The Economic Impact of UC Davis

UC Davis Chancellor Linda Katehi
UC Davis Chancellor Linda Katehi

By Linda P.B. Katehi

Since Congress passed the Bayh-Dole Act in 1980, allowing universities and other institutions to retain title to inventions and breakthroughs discovered under federally funded research, UC Davis and other universities have been steadily creating start-up companies and incubators.

Today, with a $4 billion annual budget that includes more than $700 million in research and $1.5 billion in clinical activities, UC Davis is the region’s largest employer, after state government. All told, UC Davis is responsible for $7 billion a year in annual economic activity and supports nearly 70,000 jobs. It generates more than $3.4 billion a year in employee pay alone. With our role as employer, purchaser, real-estate and workforce developer, collaborator and facilitator, UC Davis is arguably the most dynamic economic development engine in the region. Since we now receive about $340 million in state funding, that’s an impressive return on investment of more than 20:1.

But even with the state’s share of our operating revenues in historical decline, we know we can and must do more. Davis and every other healthy community needs a steady infusion of attractive employment opportunities to remain healthy and provide jobs so its young men and women aren’t compelled to move away to find work, start careers and build families. That’s why we have worked more aggressively across the entire university to support commercial ventures based on discoveries made by our researchers.

In 2011, we launched the Child Family Institute for Innovation and Entrepreneurship. It brings together researchers in science and engineering with faculty from our Graduate School of Management, investors and corporate leaders to support technology transfer and commercialization activities. Two years later, we started our Venture Catalyst program in the Office of Research. The program directly supports and trains campus entrepreneurs, conducts outreach to the Davis and Sacramento business, governmental and economic development communities and provides funding for translational research where other support isn’t available.

Along the same lines, our Engineering Translational Technology Center is a nationally-acclaimed technology incubator that is speeding high-impact and innovative ideas by UC Davis faculty and researchers to the marketplace. And last fall, we were one of the first universities in the nation to create a dedicated on-campus space for students to create prototypes of their ideas and collaborate on technology ventures. We call it the Engineering Student Startup Center, and it provides a dedicated space for our students to work together on their ventures along with the latest technology—3D printers, for example—to literally give shape to their innovative ideas.

We have more initiatives underway and more will come down the road. These are efforts that support job creation in Davis, as well as regionally and nationally. But even more valuable may be the life-saving and life-enhancing innovations put out into society where they can do the most good.

Our work is ongoing and far from complete, but our stepped-up efforts are paying off. In the last fiscal year, UC Davis helped launch 14 commercial startup companies. That’s up from eight the previous year. One of those is Tule Technologies, which is developing a monitoring system based on UC Davis technology that allows growers to use water more efficiently, an important step forward as California copes with a devastating draught. Another recent startup is Vivita Technologies, based here in Davis. The company is building biotech innovations to boost accessibility and reduce the cost of organ transplants.

San Francisco-based Dysonics was the first startup to emerge from the Engineering and Translational Technology Center. The company, founded by a faculty member, former research scientist and a UC Davis graduate, has developed a headphone technology that provides a more dynamic and richer listening experience, producing 3-D immersive sound through headphones.

In total, 62 startups based on inventions originating at UC Davis have been formed since 2003, resulting in the creation of hundreds of high-value jobs in Davis and across our region. With plans moving forward on several fronts in and around Davis to add development space for companies based on science and technology innovations, we see even greater opportunities for the university to have a positive impact on economic development right here in our own community.

In addition to start-up companies, we have created a number of public-private partnerships with great promise, such as the new Innovation Institute for Food and Health, a Partnership with Mars Incorporated announced last year and launched this past January. The Institute is designed to deliver big-impact breakthroughs in food, agriculture and health. Mars has committed to invest at least $40 million over ten years, with UC Davis adding $20 million through facilities, staff and other services.

We developed another successful partnership with CleanWorld, LLC. Based on technology developed by UC Davis Professor Ruihong Zhang and announced last April, this collaboration aims to commercialize the Renewable Energy Anaerobic Digester developed by Professor Zhang. Her “Biodigester” can turn 50 tons of organic waste each day into renewable energy, divert 20,000 tons annually from landfills, reduce greenhouse emissions by 13,500 tons annually and generate 5.6 million kilowatt hours per year. CleanWorld LLC. is opening other facilities using Zhang’s technology, thus advancing state and national goals to increase the use of renewable energy.

And last September, we announced plans to develop a 70-acre solar farm with SunPower Corp on a site south of Interstate 80. This facility will open in June and generate 14 percent of campus electricity needs, making it the largest solar power installation in the UC system.

These are exciting times and opportunities for our university and for our region. California’s economy is growing again after the last devastating downturn. Pillars of the future economy such as high-tech, clean energy, public health and food-related innovation and health care are core strengths for UC Davis. We’ve taken concrete steps to become more nimble and creative in turning our discoveries into commercial enterprises. I could not be more hopeful about working with our friends and partners in the public and private sectors to make our community, region and state more prosperous.

