Working Paper N. 2007-24

A WAY TO FOSTER INNOVATION: A VENTURE CAPITAL DISTRICT. FROM SILICON VALLEY AND ROUTE 128 TO WATERLOO REGION

CINZIA COLAPINTO

Working Paper n. 2007-24

MAGGIO 2007

DIPARTIMENTO DI SCIENZE ECONOMICHE AZIENDALI E STATISTICHE

Via Conservatorio 7 20122 Milano tel. ++39 02 503 21501 (21522) - fax ++39 02 503 21450 (21505) http://www.economia.unimi.it E Mail: [email protected]

Pubblicazione depositata ai sensi della L. 106/15.4.2004 e del DPR 252/3.5.2006 A way to foster innovation: a Venture capital district *. From Silicon Valley and Route 128 to Waterloo Region Cinzia Colapinto +

This article presents a case-study of close links between universities, firms and government agencies ranging from joint research centres to contract research funded by industry or consultancies. Knowledge and technological change or innovation have become key drivers of economic growth in the knowledge- based economy (KBE 1) where a national innovative capacity can be defined as the ability of a country to produce and commercialise innovative technology in the long term. The role of innovation and diffusion of new technologies as engines of growth is empirically well established from firm and industry level studies (Nadiri, 1993). In the KBE, the US economy is considered a model to imitate, but close linkages among firms, research communities, the financial community and government are also in place in other countries. In Canada, for example, several important regional systems of innovation (RSIs) are in place in large cities such as Toronto, Montreal, Vancouver and Ottawa 2 (similar to those in the United States). From these we focus on Toronto (Ontario), because it leads the Canadian software industry, and is in second place in telecommunications and semiconductors (after Ottawa) and in aerospace and biotechnology (after Montreal). If the European Union (EU) has set the Lisbon 2010 targets 3, Canada has identified a goal of becoming the 5th highest R&D intensive country by 2010, up from its current position of 15th out of OECD and non- OECD countries 4 (Achieving Excellence, Govt. of Canada, 2001). Mansfield (1995) linked universities to national innovation performance and found that even if academic researchers do not provide the invention itself, they provide theoretical and empirical findings and new instrumentation essential new product/process development. For this reason, this paper devotes particular attention to academic research and university-industry relation. This paper has three aims. First, it draws a comparison between Silicon Valley 5 and Route 128 and the Region of Waterloo, underlying the theme of intellectual property rights. Second, it focuses on the linkage between Venture Capital (VC) and Canadian universities in the Waterloo Region. Third, it discusses some successful examples at the University of Waterloo (UW). We demonstrate that innovation is strongly

* Acknowledgement: I would like to thank Christina Fader (University of Waterloo) and especially Franco Papandrea (University of Canberra) for their comments and suggestions. + Research fellow, University of Milan and Associate Visiting Researcher, University of Canberra. [email protected] . This work has been written during a research visit to the Department of Economics of the University of Waterloo, Canada. 1 The KBE term was defined: "[economy] which is directly based on the production, distribution and use of knowledge and information" (OECD 1996). 2 We have to mention that there are also more specialised regional systems of innovation in Calgary, Edmonton and Saskatoon, but we focus only on the largest regional innovation system. 3 During the Lisbon European Council (March 2000) Heads of State and Government established the guidelines in order to make the EU a more competitive and dynamic economy based on knowledge by 2010. At Barcelona European Council (2002) they agreed that: research and technological development (R&D) investment in the EU must be increased with the aim of approaching 3 % of GDP by 2010, up from 1.9 % in 2000; the level of business funding should rise from 56% to ⅔ of total R&D investment, a proportion already achieved in the US and in some European countries. 4 In 2000 Finance Minister Paul Martin posed this challenge, which was confirmed in the 2001 Speech from the Throne. 5 This name was coined by Don Hoefler, a journalist, in 1971: it was the title of an article about the semiconductor industry written for Electronic News, a weekly industry tabloid. 1 dependent on exchange/integration of knowledge originating from all the relevant players within a country: firms, scientific communities, the financial community, and government. 1 Some definitions In the KBE, development is a critical factor involving the systematic use of knowledge or understanding gained from research to produce useful materials, devices, systems, or methods, including the design and development of prototypes and processes. We always distinguish between product innovation , which introduces new products, and process innovation , which introduces new methods of production in order to reduce the costs of producing existing products. Innovation is a broader concept than research and development (R&D), although the latter is the starting point for innovation and R&D productivity is a central element of science and technology policies in advanced economies. Theoretically, several new approaches to understanding innovation have emerged including ideas-driven endogenous growth theory (Romer, 1990), cluster-based models of national competitive advantage (Porter, 1990), and models on national innovation systems (Nelson, 1993). Alfred Marshall (1890) noted that the concentration of firms in cities fostered economic growth by facilitating the diffusion of knowledge (knowledge spillover). Porter defines clusters as concentrations of highly specialized skills and knowledge, institutions, competitors, and related businesses in a particular region, and says that “Clusters are a driving force in increasing exports and are magnets for attracting foreign investment” 6. The reason lies in the fact that in a cluster the whole is greater than the sum of the parts. Breschi and Malerba (2001) argue that a successful factor for high-tech clusters is the extent to which local firms are embedded in a very thick network of knowledge sharing supported by close social interactions. Research funding must be included in any consideration of drivers of successful innovation. In addition to traditional government and in-house corporate funding, VC has become an important source of funds for R&D as well as an important component of the financial system, both in the US and globally [Gompers and Lerner (1999), Lerner and Schoar (2004), Megginson (2004)]. Its importance to the funding of new high-tech and/or high-growth potential firms is widely acknowledged. The establishment of more than 30 national venture capital associations 7 in the past two decades indicates that VC financing has become an important feature of the financial system of many countries. VC represents an alternative to raising funds via public equity or debt markets, especially if uncertainty or simply a long time horizon associated with the investment deter debt providers from funding these endeavours. These occur in high-technology environments, where the commercial potential of innovations is difficult to estimate. Venture capitalists (VCs) become co-owners of the start-up companies and share both risk and returns. The reward to the VC directly depends on the growth and profitability of the start-up firm. Successful investments are mainly executed through trade sales or Initial Public Offerings (IPOs) on

