With scorching temperatures and little shelter, Death Valley can be a treacherous place for visitors to be stranded.
For entrepreneurs, crossing a different “valley of death” can be just as perilous. In research and development, the “valley of death” is where new ideas die — that space where technologies show promise but are deemed too risky to attract the investments they need to survive.
Eric Muth understands first-hand the challenges of crossing this valley.
Before becoming vice chancellor for research at North Carolina A&T State University, he and a colleague at Clemson University received federal and state funding to develop a wrist-worn device that tracked the number of bites a person takes while eating.
After years of work on the Bite Counter, Muth had a commercial-ready product by the late 2000s that he took to trade shows and marketed on the company’s website. But the concept never took off. The introduction of smartwatches from companies like Apple didn’t help, but Muth said the company ran into other challenges as well. The company got caught in the valley of death — a good idea that lacked funding.
Researchers and early-stage companies throughout North Carolina, especially outside the Triangle, often face similar fates. And by some measures, North Carolina has lagged in innovation — alarming business leaders and leading the General Assembly to shovel millions of dollars to a relatively young nonprofit to tackle this problem.
NCInnovation was formed to support turning university research into commercial opportunities. The group is focused on regions outside the Triangle, where the major research universities at Duke, N.C. State and UNC-Chapel Hill have driven success not seen in other parts of the state. As the Triangle prospers, other regions of the state watch as jobs are eliminated and populations decline.
By working with schools such as N.C. A&T and East Carolina University, NCInnovation aims to boost economic development in these different regions by supporting efforts that turn university research into commercial ventures.
“We have a strong university system in North Carolina,” Muth said. “A lot of research dollars … a lot of (intellectual property) being produced, a lot of patents being granted. But, just like where I was at Clemson, the entrepreneurial enterprises suffer from something that’s missing.”
The nonprofit was founded in 2020 by some of North Carolina’s most influential executives, including Kelly King, the former CEO of Truist Financial, and Robert Ingram, an influential pharmaceutical executive who died in 2023. But it really took shape last year as it successfully secured a $500 million allocation from the General Assembly.
The amount of money involved will bring more attention to the organization to generate quick results. But that’s not how this process will likely play out, Muth said. Instead, this is a long-term effort to support an innovation-driven economy in the state, which could lead to companies forming and remaining in North Carolina, rather than only selecting the state as a site for a one-time manufacturing plant.
“This isn’t about what happens tomorrow or next year,” Muth said. “This is about … what does North Carolina look like in 2033? Because if we look like the same as we do today, these companies are going to come and go. And … we will get outbid to do the manufacturing jobs at a lower cost just like we did with textiles.
“That’s what we’re trying to avoid.”
Securing funding
When the North Carolina Senate released its budget proposal May 3, it carved out about $1.4 billion for NCInnovation. It was a huge allocation for an organization that listed its assets at roughly $4.8 million in its 2022 tax filing.
King, at the time, referred to NCInnovation’s model as a “game-changer” for North Carolina and the state’s rural areas “that have human talent but need support to press forward on commercializing research outputs.”
But the idea, and the scale of the budget allocation, faced pushback. A few prominent North Carolina business executives, including Art Pope, the CEO of Variety Wholesalers and a former state budget director, wrote to the state House of Representatives arguing against the $1.4 billion allocation. The executives argued that innovation is best fostered through free enterprise and the private sector.
Despite the skepticism, the final budget approved in September carved out a substantial amount of funding for NCInnovation. Lawmakers set aside $250 million for NCInnovation in fiscal year 2024 followed by another $250 million in fiscal year 2025.
The General Assembly didn’t hand over a check for the full amount. Instead, the nonprofit was given the authority to spend up to $50 million in 2024 and then up to $90 million in 2025, once the group completes certain requirements related to establishing its infrastructure and governance.
The rest of the money is moved into an enduring endowment that must be managed by an independent third party. The investment income from that endowment becomes the organization’s program funding moving forward, NCInnovation CEO Bennet Waters said.
The law requires NCInnovation to report to various state entities on its operations each year by Sept. 15. Among other details, this report is supposed to include how much the organization has spent to establish its network of innovation hubs and how much it has awarded in grants to academic researchers. It also includes some outcome data, such as the number of jobs created through NCInnovation’s efforts.
“NCInnovation is a vehicle for the General Assembly in the state of North Carolina to be competitive with other states,” Waters said. “It is not a private organization. It does not have shareholders. It doesn’t make or realize gains on investments in any way.”