About The Author

David Greenwald is the founder, editor, and executive director of the Davis Vanguard. He founded the Vanguard in 2006. David Greenwald moved to Davis in 1996 to attend Graduate School at UC Davis in Political Science. He lives in South Davis with his wife Cecilia Escamilla Greenwald and three children.

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13 thoughts on “The Economic Impact of UC Davis”

  1. Davis Progressive

    “Davis and every other healthy community needs a steady infusion of attractive employment opportunities to remain healthy and provide jobs so its young men and women aren’t compelled to move away to find work, start careers and build families. That’s why we have worked more aggressively across the entire university to support commercial ventures based on discoveries made by our researchers.”

    this is good to hear from the chancellor.

    1. Davis Entrepreneur

      Unfortunately this seems good to hear but the licensing results of UC Davis are pretty weak at approximately  $13 million in 2012 with the majority of the income coming from strawberry and optical switch licenses that were first granted around the year 2,000, so the R&D work that created these license opportunities is more than 20 years old. 

      Here are the top sources of licensing income for the U.C. Davis campus in fiscal 2012:
      • Optical network switch: First licensed in 1997 — $2.4 million
      • Camarosa strawberry cultivar: First licensed in 1992 — $2.3 million
      • Albion strawberry cultivar: First licensed in 2004 — $2.0 million
      • San Andreas strawberry cultivar: First licensed in 2008 — $1.1 million
      • Ventana strawberry cultivar: First licensed in 2001 — $ 614,000

      Compare that with Stanford’s license revenue of approx. $87 million in 2012. Yes the Stanford faculty level is higher than UC Davis, but not 5x higher and does not account for all of this kind of dramatic performance divergence.

      If you look at the Stanford Office of Research organizational structure and compare it with UC Davis, you will start to see some of the reasons why there is less license revenue generated at UC Davis compared to Stanford.Next look at the faculty and departmental reward structure at Stanford and compare it to UC Davis to get the next indication of where there could be improvement in the incentive structure that could also drive an increase in UC Davis license revenue over the long term.

      However, just making these tweaks to the UC Davis structure will only get UC Davis somewhat closer to the Stanford level of licensing revenue performance. If UC Davis truly wants to revolutionize the way research is undertaken and leap frog Stanford in licensing revenue it will require a new approach that is not even being discussed or considered.

      I thought some new thinking should be aired, and this article seems an appropriate place to see if there is any interest from the Chancellor or someone like Harris Lewin who runs the UC Davis Office of Research.

      To change the dynamics of this situation that has resulted in such low performance from UC Davis technology transfer activities, UC Davis will need to work on both the supply of new technologies that can be commercialized and the demand for these new technologies.  To increase the supply of licensing opportunities there needs to be a change the faculty reward structure along with the way R&D is funded, so the university can begin to change the way things are done in an effort to generate more commercialization opportunities. There needs to be an increase in the demand for commercialization opportunities to draw out inventions from faculty that can be commercialized both by existing industry and new start-up companies.

      A 2 step proposal to achieve these changes might go like this:

      Step 1 – Change the faculty reward and funding structure so that income from start-up companies and existing industry can flow quickly to faculty from the results of R&D. Faculty could then waste less time chasing grants that have very little chance of being awarded and ensure that their research effort goes where the science takes it rather than where the bureaucrats granting the awards direct it. The amount of time faculty waste on applying for grants is staggering and the financial harvest is pretty poor in comparison to the effort that goes into making these applications. Relying so much on grant funding for research also ensures that the bureaucrats giving out the grants and their lobbyists who influence them, get to direct which research path is taken rather than the scientists being free to search for new insights in the white spaces of mankind’s knowledge…this is a bad case of the tail wagging the dog.

      Step 2. Channel the funds generated from the proceeds of licensing and successfully launched companies directly to UC Davis faculty for self-directed R&D rather than trickling down these funds through the university bureaucracy. Currently an inventor gets 35%, the Research Office Allocation is 15% and the General Campus / Lab pool 50% of income generated from an invention.

      The funding allocation should be more like deduct 15% to support OR’s operation then divide the remaining income three ways:

      •1/3rd to the inventor(s)
      •1/3rd to the inventor’s Department
      •1/3rd to the inventor’s School

      Changing the funding flow from a trickle down structure to a trickle up structure will ensure that the university gets more research and less bureaucracy, rather than its current structure which is a little top heavy.   