6 See Porter M., Economic development Quarterly, Vol. 14, p.15, Feb. 2000 and On Competition, Harvard Business Review, 1998, p.199. 7 Italian Venture Capital and Private Equity Association (AIFI, 1986), British Venture Capital Association in UK (BVCA, 1983), Australian Venture Capital Association (AVCAL, 1992), Canada's Venture Capital & Private Equity Association (CVCA, 1974), Indian Venture Capital Association in India (IVCA, 1998), the Taiwan Venture Capital Association (TVCA, 1999 - borne of its predecessor, the Taipei Venture Capital Association, a non-profit organization founded in 1992) to list a few. 2 the stock market. Frequently in the seed stage, VCs are preceded by business angels 8, which organize themselves into angel networks to share research and pool their own investment capital: the Angel Capital Electronic Network (ACE-Net) was developed by the US Small Business Administration's Office in 1995; European Business Angels Network (EBAN), a non-profit association, was established with the support of the European Commission in 1999; in Canada the National Angel Organization (NAO), an incorporated not-for-profit organization, was created in 2002, that is the point of match of local association as the Angel Forum-Vancouver started in 1997. Many important firms of the last three decades such as 3Com, Compaq, Cisco, Federal Express, Genentech, Intel, Oracle, and Sun Microsystems were first funded by VCs. Venture Capital supports some of the most innovative, dynamic firm clusters in the world: Silicon Valley and Route 128 in the US, Silicon Wadi in Israel 9, Cambridge Cluster in UK, Sophia Antipolis (telecom valley) and Grenoble (high- tech hub for micro nanotechnologies) in France, Hsinchu Region in Taiwan, Bangalore in India, Tsukuba in Japan. The common model (except for Taiwan where universities focus primarily on teaching rather than research) is based on the presence of universities and linkages among firms and academic centres: local universities with strong competencies in one or more technical areas are often starting points for such clusters. The main academic contribution to the industry is through technology transfer largely through commercialisation of research findings and technologies developed by university researchers. University research laboratories are a source of new technology, entrepreneurial talent and, in the early stages of the life-cycle, ‘untraded interdependencies’ (Storper, 1995). In this paper we highlight the positive role of university spin-off, which are start-up companies whose formation were dependent on the intellectual property (IP) rights of the university and in which the university holds on an equity stake (Tang, Vohora, Freeman, 2004). The recent Korean project, Jeju Free International City Development Center (JDC) also lends supports to the efficacy of this models. This new self-governing province in Korea will create a High-tech Science and Technology Complex located near Jeju National University to enable companies to secure quality research facilities through industrial and academic cooperation. Additionally, this facility will be enriched by the presence of a well-developped high-tech industry as well as a clean natural environment. By 2011, when the complex is due to be completed, Jeju is expected to become a high-tech and biotech focal point. 10

Table 1: Venture capital districts in the world

8 Business Angels are wealthy individuals (successful entrepreneurs or senior managers) who provide capital for a business start up in exchange for ownership equity. They fill the gap in start-up financing between friends/family and VC. 9 The Israeli experience probably is the most successful instance of diffusion of the Silicon Valley model of VC beyond US. See Avnimelech, G., Teubal M., Venture Capital – Start Up Co-evolution and the Emergence and Development of Israel’s New High Tech Cluster—Part 1: Macroeconomic & Industry Analysis ”, Economics of Innovation and New Technology, Vol.13, N.1, p. 33- 60, 2004; Carmell, E., de Fontenay C., Israel's 'Silicon Wadi': The source of its comparative advantage in the IT industry, in Building High-Tech Clusters , Bresnahan and Gambardella eds., Cambridge University Press, 2003. 10 JDC is a special government agency under the purview of the Ministry of Construction and Transportation. It was established in 2002 under the Special Act on Jeju Free International city. See www.jdcenter.com. 3 2 USA: the high-tech country High-tech and research intensive sectors are major features of US industry boosted by the activities of the defence industry and the government 11 [mainly Department of Defence (DOD), National Institutes of Health (NIH), National Science Foundation (NSF), but also National Aeronautics and Space Administration (NASA) and Department of Energy (DOE)] and a highly developed information & communication technologies sector (ICTs), as well as a growing concentration of transnational R&D expenditure in the US 12 . Other strengths of the US economy include a highly qualified workforce, a best access to external sources of finance, appropriate local infrastructures, diffusion of knowledge and creation and expansion of technology-based firms. Public research institutions tend to have a powerful leverage effect on R&D investment by all kinds of enterprises and there are strong science-industry relations: this situation also facilitates mobility of researchers between public research and the private sector improving networking between public and private R&D. Figure 1: Investments in Defence Sector (US$ billions, 1999)

Business angels and venture capital have always been a feature of high-tech development in the US. The first publicly-owned venture capital company, American Research and Development Corporation (ARDC), was founded in Boston in late 1946 by Karl Compton , Rector of the Massachusetts Institute of Technology (MIT), Massachusetts Investors Trust chairman, Merril Griswold, Gen. Georges F. Doriot , a native of France and assistant dean of the Harvard Business School, and some entrepreneurs from New England (such as John Hancock Mutual Insurance). It was established to “help create, form, develop and build companies based on new ideas or on existing ideas with a new approach” 13 . In the early post-World War II environment techniques for measuring and evaluating new technological ideas were virtually unknown among investors, and consequently very few investors were prepared to risk their capital in underwriting new ventures. Indeed, the president of the Federal Reserve Bank of Boston, Ralph E. Flanders, voiced concern over the amount of capital that was piling up in the coffers of the life insurance companies and the investment trusts, which he felt would limit the availability of capital for new undertakings 14 . Major venture-backed companies, such as Digital Equipment Corporation, Data General, Thermo Electron Corporation, Polaroid and Raytheon, developed in the so-called Massachusetts Miracle (because of the fast growth in the ‘80s) or high-tech corridor or Route 128 15 . This cluster is based on the MIT, Harvard University and was supported by funding from the Federal government, especially from the DOD.

11 Even if, as Porter suggests, the development of innovation clusters should be market-driven; otherwise government has to invest over a long time: in Taiwan the government invested more than 1 B US$ during 1980-2002 and created the Industrial Technology Research Institute as a technology transfer organization. 12 This fact suggests a decline in the global attractiveness of the EU as a location for R&D as compared to the US. In 1991, both the US and the three larger EU countries (France, Germany, UK) attracted around 45% of all cross-country business R&D investment in the OECD area. In 1998, the three European countries attracted only 35%, whereas the US share had soared to 55%. (OECD, Measuring globalisation - The Role of Multinationals in OECD Economies, 2001) 13 See Bylinsky G., General Doriot's Dream Factory , Fortune, August 1967. 14 Cfr. Dominguez John R, Venture Capital , Lexington Books, 1974, p. 47. 15 See Rosegrant S., Lampe D., Route 128 , NY-Basic Books, 1992; Earls Alan R., Route 128 and the Birth of the Age of High Tech, Arcadia, 2002; Jaffe, 1989. 4 Government funded activities include: the Whirlwind project at MIT and the control work at MIT's Instrumentation Lab (now Draper Lab); work on DOD contracts for missile and radar systems at Raytheon; and several NASA contracts filled by EG&G Incorporated. Also the presence of many high- technology firms such as DuPont, Kodak, Xerox would have spurred innovation (Rosegrant and Lampe 1992). The industries related to MIT are semiconductors (for instance, one spin off was Fairchild), integrated circuits (Intel), biotechnology (Genentech), Internet (Akamai). From its beginnings on the US East Coast (New York and Boston) VC gradually expanded to Silicon Valley on the West Coast. Since World War II, both areas have been dedicated to information technology. Comparing these two regions enables us to observe the different means by which an economic area can gain success in the information revolution and indicates which strategies are most conducive to long-term success. On one hand their success has rested on a three-way alliance between government, industry and university-level education, on the other hand they present a different social environment. Because of the high involvement of the Federal Government Route 128 firms are in fact staid and centralized affairs. In the high-tech corridor the firms are more spread and consequently interactions between researchers are less common and frequent. On the contrary the most crucial aspect of Silicon Valley is its networks linking educators, VCs, lawyers, head-hunters, engineers, industrial associations. Financial, educational, and political institutions are linked not only to information technology enterprises, but also to one another in this region, creating a distinct institutional context that has become an important feature of economic success. Apart from the Silicon Valley job-mobility and community-building model 16 , both regions have a similar attitude towards applied research. For instance Fred Terman, an electrical engineer professor from MIT, encouraged his students to sell applications of new-technologies in the marketplace: he provided funds and equipment to David Hewlett and William Packard, to commercialise the audio-oscillator in the late 1930s. Besides the linkage industry-university became physically stronger when Varian Associates first moved its R&D and administrative operations to Stanford in the late 1940s, and soon after other companies such as General Electric, Eastman Kodak, Admiral Corporation, Hewlett-Packard joined it. The Valley growth is due to the presence of many research universities, besides Stanford like UC-Berkeley, UC-San Francisco and UC-Santa Cruz which played a salient role, especially in the engineering and biomedical areas. Regarding cluster infrastructures, a relevant centre, focusing on the intersection of quantitative sciences with biological systems, is the California Institute for Quantitative Biomedical Research (QB3), a cooperative effort among UC-Berkeley, UC-Santa Cruz and private industry. Another science and technology centre is the UC-Berkeley Center for Information Technology Research in the Interest of Society (CITRIS) that focuses on the application of IT in several fields including bioengineering and bio-informatics. Many Silicon Valley firms have signed up as industry partners of CITRIS including HP, SUN, Intel and IBM and have pledged $170 million