In its early days, the nonprofit had memorandums of understanding to establish four regional hubs at anchor universities in different parts of the state. This includes East Carolina, N.C. A&T, Western Carolina University and UNC Charlotte.
The organization has also hired directors who will be based at each university and a 13-member board of directors that includes eight members appointed by the General Assembly, with four each from the Senate and House.
NCInnovation aims to complete its objectives through multiple means. This includes building out regional networks that can connect private industry to universities throughout the state, mentoring and other services that support researchers. But a significant portion of the group’s work will be focused on the non-dilutive grant funding it will administer to try to help turn research outputs into commercial ventures.
The North Carolina Collaboratory, formed by the General Assembly in 2016, will manage the grants awarded by NCInnovation. The collaboratory facilitates and funds research at universities throughout the state, and through a partnership, NCInnovation can leverage that existing infrastructure.
The collaboratory will act as pass-through entity and will not carve off any percentage of the grants or any earnings from intellectual property that is monetized, executive director Jeff Warren said. In addition to managing the distributions, NCInnovation is required to consult with the collaboratory “for the purposes of making determinations regarding terms and amounts of distributions,” according to the state budget bill.
With its involvement in more than 500 projects throughout state, the collaboratory has insight into numerous promising research opportunities. But the final say on which projects will receive support is left up to NCInnovation and its leadership.
“We’ll be part of the process, because we may have information that (NCInnovation) doesn’t, but at the end of the day, they have a governing board with bylaws that was put in place by the legislature,” Warren said.
While work is already underway on the regional hubs, NCInnovation plans to soon begin compiling an initial list of projects that could receive grant funding. NCInnovation will accept submissions directly from universities while also tracking down ideas on its own by combing through intellectual property that may already be sitting on a shelf at a university.
But ultimately, the group’s grant funding can only take these ideas so far. The real test will be whether, after receiving this additional support, these ideas can attract venture capital funding.
“At some point we’re going to have to see if the Field of Dreams phenomenon works,” Waters said. “If we build it, will (venture capital) come?
“If we get more companies to the point of being commercially investable, will more commercial capital come here?”
Addressing a problem
Despite the billions of dollars in research funding coming into North Carolina, the state falls short compared to others in certain outputs, like patent applications or startups formed. And to the extent this activity is taking place in the state, it’s mostly concentrated in the Triangle.
NCInnovation commissioned a report in 2022 from the national economic research firm TEConomy Partners to look at why North Carolina lags others in national rankings of innovation.
Among other findings, TEConomy found that despite the amount of research dollars flowing into universities from government sources, North Carolina placed below the top 20 percent of universities in invention disclosures, new patent applications and startups formed from 2018 through 2020.
The report found other challenges, including an uneven level of success, with most research funding concentrated at Duke, UNC-Chapel Hill and N.C. State. Additionally, the report identified a lack of applied research that can translate to commercial opportunities, an underdeveloped venture capital environment and little regional collaboration.
Many universities have tech transfer offices to support moving research into commercial ventures, but not all have the resources of large institutions like UNC or Duke. For instance, N.C. Central University has a single employee overseeing the university’s tech transfer operations.
Undi Hoffler joined N.C. Central as its first director of research compliance in 2009. After a few years, Hoffler also began addressing some of the university’s gaps around intellectual technology transfer after some changes in U.S. patent law in 2012.
Since then, Hoffler has worked to lay the groundwork for the university’s efforts around capitalizing on innovation, which includes supporting patent applications and ensuring that faculty members are credited for receiving certain federal funding awards when it comes to promotions and tenure. The university has also added specific language around supporting innovation in its strategic plan, which Hoffler said is an important step.
NCCU has seen its number of patent applications and invention disclosures rise, despite a slowdown around the pandemic. But there are still significant challenges to turning an idea into a commercial opportunity. Funding is a major challenge, as awards from government sources like the National Institutes of Health or the Small Business Innovation Research program can only go so far. And faculty members may lack the experience needed to form a company.
“You’re thinking about a number of things on the business side of things that as a faculty member you’re not thinking about,” Hoffler said. “It requires a lot of time to get a company stood up and to maintain that, and also if you’re trying to maintain your role as faculty; what does that look like?”
Other states have similarly put public dollars behind trying to address these challenges.
In the 1980s, Georgia failed to land the headquarters of Microelectronics Computer and Technology Corp. Instead, the large technology firm, which has since closed, chose Austin, Texas, helping jumpstart the city’s reputation as a prominent tech hub. In response, Georgia leaders in 1990 formed the Georgia Research Alliance, a nonprofit aimed at boosting the state’s economy through the support of university research and company creation.