      A key component of the funding flow would be to ensure that some of the seed funds invested in a start-up resulting from UC Davis technology should go back to the university researchers immediately rather than waiting for the company to have a successful financial exit. The financial harvest should be made from the first investment in the start-up and those funds should go directly to the inventing faculty very quickly so there is a direct correlation between R&D commercialization and funding for more R&D. This rapid linkage between invention and initial seed investment returning funds to the researcher will enable faculty to fund some of their research from commercialization of technologies rather than being completely reliant on grants. These funds won’t be huge as start-ups never have enough cash, but small amounts of money applied directly at the cutting face of science go a long way in R&D efforts when compared to funds that are dropped into the general research fund and are dramatically diluted by the university overhead before these funds get to the actual scientists doing the work. Obviously, rules will have to be put in place that ensure some of these funds go into pure blue sky research to ensure that faculty does not become overly focused on commercialization at the expense of the quest for expanding human kind’s general knowledge base.   

      These two changes could have a profound effect on the type of research UC Davis could undertake. Peter Thiel like sentiments sums it up best in my mind.

      What we wanted as human kind was step change like inventions with things like:

      . Flying cars
      . Space travel
      . Healthily living in old age

      What generated the most financial reward was incremental change with things like:

      .    Facebook and 144 characters to Twitter messages with

      I suspect it is time to think more boldly about research and for American science to start to explore the true white spaces in mankind’s knowledge again rather than incentivizing our best universities and faculty to do incremental research work that might be more effectively done in corporate R&D facilities.

      Two initiatives that could help facilitate this conversion to a more faculty directed Research and Development effort and away from a Washington DC or Sacramento bureaucrat directed science effort might be:

      1. A matching service between faculty and entrepreneurs so the first stop for faculty is not the Office of Research when an invention shows potential for commercialization but the first stop is a university matching service to find an entrepreneur to partner with who can drag that invention out of the lab and into the market.

      2. An investment fund that invests in UC Davis start-ups and draws its funds from UC Davis alumni in syndicated investment pools and so tap into alumni loyalty just like the football team does.   

      A matching service will dramatically improve the rate of technology licensing and the launch of new start-up companies based on U.C. Davis developed technologies as entrepreneurs have the characteristics that, when paired with a scientist, can dramatically improve the chances of an invention leaving the lab and seeing the light of day. This could be brought to life by setting up a “dating service” that matches entrepreneurs and faculty, so faculty can focus on the science and entrepreneurs can focus on building the businesses around the science, rather than the current strategy which is trying to convert faculty into entrepreneurs or at least make faculty some what more entrepreneurial.

      An investment fund that invests in UC Davis start-ups and draws its funds from small investments made by UC Davis alumni that are syndicated together can close the funding gap between initial R&D funds and Series A Venture Capital. The Funders Club in San Francisco has pioneered the syndication of small investors into larger investment pools that very successfully provides the capital that is needed to fill the gap between Angel funds and VC funds for Internet start-ups. The university could adapt this model and take it to it’s alumni creating a UC Davis Alumni “Funders Club” so the alumni can use self-directed IRA’s and the like to invest in UC Davis start-ups. These alumni funds could also be leverage up with the university endowment and other outside funds which could enable a UC Davis Alumni “Funders Club” to become a true agent of change.

      Finally a thought to leave you with…if Prof Andy Frank (UC Davis Faculty) and a matched entrepreneur had started Tesla instead of Elon Musk/Ian Wright/Martin Eberhard/JB Straubel and UC Davis owned 30% of Tesla, the return from that one start up would have funded all of UC Davis research for 10 years…no grants needed….how many other pioneering opportunities have gotten away like this?   For the future prosperity of the town of Davis and its university we need to make sure the next BIG inventions currently in UC Davis labs don’t get away.

      Maybe this is the time to think about changing the R&D paradigm and how the university’s research is funded might be a good place to start….let’s at least start a discussion before we keep on with existing paradigm for the next 20 years and the world leaves our idyllic little town behind.

  2. Daniel Parrella

    Where is the discussion on this article? Arguably the most powerful person in the region reaches out and we get two comments? Anyways….

    Thank you David for facilitating this submission and thank you Chancellor Katehi for writing such a great article.

    I have been really impressed with what the UC is doing when it comes to facilitating startups and this does a great job of shining a spotlight on some of the activities that dont get much attention. Ironically I heard about the Engineering Translational Technology Center today when I sat down with the Venture Catalyst group.

    The only thing Chancellor Katehi missed is the wet lab incubator space which recently opened to give bio/agtech startups access to lab space.  I know they are planning on going public about it soon and I cant wait until they do, that is the kind of leadership that can pay huge dividends in the long run.

    What I love about this article is briefly touches on the economic impact and then focuses instead on the “even more valuable may be the life-saving and life-enhancing innovations put out into society where they can do the most good.” My experience has been so far that people are more interested in potentially saving lives through cutting edge cancer research than they are through generating city tax revenue. I am going to send a letter to Chancellor Katehi asking her to do more articles like this and I hope others do the same. Thanks all! 