16 See Senge P. M., The fifth Discipline. The art and practice of the learning organisation , Random House, London, 1990. 5 The innovative interface between academia and industry finds its roots in the University Honours Co- operative Program (1953) - that made it possible for local companies to let their engineers and scientists to pursue advanced degrees at Stanford as part-time students while working full time - at the Stanford Industrial Park (now called Stanford Research Park), which brought together university researchers and nascent industry interests in the 50’s. The strong support of venture capital confirms the three-way alliance, especially Biotechnology and medical device firms have captured an increasing share of VC, in fact in 2004 they accounted for about $727 million, equal to 18% of all VC funds directed to the Valley. Table 2: VC Investment in Silicon Valley Biotechnology and Medical device Firms (mln dollars) The influence of government and the natural environment of Northern California should not be underestimated. The relocation of a major military contractor, Lockheed, to California in 1956 brought federal defence dollars to the area (for semiconductors) and the pleasant climate and availability of space were attractive factors. Also from the mid-1980s, Silicon Valley became the typical location for VC firm which invested more in electronics than in biomedical technologies 17 . Table 3: Support for R&D and R&D plant from state government sources, 1995 18 Looking at the second half of the last century we can highlight the Silicon Valley capability of responding through innovation to the decline of a R&D area: when an industry reaches maturity, Silicon Valley renews itself and focuses on a new related issue generating a cluster life-cycle which assumes the traditional S-form. This process of renewal is being used again in the 2000s, as the cluster bets on the convergence of information technology, biotechnology and nanotechnology. Figure 2: Silicon Valley Renewal

2.1 American Universities and Intellectual property

American copyright law has always had the strictly utilitarian goal of providing incentive for people to engage in the production of innovations and inventions. Copyright might be viewed as mutual obligation agreement whereby “the government grants a limited right to profit from your intellectual property in exchange for your agreement to give the public limited access to it during that period, and, eventually, for it to lapse into the public domain” (Boynton, 2005). Intellectual property rights (IPRs) are an important factor in defining the rules of the game in research collaborations and technology transfer among firms and between industry and academic research organisations. The increasing importance of intellectual property to firms is reflected in the growth of patenting activity and earnings gained from the licensing of technology. Internationally, IPRs are

17 See Saxenian A.L., The origins and dynamics of production networks in Silicon Valley , Research Policy, Vol. 20/5, 1991; Rogers E.M., Larsen J.K., Silicon Valley Fever: The Growth of High-Technology Culture , NY Basic Books, 1984; Wolfe T., The Tinkering of Robert Noyce: How the Sun Rose on the Silicon Valley, Esquire 100, p. 346-374, 1983; Kenney M., Understanding Silicon Valley: The Anatomy of an Entrepreneurial Region, Stanford University Press, 2000. 18 Battelle Memorial Institute and the State Science and Technology Institute, Survey of State Research and Development Expenditures: FY 1995. 6 protected and and enforced through the implementation of the WTO Trade Related Intellectual Property Agreement (TRIPS) 19 and the World Intellectual Property Organisation (WIPO) conventions. In the current political climate, the US federal government has limited funding of basic research conducted in universities: thus licensing represents an alternate source of funding 20 , even if there are some cons of licensing university inventions (conflicts of interest 21 , increase in product prices because of licensing university inventions). Nowadays university administrators see spin-off as having several benefits: they can generate good revenue for the institution, make the university more attractive to current and potential faculty members, and benefit the community and the nation as a whole (Lerner, 2005). In 1980 the Congress enacted two laws that have fostered the transfer of federal technology to US business: the Stevenson-Widler Technology Act (P.L. 96-480/1980) and the Patent and Trademark Act (known as Bayh-Dole Act, P.L. 96-517/1980 22 ) The Bayh-Dole Act gives universities, small businesses and non-profits entities the option to retain title to inventions resulting from government-sponsored research (create incentive) 23 , whereas the government receives a royalty-free license for its own use or purposes. Residual revenues are used to support research and teaching activities, thus helping to facilitated the creation of viable technology clusters around academic centres of excellence. Universities are required periodically to report their licensing activity to the Government 24 . Prior to 1980 when universities patents were generally owned by the federal government, no more than 10% of those patents were licensed to industry for commercialization. Trend data now show that over 20,000 licenses and options have been issued since 1991 and that the rate of licensing activity has doubled between 1991 and 1998 (AUTM 1998). As already noted, the role of universities as seedbeds for industrial and economic development is widely recognized and is highlighted by Stanford’s contribution to the development of Silicon Valley, by the University of California’s contribution to the biotechnology industry, and by the contributions of MIT and Harvard University to the development of a strong industrial concentration in electronics, biotechnology and health sciences. Figure 3: Number of institutions with Technology Transfer Office (TTO)

A summary of the policies for the prompt reporting of intellectual property created during the course of a sponsored research agreement adopted by the main American universities linked to clusters, such as Harvard, MIT and Stanford, follows. Harvard Medical School (HMS) chose to establish its own technology transfer operations in 1985. The office of Technology Licensing and Industry Sponsored Research (OTL) is a department within the Office of Research at HMS and manages inventions made at HMS and HSDM. The office of Technology and

