In June, OUP released our Research Realized interview with Nancy Sullivan, CEO and Managing Director of Illinois Ventures. Illinois Ventures is a seed and early-stage technology investment firm focused on research-derived companies in information technologies, physical sciences, and life sciences.
While their origins are investing in businesses based on innovations from the University of Illinois, they have also expanded to explore other regional opportunities. Illinois Ventures offer three types of funding: proof of concept grants, seed funding, and venture capital.
Most universities I know are now employing some sort of internal proof-of-concept grants — but to combine those with seed funding and venture capital under one roof is a fairly unique concept. The proof-of-concept funding is Illinois Ventures’ newest area of funding, with $50,000 for a first phase and possibly a larger amount in a second phase if the first phase goes well.
For their seed stage funding, Illinois Ventures typically invests around $150,000 in a $500,000 round, usually through a convertible note. Illinois Ventures recently announced the raise of their third venture fund and have already started investing out of it.
Nancy and I explored a range of topics during the interview, from the work done at Illinois Ventures, to attracting talent to Illinois startups, to her work at the Women’s Entrepreneurial Life Sciences Initiative. Excerpts of the interview are below, but you can find the full interview on SoundCloud or iTunes.
If you’re investing in university-related technologies and you’re at the very front end of these [financings], these are typically not going to be me-too products. These are revolutionary, trailblazing products that are going to make very large impacts. But in order to do so, you have deep technology risks that you are going to have to get over, you then have to get over some market risks and adoption because it is a change, and then you are looking at an execution risk.
So, those risks are very real, but the opportunity is transformational, and as you think about it, you need to try and keep it in the lab as long as possible to reduce some of that technology risk where you can and focus more on the execution and the market risk once you do a startup. We have a lot to do at the university with resources on the technology side. We want to support our researchers after the federal grants run out because this is too late for [federal grants], but may not be ready for a startup … so I think that models that have done [this further support] are smart…
It also gives a faculty member a feel for what it might like to do a startup because you’ve defined the milestones, you’ve defined the timeline, you’ve defined what has to come out, it’s go/no-go; it starts feeling a little different than a typical federally-funded research grant. It allows the faculty member to understand if they feel right doing that or not.
The second thing… is that you can’t do it alone. This is not a singles game by any means… We want large co-investment networks around the table. We’d be happy to share the upside, but often it takes a lot of time, a lot of expertise, and a lot of money, and the more you can have at the beginning, the easier that process is to the growing pains [of the startup.]
For the talent that has moved to the west coast, it was enticing when they got right out of college, sharing a studio with four buddies, being in Silicon Valley, but after they get married, perhaps, have their first child, coming home, being close to the grandparents, and being able to afford a nice home in the area, has been a way… to attract the talent that is experienced to come back. What we have to show them … is that if you take a risk and you join a startup and that doesn’t work, there are three or four more waiting for you to join.
In Champaign, we have a nationally-recognized incubator called EnterpriseWorks and a research park that is starting to attract some of the larger marquis-name companies… Here in Chicago, we have an amazing medical school, and alongside our medical school we’ve seen the opening of something called Matter. It’s an incubator focused in the healthcare area [located] in downtown Chicago that is three years old now and is at a point that it is attracting international attention.
IT has been an area of growth for Chicago. 1871 was launched as an incubator. The university is a partner in both Matter and 1871 to try and take ideas out of the lab, into the startup community, and get them involved in incubation and programs that make a big impact. In all of those, one of the key pieces we’ve seen that have made strong roads for us is our corporations [and venture capital colleagues] are getting involved early on [to help] advance them.
At the time [at Northwestern] we had a Vice President for Research, Dr. Lydia Villa-Komoroff, who was very supportive of women and very supportive of the idea [I had]. I was complaining that we weren’t seeing a whole lot of women-led ideas. She looked back at me and said, “What are you going to do about it?” …
I found [an NSF grant program] and I brought it to her. I am not a PhD. I did not realize what the NSF requires, and she looked at me and said yes, and I’ll be your co-PI. It wasn’t until years later that I realized what she had done for me. What I learned from that experience … is what you need to do for others, and how you can do it quietly without ever having to explain what you’ve just done. People will realize it one day. That’s a lesson for me personally.
On a professional front, I really realized that the ideas women had were amazing. Their opportunities were incredibly real. I think we’ve gotten over this as this was years ago, but at the time how the story was being told [by women] was quite different than what the funding world was used to. It wasn’t the base technology, it wasn’t the ideas. [We spent] a lot of time with the women helping them rethink and be very clear and confident in what they had… It was going from being a scientist to [a marketer] and getting these ideas forward. We ended up having lab space where they could do those killer critical experiments — don’t go out and raise money too early. People don’t want to hear what you think can happen. Go in the lab, spend three months, and see if you can make it happen. Once you make it happen, let’s raise the money at that time.
Nancy had a number of other great insights on both university venture capital and mentoring women scientists. Listen to the full Research Realized interview on Soundcloud or iTunes.