     

     

     

     

    1. hpierce

      Perhaps lack of comments might be realization that UC intends to patent innovations using their facilities, not as a gift to the public at large, nor to bring tuition down, but to further senior faculty/researchers and senior administrators salaries and/or benefits.  Just an opinion.

      1. KSmith

        As far as I know (and have commented on the previous tech transfer article), the university does use its inventions for the public benefit. This is sometimes effected through the combination of exclusive and non-exclusive licenses to UC technology and IP, a portion of which revenue does go back to the university in for a variety of uses (and I believe tuition support is part of it).

        UC also retains rights to our inventions so that we can make helpful technology available at little or no cost for the public benefit (for example, research materials can go to other institutions, and plant varieties can go to developing countries whose subsistence farms want to try new crops).

        I, personally, have not seen the funds used to further “senior administrators salaries and/or benefits.” At least in my division, there have been few pay raises over the past 6 or so years among non-represented staff.

      2. hpierce

        Followup question ksmith… should UC have “exclusive’ licenses, or should the fruits of federally funded UC research be “open source”, under non-exclusive licenses?  Just asking your views/opinions.

        1. KSmith

          Accidentally hit “Report Comment” instead of “Reply,” so moderators, please ignore that.

          “Open source” usually (if I’m not mistaken) relates to software, and allows anyone access to the source code to modify and distribute (with perhaps some minor restrictions).

          I think what you meant instead is “public domain,” which means that intellectual property is freely given to the public to modify and distribute at will.

          In my opinion, much of UC research should be transferred via non-exclusive licenses that would generate royalties for the university, the proceeds of which would them be put back into research, tuition, and infrastructure.

          I am also a proponent of fulfilling the public benefit mission through low or no-cost licenses to other universities or similar beneficiaries to keep research going.

          There are a few cases in which exclusive licenses might make sense, such as when dealing with companies/organizations who are uniquely positioned to maximize the use/distribution/transfer to marketplace of UC IP. These types of licenses should (and I believe are) rare, and there are generally more stringent conditions written into these (as far as I know).

        2. hpierce

          Thank you for your response.  I am in agreement with the principles you cited, with the possible exception of the last paragraph, where I don’t know enough about it to form an opinion.

          Oh, and yeah, based on my limited terminology, “public domain” = “open source”.

  3. Frankly

    I think the lack of comments indicate two things:

    1. There are a lot of people that agree and like what they read.

    2. Those that don’t or do not like what they read don’t have any compelling arguments for their cause and will just wait like Barracuda to strike in opposition when they see the opportunity.

    One comment that I have made already in the previous article from the Chancellor…  I think we are seeing a transformation in the business model for public universities and is inevitable and unstoppable.  Either Davis plays as an active and supportive partner, or Davis gets passed over and fails to benefit.

    It appears that Palo Alto has a City-University Liaison Commission.  Does Davis have the same?

     

     

    1. hpierce

      Frankly, do not mean this as an “attack”, but from a number of your recent posts, seems like you are advocating for more committees/commissions… this seems to be in contrast to other sentiments that I seem to remember you expressing.  Is your “tongue in cheek” for adding committees/commissions, or are you really advocating for more (with their “overpaid/underworked” staff support)?  Meant as a fair question, except for the part in parenthesis (which was minor “dig”).

      1. Frankly

        Hpierce – this is timely.  Just got off a long conference call with my federal program administrator that is telling me that service levels are going to drop because of budget pressure and my private business is going to have to do more to pick up the slack.    It isn’t that the agency is having its budget cut, it is that it isn’t allowed to increase with the escalating employee compensation costs… primarily driven by the wave of early-full-paid-retirement lottery winners that are cashing out.

        My suggestion/question was similar in that I see a need for more outside community involvement in the work to help manage these complex projects because the city staff are less and less capable of doing it themselves within a reasonable budget.

  4. Doby Fleeman

    Wow, how did I miss this great article?  For me, it’s easy – operating most days from my mobile phone – I refresh the days articles using the singular landing page titled “City of Davis” and then scroll down to see the latest articles.  As I look at the tags for this article, it doesn’t post under City of Davis.

    Suggestion, maybe articles like this – affecting the entire community – could be always be linked to the City of Davis index?

    More importantly, what a great follow-on article by the Chancellor.  Based on Chancellor’s Katehi’s demonstrated success at Champagne Urbana, in moving university research into the commercial research and development sector, there should be not doubt that she understands the essential linkages and opportunities between the University, local and regional communities.

    Translating those successes to Davis and the Sacramento Region, as a whole, would seem to be somewhat more of challenge.   Events of recent month demonstrate that things are definitely looking up both for Davis and region.  Here’s hoping our host community can provide the type of welcome support it has traditionally shown for new arrivals and those interested in adding their contributions to help make ours a host community befitting of the university we are blessed to have in our midst.

     

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