I seldom go out there," he says.

Many Tech students encourage their professors’ activities. "Their companies advance their technology. I expect they learn more in the process," says freshman computer engineering student Randy Bowles of Martinsville. His roommate, sophomore engineering student Derek Ingus of Wise, agrees. "My profs keep their office hours; I’m happy." Junior aerospace engineering student Nicolas Spitz, of France, says: "High-tech start-ups are what’s happening. That’s what I want to learn about. If my professor has a business, that’s an asset."

The new pioneering spirit has taken some curious turns at Tech. In one project just on the drawing boards, a student has come up with an idea for a start-up company and wants to fund faculty members. "He’s trying to fund a faculty member for research that is particularly interesting to him," Ferrari says. Tech is dealing with the company as a separate entity and making sure the student, an undergraduate whom Ferrari declines to identify, is not directly supervised by the faculty member he funds. Of course, Tech gets to keep the intellectual properties that result.

Like Virginia’s other public universities, Virginia Tech ventured into the choppy waters of academic entrepreneurship relatively late, more than 15 years after the vanguard institutions in other states. Cautiously, Tech developed an entrepreneurship policy after much study and consensus building, avoiding the mistakes of some early birds — the lack of full campus buy-in, inadequate conflict-of-interest policies and vague monitoring processes, according to Purdue University’s Vice President for Research Gary Isom.

Tech’s guidelines are more explicit than those of many universities but they fall on the liberal side in handling university contracts and royalty revenues. At MIT, for instance, inventors receive 33 percent, rather than 50 percent of the royalties, after costs are deducted. But some schools are trying harder; Oklahoma University, a relative newcomer, is rewarding faculty with 33 percent of the gross revenue from their inventions, even though the university may suffer a loss after marketing and patenting expenses. Its engineering dean, Arthur Porter, former technology advisor to Texas Gov. George W. Bush, is putting inventions on par with scholarly research in the academic rewards system.

Tech hopes to do the same, and more. Not only will the school benefit if the conflict-of-interest rules smooths out problems and encourages research, but the surrounding New River and Roanoke valleys will benefit as well. Rappaport’s firm already has expansion plans. He’s been searching for a manager with experience in a high-tech, high-growth company, talking to venture capitalists, and patenting new ideas for the installation and management of wireless communications. "I would love to have Wireless Valley break through and do an IPO — that would create several hundred jobs and spawn more," he says.

For all the progress the university has made, it’s still tweaking its policies. To help professors be entrepreneurial, Tech is considering liberalizing old rules that limit outside consulting to one day a week for not more than five consecutive weeks. "Is a day eight hours, 12, 24? And do weekends count?" asks McPherson. "These rules were set up before business could be conducted electronically."

Tech’s conflict of interest policy can be reviewed at the College of Engineering Web site.