19 The World Trade Organisation establishes minimum standards for the protection and enforcement of IPRs. See http://www.wto.org/english/tratop_e/trips_e/trips_e.htm 20 As an example, we can mention that traditionally, the Government pays about 85% of research at Stanford. 21 Conflicts of interest may result from use of university facilities by a spin-off, alterated professional judgment by academics to further personal gain or control over research findings and withholding publications/data. 22 We find the same approach in many developed countries, like United Kingdom and Japan. 23 Previously, it had been necessary to petition each sponsoring agency, causing often considerable delays that extended beyond patent filing deadlines, preventing many invention disclosures from being licensed. 24 The Bayh-Dole Act protects the public interest by authorizing a federal agency “to march in” and assert control over a federally funded invention. 7 Trademark Licensing (OTTL), located in Cambridge, manages inventions made by all the other faculties of Harvard University. The two independent offices work closely and coordinate their efforts to manage Harvard's intellectual property. At MIT, there are two offices and one committee responsible for addressing all Intellectual Property matters: the Committee on Intellectual Property is empowered to develop Intellectual Property policies for the Institute; the Office of Sponsored Programs negotiates the patent and copyright terms for each research agreement with every government and industrial sponsor; the Technology Licensing Office (TLO) licenses the resulting intellectual property. MIT policy establishes that the inventor owns Intellectual Property only if he doesn’t subscribe different agreements with MIT (as in the case of the so called “works-for-hire” contracts) or with a firm (like a sponsored research, whose scope has, any way, to be distinguished from the one of research commitments at the Institute). If the inventor has significantly used funds or facilities administered by MIT (Institute-funded research), the TLO may license the inventor exclusively or nonexclusively on a royalty basis. Inasmuch as the high costs of licensing, MIT considers 3 years are a reasonable dissemination time, after TLO can terminate the licence. At Stanford in general, “title to all potentially patentable inventions conceived or first reduced to practice wholly or partly by members of the faculty or staff (also student employees) of the University in the course of their University responsibilities or with more than incidental use of University resources, belongs to the University” 25 . Stanford has the Office of Technology Licensing (OTL), which manages the licensing activity and helps turn scientific progress into tangible products, and the Industrial Contracts Office which handles all the Industrial contracts dealing with industrial sponsored research related to existing University inventions and patents. If successfully licensed, cash royalties provide funding to the inventors' departments/schools, as well as personal shares for the inventors. Stanford derives direct financial benefits 26 from licensing technology, and this allows funding of pioneering research or basic research. OTL - established on January 1, 1970 - was created by Niels J. Reimers, who joined Stanford as Associate Director of its Sponsored Projects Office27 , and became the first Director and Licensing Associate of OTL. Prior to the establishment of OTL, licensing activities were contracted to an external corporation. During the pilot program, OTL had produced an income of $55,000, more than 10 times the amount received from 15 years of licensing through the external corporation (the model started in 1950’s). Stanford’s policy on royalty sharing provides for net cash royalties to be divided into three equal parts: ⅓ to each the Inventor, inventor’s department, and the Inventor’s school; in a sense this policy rewards the institutions that have supported the development of the invention. As noted by the US Federal Reserve Chairman, Alan Greenspan: “...Intellectual property - patents, copyrights and trademarks - have become increasingly important in recent years as American’s economic output has shifted ...Only in recent decades, as economic product of the United States has become so predominantly conceptual, have issues related to the protection of intellectual property rights come to be

25 See OTL Patent Policy, http://otl.stanford.edu/inventors/policies.html 26 OTL's 1995-96 income of $44 million dollars represents over 10% of total research funds spent by Stanford See http://otl.stanford.edu 27 The Sponsored Projects Office had the responsibility for negotiating contracts with research sponsors, including the U.S. government. 8 see[n] as significant sources of legal and business uncertainty...” 28 The importance is reinforced by the Technology Transfer and Research Ethics Committee of the Council on Governmental Relation (COGR, March 2000): “…recent data and the application of impact models show a return to the U.S. government and the national economy from university licensing of $33.7 billion, and supported 280,000 jobs during the university fiscal year ending June 30, 1999 ”. 3 Canada and Waterloo region According to Canadian Venture Capital Association, about 47% of the total investments go to Ontario-based technology-intensive firms, and the region accounted for 10% of all the intelligent technology-related initial public offerings on the Toronto Stock Exchange between 1994 and 2004. Canada ranks second behind US in VC investment measured as a percentage of GDP. Also, VC investment is directed in about equal proportions to early stage financing and expansion.

Figure 4: Investment in VC, 1998-2001 (per cent of GDP)

Canada is also in second place after the US in terms of the share of VC funding going to high-tech companies. In 1999, the high-tech sector accounted for over 80% of the total VC investment in the USA and 76% in Canada (OECD, 2000). In the Waterloo area, the triangle made up of three towns (Waterloo-Kitchener, Cambridge, and Guelph) were born Research In Motion (RIM), Christie, Dalsa, ATS, Com Dev, Open Text and some 500 other technology companies. The Waterloo success is fuelled by several research institutions, the UW (with excellence in Mathematics, Computer Science and Engineering,), Wilfrid Laurier University (WLU, famous for its business and economics programs) - both in Waterloo, they have a common root 29 -, Conestoga College Institute for Technology and Advanced Learning and the University of Guelph. Even if the products are not the direct result of research undertaken at the Universities, these academic institutions are magnets for new ideas/ventures. Many serial entrepreneurs have also studied in these universities (see 4.2). There are some similarities between Silicon Valley and the Waterloo district: they focus on the same emerging services, such as Health Sciences, Biotechnology, Pharma, Environmental and Nanotechnology. Looking at the social network, we find that the support and networking for start-ups do not rely only on the universities but on organizations such as Communitech , the 350-company non-profit group that links the tech community together, and Canada's Technology Triangle (CTT), the local economic development bureau. Also the Waterloo has a strong private industrial research ($C277 Million 2002) and many Research Institutes (around 150). Also the waterloo model is based on the three-alliance, in fact since September 1999, a local actor, Waterloo Ventures, finances early-stage high technology companies: the fund is born from the

28 February 28, 2004, Associated Press. 29 The town had a large Lutheran community which established Waterloo College, in 1914; the College was soon affiliated with University of Western Ontario in London. And in 1959 it became the University of Waterloo: nowadays it has world-renowned computer science, engineering, and mathematics programs. The Lutheran college continued to operate independently first as Waterloo Lutheran University, and then in November 1973 it became an autonomous institution, Wilfrid Laurier University . 9 collaboration between Working Ventures Canadian Fund 30 and the universities (Conestoga College, WLU 31 , UW), which allows on the one hand young companies affiliated access to educational resources, on the other hand university spin-off to be funded. Waterloo Ventures, a Working Ventures Community Small Business Initiative, is the third fund to be created under the Ontario government's Community Small Business Investment Fund (CSBIF) program. The program was developed to provide a local source of capital to small, high-growth businesses and to provide stimulus for investment partnerships between investment pools, universities and their local communities. Working Ventures has invested an initial $C5 million in Waterloo Ventures, but also individuals are allowed to invest 32 . Using the invested venture ratio (IVR) methodology 33 - as a proxy fro the amount of shareholder value created by technology firms in a cluster -, in 2005 Waterloo region gets 7,02, a good result in comparison to California (5,14) and Massachusetts (4,47) (PriceWaterHouseCoopers, 2005). If we look at IRR over the last ten year it is 26%, mainly due to the RIM performance 34 . During 1996-2004, there were 6 35 IPOs (10% 36 ) completed by high-tech companies from Waterloo region in Toronto Stock Exchange . Figure 5: Growth of University spin off, 1962-july 2001. As shown in Figure 5, commercialization activities of universities In Canada are growing steadily. In addition, the rate of IPOS has been increasing especially in the case of firms in biotechnology and information/electronic technologies. The lack of uniform or well-defined intellectual property policies in Canadian universities have led to calls for the introduction of legislation similar to the Bayh-Dole Act as UK and Italy have done, even if its effects on the research culture of universities remains unclear 37 . The creation of research administration structures and technology transfer offices (TTOs)/industry liaison offices (ILOs) in the past 15/20 years (more than a decade after their emergence in the United States) has contributed to this change. Technology transfer activities are now written into universities’ mission statements. The blending industry and university is now a Canadian characteristic, which is not only confirmed by the increasing number of spin off companies, but also by the increasing share of academic R&D funded by industry: from 6,3% in 1990 to 11,8% in 1997 (it is interesting to compare these data with the American shares, from 4,7% to 5,5% in the same period, and the English ones, from 7,6% to 6,2%) 38 Table 4: Summary of spin-offs from selected universities (1995-2003)