Since 1991 GRA has received $702 million from the state for its investments. Unlike NCInnovation, GRA is funded on a yearly basis, with the most recent allocation totaling $10 million.
The group uses this money in multiple ways, including recruiting efforts to bring researchers to its partner universities — which includes eight schools — and funding for tools and facility updates for university researchers. The nonprofit also provides seed funding to researchers trying to commercialize these efforts. There are more than 200 active companies with ties to GRA, and the organization says that about 87% of its companies remain in business after four years.
Kentucky formed Kentucky Commercialization Ventures, or KCV, in 2020 with a similar goal of NCInnovation. KCV, which works on an annual budget of around $1 million, essentially operates as the tech transfer office for multiple universities, especially smaller ones, throughout Kentucky.
The organization has spent its first few years building out its programs and connecting with researchers at its partner institutions. KCV has had early success with community colleges and regional schools filing their first patent applications, said KCV Executive Director Kayla Meisner.
“The chicken and the egg between all research, innovation, investment and resources is, until you have enough going, you will never have the in-house resources to help aid those, and you can never build up your in-house resources to aid commercialization if you don’t have it already happening,” Meisner said.
Not all types of research lead to commercial opportunities, but it’s an important consideration as it ultimately adds to higher education’s main objective of addressing workforce needs and preparing students for their careers, said Sharon Paynter, acting chief research and engagement officer at East Carolina.
“The better we are at helping to think about that from a rural economic development perspective, the better we will be at getting our students into jobs that create community vitality,” Paynter said. “And for the state of North Carolina, for us to think about that from a larger economic development play ... is a really good return on the investment that the state has made in our universities.”
Long-term approach
This emphasis on turning university research into economic development won’t change the research itself, Paynter said. Instead, it’s part of a shift in thinking about how that research can help North Carolina have a more innovation-driven economy.
Paynter cites, as an example, the biopharmaceutical industry, which has an already strong presence in eastern North Carolina. There are different types of technologies and companies that can be synergistic with this industry, creating a workforce where you’re replicating the right sorts of skills.
The goal isn’t to just create new companies, but to also ensure these ventures have the resources that allow them to remain in North Carolina.
“As new companies come online, you’ve got the right people trained to make those companies successful and viable,” Paynter said. “And then the communities around them become strong economic engines within different pockets of the state.”
For years, North Carolina, compared to other states, has had a more distributed approach to regional economic development, said Sara Lawrence, director of economic development at RTI International in Durham. Often efforts in one part of the state are disconnected from what’s going on elsewhere.
But there’s a need for broader collaboration, as funding agencies within the federal government put more emphasis on place-based economic development. Lawrence points to a consortium led by the North Carolina Biotechnology Center recently landed a $25 million grant from the U.S. Department of Commerce to support life sciences manufacturing in the state.
NCInnovation, with hubs anchored at specific universities, is trying to support this regional approach.
“It doesn’t matter what side of the aisle you’re on,” Lawrence said. “If we want to grow our state in transformative kinds of ways, a focus on innovation and technology-driven economic development is a critical piece of that conversation.”
As for measuring its successes, Waters said NCInnovation is focused on the long term. The organization is placing more importance the first year or two on outputs rather than outcomes. For instance, NCInnovation wants to compile a list of all of the projects in the state of potentially fundable projects.
“I’m not going to be responsible for wasting state dollars,” Waters said. “We have to go do that work. It’s part of what it takes to build an enduring structure that will withstand the forces of commercialization and capitalism.”
While Waters acknowledges that some people may criticize this approach, he compared it to his previous experience working on the Freedom Tower project in New York City.
After leaving a job at the U.S. Department of Homeland Security, Waters became involved in strategy advisory services. As part of this work, Waters helped with the strategy security plan for the Freedom Tower, which had been underway for about three years at the time.
When he arrived at the site, there was no above-ground work to see. But when he went underground, about four to five stories, Waters saw massive braided cable wires and large bolts holding massive plates in place. Infrastructure supporting what is now called One World Trade Center.
What Waters sees now is “almost non-existent partnerships between industry and academia.”
So the beginning is where NCInnovation must build a new infrastructure so more economic growth can follow.
“There’s an awful lot of infrastructure work that has to get done before you start spending hundreds of millions of dollars on grants, much less venture investments,” he said.