30 Working Ventures Canadian Fund is Canada's largest national VC fund, which has been launched by TechCapital Partners, a very specialized fund: its interest is in early stages companies whose technologies are 1/2 years away from commercialisation and that are located in the Waterloo area (hands-on approach). 31 Ron Craig, Professor of Business from Wilfred Laurier University, is a member of the Board of Directors. 32 The tax policy is favourable for private investors, which are eligible to receive a 15% tax credit of the amount invested, up to a maximum of $C75,000. Half of that credit will be received in the year of investment and the remainder will be received as the fund invests the money in local businesses. 33 The IVR methodology was developed by Greenstone Venture Partners and Leading Edge BC. For each region the IVR was calculated dividing the value of technology company existing from 1999-2004 by the amount.of equity invested in technology companies in the same period. 34 16% without RIM. Source Toronto Stock Exchange (TSX). 35 Automation Tooling Systems Inc. (ATA, 1993), COM DEV International Ltd. (DCV, 1996), Dalsa Corp. (DSA, 1996),The Descartes Systems Group Inc. (DSG, 1998), MKS Inc. (MKH, 1997), Open Text Corp. (OTC, 1996), RIM (1997). Source: TSX. 36 The same result by Ottawa and Vancouver. Source: TSX. 37 See Mowery D.C., T he Bayh-Dole Act of 1980 and University–Industry Technology Transfer: A Model for Other OECD Governments? , July 2002. 38 Source: Statistics Canada; National Science Board, Science & Engineering Indicators, 1998.

10 Table 4 provides an insight into the relative position of the Waterloo area in Canada. It shows that 50% of all spin-offs at Waterloo are in ICT (the highest rate for any of the universities) and that all of the spin-offs at Waterloo are ‘active’. We decide to concentrate the attention about the University of Waterloo, which is one the most creative institution and represents a successful case study. 3.1 The University of Waterloo With its industrial collaborations and its innovative capacity, the UW has contributed to the creation of the Waterloo Region Technology cluster - many businesses have been created to commercialize research performed at UW, including the well-known mathematical software developer Waterloo Maple and the intranet software business Open Text . It is a research-intensive university, that aims to transfer ideas and technology to the private sector and create intellectual capital, for instance through: - the Institute for Compute Research (ICR, 1982) created in order to facilitate interactions with industry; - the Institute for Quantum Computing financed by private donations (f. i. Mr. Lazardis, RIM) and government funding; - the Leitch-UW Multimedia Laboratory, a partnership among Leitch Technology Corporation and UW in the multimedia communications research, opened in the Centre for Environmental and Information Technology (CEIT) building in September 2003 on the UW campus; - the UW Research and Technology Park (a 1.2 million square feet R&T park) on the North Campus is a partnership between UW, the City of Waterloo, the Region of Waterloo, Communitech and CTT, with the support of the federal and provincial governments. It has opened in 2004 (Sybase Inc. and Open Text Corp. have been the first movers). o an Accelerator, which assists early-stage companies in their development stage, mirrors the tradition of supporting start-up companies and spinning off technology from the research projects on campus. Overall UW has 53 research institutes, including 15 in ICT, and hosts 12 federal and provincial Centres of Excellence, 6 of which are dedicated to ICT. This represents an essential element in the development and marketing of competitive industry clusters. In 2003-04 UW attracted $C103 million a year in research from public and private sources. The research funding, which has grown substantially over the recent years, is strongly from the Government of Canada (NSERC, Canada Fund for Innovation, etc.) and from the Government of Ontario. The increase in private sector contributions, from $C9.2 million in 1996/97 to $C30.1 million in 2001/02, can be used as an indicator of the extent of linkages between UW and private sector companies. the Among private funding, it is worth remembering funding of $C25 million provided to the UW School of Computer Science by David R. Cheriton 39 ,to support research into the design and implementation of efficient and reliable computing systems.

39 Cheriton, professor at Stanford and former UW student, is widely known for his research contributions in high-performance scalable systems, Internet architecture and hardware-software interaction, and successful commercialization of his research results. In addition to his achievements in research, he has been involved in many start up companies both as co-founder and investor and has acted as a technical adviser to many prominent Silicon Valley companies including Sun Microsystems, Cisco, Google, VMware and Tibco. He was named one of Forbes Magazine's Top Ten Venture Capitalists (2005) based on his seed investment in Google. 11 Figure 6: Private sectors contributions, $C m UW established its Technology Transfer and Licensing Office (TTLO, 1992) to help academic researchers protect and commercialize the results of their research. This was followed by the establishment of Communitech in 1997 to assist partnership formation and collaboration and Innovate Inc in 2001 to provide entrepreneurship for new start-ups. In particular Innovate Inc is a novel approach to business pre- incubation within an university community. Together with its affiliates, Enterprise Co-op 40 and Entrepreneurs' Association of the UW , it assists entrepreneurs within the university community in the development of their venture concept, business case development, building their business venture team and possible introduction to incubators, investors and funding sources. TTLO’s task involves a sensitive balance of competing demands. Because of the high cost of patent protection (typically $C10,000 to $C20,000 per patent), it has to balance the publication pressures faced by most university researchers against the need for absolute confidentiality to preserve the broadest possible patent protection opportunity. As a result TTLO must make rapid patent investment decisions. TTLO also handles licensing arrangements and, in the case of platform-type technologies, the creation of a spin off company. Usually, after identifying potential partners, purchasers, or other " receptors " of a technology, TTLO forwards a non-confidential technology data sheet to each. This is followed by negotiation of a confidentiality agreement and, often, a licensing of the technology with interested parties. Licensing does not follow a standard format but is based on the needs and characteristics of both parties. In Canada flexibility is an important feature of the approach adopted by universities for commercialization and intellectual property ownership initiatives that facilitates the adoption of policies that best address the different needs of researchers and industry. A key factor of UW success is, in fact, the longstanding principle that individuals, not the university (most North American universities retain ownership of intellectual property developed within their laboratories and classrooms), own the fruits of their work according to Policy 73 (28 October 1997), which pertains to all students and university staff, including co-op students. There are some exceptions to this principle, namely: • when works are created as assigned tasks in the course of administrative activities; • works created in the course of teaching and research activities grant UW a non-exclusive, free, irrevocable license to copy and/or use such works in other teaching and research activities, but excluding licensing and distribution to persons or organizations outside the University community. • in sponsored or contract research activities, ownership of IP rights may be determined in whole or in part by the regulations of the sponsor or the terms of the contract.. 41 Among UWs departments, Electrical & Computer Engineering (ECE) engages in intense collaborative research with many companies, such as ATS Spheral Solar Power, Bell Canada, Canadian Microelectronics Corporation, COM DEV, IBM , Microsoft, NORTEL, and RIM.

40 UW is a co-op university, now it has more than 10.000 students in co-op studies (Source: UW). It is another way of blending academics with industry. 41 Source: UWTLO. 12 The technology transfer capability is largely mirrored by the creation of spin offs. UW's TTLO has identified 106 spin-offs employing 2,134 people in the 90s and a report by PricewaterhouseCoopers in 2001 identified more than 250 Canadian high-tech and knowledge-based spin-off companies that trace their roots to UW (see tables 6, 7) Table 5: UW spin-offs in the 90s Table 7 confirms that UW is an entrepreneurial university and a catalyst for cluster development. It is clear that “transfer” is not confined to spin offs, but is also by partnership and funded research (f.i. Virtek Vision 42 and Certicom Corp. or Communitech) and by knowledge generation through students (f.i. high recruitment of UW graduates from RIM and Open Text Corp.). In a recent survey PriceWaterHouseCoopers (2001) has shown that even if Waterloo is a young cluster, there are examples of subsequent spin off, also from UW-affiliated firms: Kaparel from PixStream, B2BScene from Open Text. Table 6: Main Waterloo ventures Overall, in terms of spin off companies the relative position of the UW in Canada and in North America is illustrated in tables 7 and 8 respectively. UW is at the top of the ranking in both Ontario and in Canada (table 7) and is among the top ranked universities (6th ) in North America (table 8) . Table 7: New Spin-Off, Canadian Universities., 2002-04 Table 8: New Spin-Off, North American Universities, 2002-04. Best practice universities recognize that it is better to form networks with other universities and research centres, even internationally, to identify opportunities for combining IP from different research projects. On the other hand this explains why research-intensive universities should focus their commercialization efforts in areas of repeated technological innovations, which represent their core areas that can be expected to align closely with their strategic research plans in order to maximize the benefits and create higher value-added innovations In cases where there will be potentially feasible innovations outside of the core, collaborative relationships could be developed with other institutions. For example, if UW produces a marketable innovation in food or agri-technology, it would approach the University of Guelph (Department of Business) for help 43 : both institutions in this way should attract receptor firms and investors in the way that some major U.S. high- tech centres have done (e.g., Route 128 and Silicon Valley). 4 Conclusion The most important force transforming a country is the networked economy, where everything is connected to everything else. To succeed on a world class scale requires two essential elements each dependent on the other for survival: venture capital and venture knowledge. After the analysis of the explosive growth of innovation and capitalism, which has fuelled the diffusion of high-tech start-ups

42 In March 2001, the UW-based Waterloo Biotelemetry Institute announced its collaboration with UW spin-off, Virtek Vision, expanding environmental monitoring performed at the institute to include genomic research in environmental areas. Source: UW. 43 This notion of loosely affiliated and collaborative relationships among academic institutions has been proposed by the Ontario Council on University Research and is under discussion. In this area it has been created MARS Discovery District, an integrated commercialization model being developed in Toronto to commercialize state-of-the art biotechnology research and leading-edge genomics and proteomics research 13 crammed into the Silicon Valley, it is clear that by supporting an indigenous model of the Valley, Canada 44 can stem the brain-drain south and even reverse the trend, especially in The Waterloo as shown. Universities emerge as a significant driving force in moving the high technology frontier, a rich source of intellectual capital for potential spin-off company formation. A major part of their mission today is how to transfer knowledge into feasible technology and then technology into commercial reality. Going beyond the traditional case studies about Route 128 and Silicon Valley, we have highlighted that UW is an “entrepreneurial university ” characterized by numerous linkages and knowledge flows with local high technology firms and by relationships with the venture capital industry. The UW was established at the beginning of software development, it engaged in transferring software through licensing in the 60's and in transferring technology through spin off in the 80's. There are various modes of knowledge and technology transfer; such as: 1) publications, patents and deliverables from fundamental and applied research; 2) development of high-tech human resources in graduate training and co-operative programs; 3) government and industrial sponsored research; 4) technology collaboration/consulting and technology licensing 5) spin off companies. Much of UW success relies on its progressive Intellectual Property policy - whereby professors retain complete ownership of their research - coupled with the Co-operative Education program - that is well integrated with local and global industry (as Stanford University) - and a local active venture capital industry.

5 Figures and tables Table 1: Venture capital districts in the world Cluster Country University Area Cooperation with Sophia France Université De Nice Sophia Antipolis (Unsa), Telcos, nanotechnologies Ontario Cluster Antipolis Institut Eurecom (E.P.A.), Institut Superieur Grenoble d’informatique et d’automatique (Isia), Institut National De Recherche en Informatique et en Automatique (Inria) Silicon Wadi 45 Israel Talpiot Program, a unit of Army Academy data communications, Silicon Valley (specialized in mathematics, physics and hardware design, internet engineering), Technion (the Israeli Institute technologies, medical e bio- of Technology), also US Universities technology, agricultural/materials technology. Hsinchu Taiwan 46 Usually US universities Silicon Valley 47 Science Park Cambridge UK Cambridge University biotechnology, hardware, No Cluster 48 electronic engineering,

44 As an example, the government has created the National Innovation Centres (NIC) offering management expertise and support in order to establish networks and collaborations from local to national area. NICs can use national networks such as the Canadian Manufacturers and Exporters (CME) or the Industrial Research Assistance Program (IRAP) run by the National Research Council of Canada (NRC). 45 Silicon Wadi is the most successful case of export of the American VC practice, because of the important role played by the government creating Yozma, an organization to encourage VC in Israel. The main difference is that the US government plays an indirect role, while the Israeli one is proactive. See de Fontenay C., Carmel E., Israel’s Silicon Wadi: The Forces Behind Cluster Formation , D.P. 00-40, Stanford Institute for economic policy research, 2001. 46 Taiwan is the most dynamic VC industry in Asia and the most important destination for its capitals is Silicon Valley. 47 We can mention the five-year agreement between the government-funded Industrial Technology Research Institute (ITRI) and UC-Berkeley in order to create the ITRI/UC-Berkeley Research Center focusing on nano-energy technologies and their applications. 48 Most of the best companies in Cambridge county - such as Acorn, Sinclair Research, Cambridge Consultants - have their roots in the academic world. 14 software Route 128 US (MA) MIT, Harvard University Semiconductor, Biotech nd Silicon Valley US (CA) Stanford University, UC San Francisco, UC semiconductors, electronics, Silicon Wadi, Berkeley, LLNL, LBNL PC, ICT, nano technologies Taiwan

Figure 1: Investments in Defence Sector (US$ billions, 1999)

1000 277

100 43 40 38 33 29 B$ 10 9 8 10 5 4 3 2 1 1

* * * e K a* ia l* an or nd w ay* USA Japan U any rni I rae eden w land* rance* m o Is ai gap Ireland F if T w n or in er S Si N F G Cal

* 1998 data corrected by inflation 1999 - Source: CIA World Factbook, WEFA World Economic Outlook

Table 2: VC Investment in Silicon Valley Biotechnology and Medical device Firms (mln dollars) Biotech Share Medical devices and share Combined biotech and share equipment medical devices 2002 $ 243 5% $ 484 10% $ 727 14% 2003 $ 253 6% $ 450 11% $ 703 16% 2004 $ 312 8% $ 415 10% $ 727 18% Total $ 808 $ 1,349 2,158 Source: PricewaterhouseCoopers/Thomson Venture Economics/NVCA

Table 3: Support for R&D and R&D plant from state government sources, 1995 49 Support for R&D and Ranking $ per capita Ranking State Ranking R&D plant 000$ spending Total states 2.514.169 9,59 0,35 California 248.756 1 7,87 29 0,29 27 Massachusetts 21.803 27 3,59 38 0,12 38

Figure 2: Silicon Valley Renewal

Source: Silicon Valley Edge

49 Battelle Memorial Institute and the State Science and Technology Institute, Survey of State Research and Development Expenditures: FY 1995. 15 Figure 3: Number of institutions with Technology Transfer Office (TTO)

Source: Association of University Technology Managers (AUTM) FY2003 Annual Survey

Figure 4: Investment in VC, 1998-2001 (per cent of GDP)

Source: OECD, Science, Technology and Industry Scoreboard 2003. Figure 5: Growth of University spin off, 1962-july 2001.

Source: Denys Cooper, NCR, 2001.

Table 4: Summary of spin-offs from selected universities (1995-2003) Line of Business Location University Status # Biotech ICT Other In region Elsewhere Alberta Active 31 20 9 2 26 5 N = 42 Inactive 11 9 1 1 McGill Active 19 14 2 3 14 5 N = 30 Inactive 11 6 3 2 Montréal Active 27 17 6 4 22 3 N = 37 Inactive 10 7 1 2 Queen’s Active 21 14 2 5 12 9 N = 25 Inactive 4 1 2 1 Sherbrooke Active 12 7 3 2 8 4 N = 13 Inactive 1 - - 1 SFU Active 24 5 10 9 23 1 N = 38 Inactive 14 2 7 5 Toronto Active 38 23 7 8 34 4 N = 53 Inactive 15 9 2 4 UBC Active 27 14 9 4 20 7 N = 43 Inactive 16 5 2 9 Waterloo Active 20 2 10 8 13 5 N = 20 Inactive - - - - Totals Active 219 116 58 45 172 43 N = 301 Inactive 82 39 18 25

Figure 6: Private sectors contributions, $C m

80 70 60 50 40 30 20 10 0 96-97 97-98 98-99 99-00 00-01 01-02 02-03 03-04

Source: UW.

Table 5: UW spin-offs in the 90s Category # examples closely coupled with technology transferred from the university 20 Dalsa, Open Text, Virtek, Watcom coupled to a lesser degree but where an identifiable transfer of intellectual 9 RIM resources has been significant in their success Businesses started by UW graduates, professors and/or staff without any 77 identifiable transfer of specific university technology or resources Total 50 106

Table 6: Main Waterloo ventures Company Year Founder UW Listed at Notes Biomedical 1994 Dr. Ted Dixon CEO and Professor Emeritus UW. -- Photometrics Dr. Brian Wilson head of Medical Physics at Princess Margaret Hospital, University Health Network, Toronto.

50 The survey does not consider Waterloo spin-off firms that have merged with or been acquired by other firms. Source: University of Waterloo. 17 Company Year Founder UW Listed at Notes Dr. Melanie Professor of Optometry, UW. Campbell Dr. Owen P.Ward Professor at The Department of Spin off UW. It has Bilogyy 2 subsidiaries: Director, Waterloo Science and Biorem Biorem Inc. 1991 BRM (TSXV) Business Programs Technologies Inc. and Biorem Environmental Inc. Dr. Ron Mullin Prof. of Mathematics (retired in 1996). Received the “Synergy Award”. It Certicom Corp. Dr. Scott Prof. of Mathematics and Computer 1985 CIC (TSX) created two senior (ex Cryptech) Vanstone science, UW. Gordon Agnew engineering professor UW industrial chairs of cryptography at UW Prof. Dr. Savvas Professor in Electrical Engineering at Dalsa 1980 DSA (TSX) Chamberlain UW Dr. David Wang Full Prof. at the Department of University Spin-off Electrical and Computer Engineering Coinvestment by UW Tech Capital Handshake VR 2001 Dr. Kevin Tuer PEng UW Partners, BDC Venture Capital, Tim Ellis VP Operations Trellis Capital Corporation. Ignis Innovation 1999 prof Arokia Department of Electrical and UW spin-out, from Nathan Computer Engineering, UW Bell Canada University Labs at the UW Project. Intelligent 2002 Dr. Otman Basir Associate Prof. Department of Mechatronic electrical & Computer engineering Systems Lewis Media 2001 Jeff Lewis Joseph Fung computer engineer UW (quit) Mercator Robotec 2000 Dr Jan Paul Professor, Director of Mechatronics Inc. Hiussoon Engineering, Dept. of Mechanical Engineering UW Alex White Mortice Kern Trevor Thompson masters of mathematics in computer 1984 MKX ( TSX) System Inc. Randall Howard science UW Steve Izma Open Text 1991 51 Professor Frank David R. Cheriton School of Computer OTC (TSX) Joint venture UW Tompa Science – UW OTEX and the Oxford (Nasdaq) University Press Pattern Discovery 1997 Professor Andrew full professor of Systems Design spin-off from the Software Systems K.C. Wong Engineering, Director of the Pattern world renowned Analysis and Machine Intelligence PAMI Lab (PAMI) Laboratory at the UW PixStream 1997 Brad Siim bachelor of applied science degree in Incorporated by computer engineer Cisco (2000) Stephen Bacso Student UW Research in 1984 Michael Lazardis electrical engineering (quit) RIM ( TSX) Motion RIMM (Nasdaq) QNX Software 1982 Gordon Bell Students ain Computer science UW Purchased by Systems Dan Dodge Harman International Industries (2004) Sandvine Brad Siim bachelor of applied science degree in SAND (AIM- Financed by Tech 2001 Incorporated computer engineer UK) Capital Partners. It Tom Donnelly McGill University is a co-investment David Caputo York University with Celtic House, Marc Morin bachelor of applied science degree in VenGrowth, electrical engineering Business

51 Open Text was born out of a UW computer indexing and string search project undertaken in 1984 under an agreement with the Oxford University Press and finalized in 1988: Centre for New Oxford English Dictionary (OED) and Text Research. The project led to the creation of the first search engine technology for the Internet in the early 1990s. While the research continues at the University, the tangible results are further developed and commercialized by Open Text Corporation, a spin-off company (1991) located in Waterloo. 18 Company Year Founder UW Listed at Notes Don Bowman bachelor of applied science program Development Bank for system design engineering of Canada. Senesco 1998 Prof John E. Department of Biology UW SNT (Amex) Technologies Thompson Sascha P. Fedyszyn Sirific Wireless 2000 Taj Manku Dept. of Electrical and Computer University Financed Corporation Engineering by Tech Capital and Solowave Investments SlipStream Data 2002 Prof. En-hui Yang Department of Electrical & computer Subsidiary of RIM Prof. Ajit Singh Engineering UW TurboSonic 1998 Dr. Donald Spink BSC at UW Technologies Virtek Vision 1993 Prof. Andrew K.C. See above VRK (TSX) International Wong Watcom 52 1981 Prof. J. Wesley Department of mathematics and It has become a Graham the university's Computer Systems division of Sybase Group Canada Limited. John Cherry professors in the earth sciences UW Spin off Waterloo Barrier 1994 department (Waterloo Centre for Sam Vales Groundwater Research) Waterloo Maple 1987 Keith Geddes David R. Cheriton School of Computer Maple Software was Software 53 Now Science, UW distriburted by Waterloo Maple Prof. Gaston doctorate in computer science UW Watcom from 1984. Inc. Gonnet

Table 7: New Spin-Off, Canadian Universities., Table 8: New Spin-Off, North American Universities, 2002-04 2002-04. University 3-Year Rank University 3-Year Average Rank Average (MIT) 19.3 1 University of Waterloo * 10.0 1 University of California 16.7 2 University of Toronto 6.7 2 System McGill University ** 4.7 3 Georgia Institute of 11.7 3 University of Alberta 4.0 4 Technology Université de Montréal 4.0 4 University Illinois, Chicago, 11.3 4 University of British Columbia 3.7 6 Urbana Universite Laval 3.0 7 Stanford University 11.3 4 Simon Fraser University 3.0 7 California Institute of 10.0 6 University of Calgary/UTI Inc. 2.3 9 Technology Queen's University 2.0 10 University of Pennsylvania 10.0 6 University of Saskatchewan 2.0 10 University of Waterloo* 10.0 6 University of Michigan 9.0 9 University of Southern 7.7 10 California University of Pittsburgh 7.7 10 University Florida 7.7 10 Source: Association of University Technology Cornell Research Fdn., Inc. 7.7 10 Managers Licensing Survey University of Toronto 6.7 14 University of Colorado 6.0 15 Ohio State University 6.0 15 Virginia Tech Intellectual 5.7 17 Properties Inc. SUNY Research Foundation 5.7 17 North Carolina State 5.3 19 University University of Maryland, 5.0 20 College Park Harvard University 5.0 20

52 iAnywhere evolved from Watcom and it is headed by Terry Stepien in Waterloo 53 Maple was conceived in 1980 and presented in a conference in 1983 [(see B.W. Char, K.O. Geddes, W.M. Gentleman, and G.H. Gonnet, "The design of Maple: A compact, portable, and powerful computer algebra system." Appears in Computer Algebra (Proceedings of EUROCAL '83), J. A. van Hulzen (ed.), Lecture Notes in Computer Science, No. 162, Springer-Verlag, Berlin, 1983, pp. 101-115]. * Two year average only. 19 6 References [1] AUTM Licensing Survey: FY1998. The Association of University Technology Managers, Survey Summary. [2] Battelle Memorial Institute and the State Science and Technology Institute, Survey of State Research and Development Expenditures: FY 1995 [3] Bodell R., Brox J.A., Fader C.A., Canadian University Policies on Intellectual Property and the rate of Technology Transfer, University of Waterloo. [4] Bordt M., Read C., Survey of Intellectual Property Commercialization in the Higher Education Sector (Statistics Canada Science and Technology Redesign Project, 1999. [5] Boynton R.S., Righting Copyright , Bookforum, 2005 [6] Breschi S., Malerba F., The Geography of Innovation and Economic Clustering: Some Introductory Notes, Industrial and Corporate Change 10, 4, 2001, p. 819. [7] Clayman B. P., Holbrook J. A., The Survival of University Spin-offs and Their Relevance to Regional Development, Centre for Policy Research in on Science and Technology (CPROST). [8] Commission Of The European Communities, More Research For Europe Towards 3% Of GDP , COM(2002) 499 final, Brussels, 11.9.2002. [9] Council on Governmental Relations, Technology Transfer in U.S: Research Universities: Dispelling Common Myths , March 2000. [10] Gompers P. A., Lerner J., The venture capital Cycle , The MIT Press-Cambridge, USA-UK 1999. [11] Gray G.G.H., A Typical Day at the University of Waterloo Technology Transfer and Licensing Office, UW, Canada, 5 November 1999 [12] Jaffe A.B., Real effects of Academic Research, The American Economic Review, Vol. 79, n.5, 1989, pp. 957- 970. [13] Lerner J., Schoar A., Transaction Structures in the Developing World: Evidence from Private Equity, Working papers 4468-04, Massachusetts Institute of Technology, Sloan School of Management, 2004. [14] LERNER J., The University and the Start-Up: Lessons from the Past Two Decades, Journal of Technology Transfer, 30 1=2, pp. 49–56, 2005. [15] Mackun P., Silicon Valley and Route 128: Two Faces of the American Technopolis, http://www.internetvalley.com/archives/mirrors/sv&128.html. [16] Mansfield E., Academic Research Underlying Industrial Innovations: Sources, Characteristics, and Financing , The Review of Economics and Statistics, Vol. 77, N.1, 1995, p. 55-65. [17] Megginson W., Towards a Global Model of Venture Capital ?, Journal of Applied Corporate Finance, Vol. 16, N.1, p. 8-26, 2004. [18] Nadiri I., Innovations and Technological Spillovers , NBER Working Paper N. 4423, 1993. [19] Nelson R., National Innovation Systems. A Comparative Analysis, Oxford University Press, New York, 1993. [20] Porter M. E., Clusters and the New Economics of Competition , Harvard Business Review 76, 6, November/December 1998. [21] Porter M.E., The Competitive Advantage of Nations , Free Press, New York (NY), 1990. [22] PriceWaterHouseCoopers, Making Magic in Waterloo Region: a Report on the Exceptional Investment and Entrepreneurial Potential of Canada’s Hottest High-Tech Location, September 2005. [23] RBC Financial Group, Canadian Manufactures & Exporters, Canadian Federation of Independent Business, Managing for growth Enabling sustainable success in Canadian SMEs, 2003. [24] Romer, PM.., Endogenous Technological Change, Journal of Political Economy , University of Chicago Press, Vol. 98, N.5, p. 71-102, 1990. [25] Rosegrant S., Lampe D., Route 128 , NY-Basic Books, 1992. [26] Storper M., The Resurgence of Regional Economies, Ten Years Later: The Region as a Nexus of Untraded Interdependencies ., European Urban and Regional Studies, 2(3), 1995, pp. 191-221.

** McGill includes revenue from McGill University Health Centre, Douglas Hospital & Jewish Hospital Research Ctr. 20 [27] Tang K., Vohora A., Freeman R. (2004), Taking Research to Market, Euromoney Institutional Investor Plc, London. [28] United States Securities and Exchange Commission, Form 40-F, Annual Report Pursuant to Section 13(A) or 15(D) of The Securities Exchange Act of 1934, Research In Motion Limited, Washington, D.C. 20549. [29] University of Waterloo, Policy 73 -- Intellectual Property Rights, http://www.adm.uwaterloo.ca