Business Partners

One sunny spring afternoon, friends sat together in the backyard of a Corvallis home sipping wine, bemoaning the recent hike in gas prices to $3.50 per gallon. Among them were a former product-development specialist for Hewlett-Packard and an Oregon State University chemist. Perhaps inspired by the bioethanol in their glasses, what might happen, they wondered, if they could turn local agricultural by-products — grass and wheat straw, fruit and vegetable processing wastes — into fuel? Thus was born the idea for a new company, Trillium FiberFuels.

They didn’t intend to compete against the rapidly expanding corn-ethanol industry. As of 2010, more than 200 facilities, mostly in the Midwest, were churning out about 13.5 billion gallons of corn ethanol a year. The Trillium co-founders’ hope was that they would develop a more environmentally sustainable product (lower greenhouse-gas emissions, less water pollution), provide another revenue source for rural Oregon land-owners and contribute to the national energy goal of producing 36 billion gallons of biofuel annually by 2022. Trillium had entered the cellulosic-ethanol business.

Priority No. 1 for any new company is to stay alive. So Trillium succeeded in competing for federal and state grants and spun off another small business along the way (Cascade Analytical Reagents and Biochemicals). In a small wood-frame building just off Highway 99 north of Corvallis, the company has developed a method (known as xylose isomerization) to ferment the 20 percent to 40 percent of plant biomass that resists being turned into ethanol by yeast. Trillium president Chris Beatty credits research by OSU Distinguished Professor Stephen Giovannoni, who isolated and sequenced the genome of a microorganism used in the company’s experiments.

The goal is to produce cellulosic ethanol at a competitive price and ramp up production quickly. “If you’re going to make a dent in this business, it’s either grow big or stay home,” says Vince Remcho, Trillium co-founder, OSU professor of chemistry and affiliate scientist with the Pacific Northwest National Laboratory. Other co-founders include Beatty, Steve Potochnik and Grant Pease, all with former or current ties to HP.

Priming the Pump

Trillium isn’t the only business collaborating with OSU to have grand ambitions. Spun directly out of research or boosted by patented OSU technology, others are aiming to grab significant shares of business and consumer markets. Some of their products are already coming off farm fields and manufacturing lines.

Through their relationships with OSU, these and other companies create jobs, diversify the Oregon economy and respond to market demands for more sustainable, consumer-driven technologies. And in turn, OSU benefits. Students gain experience through internships. Faculty stay up-to-date on industry practice. And licensing revenues provide new research funds. “The purpose of our efforts is impact,” says Ron Adams, executive associate vice president for research. “It relates to our land grant mission, so we’re furthering economic development and social progress. We’re partnering in R&D that will result in new products and business opportunities.”

Still, working with businesses isn’t like serving students or competing for research grants. Adams and others are mindful that entrepreneurs and business managers face rapidly changing risks and protect their interests accordingly. “The people who are investing their lives and money in those enterprises are not depending totally on us to get it done,” Adams says. “If you’re an entrepreneur running one of these companies, you want 100 percent control.”

While companies do look to universities for innovation and skilled, well-educated employees, “we’re not an economic development organization,” adds Brian Wall, director of the Office of Commercialization and Corporate Development. “We are an economic driver through our graduates, research partnerships and licensing. We’re always on the lookout for discoveries that offer opportunities for commercialization and new business investment. This is an important area of growth and impact.”

The rules that define that process — agreements on copyright, licensing, royalties and other steps — are based on policies created by the Oregon State Board of Higher Education.

Show Me the Money

Private-sector partnerships show up as support for problem-oriented research. Nationally, according to the National Science Foundation, industry funded nearly 6 percent of the roughly $55 billion in research performed in institutions of higher education in 2009. At Oregon State in 2011, studies funded directly by industry totaled about $5.4 million, or 2 percent of the university’s $261.7 million in grants and contracts. However, that doesn’t include contributions from research gifts, agricultural commodity groups, the forest-products industry and testing services, which bring the total close to $13 million, or about 5 percent.

What about return on investment? Perhaps the most dramatic comes from the agricultural sciences, which helped Oregon farmers and ranchers to earn a record $5.2 billion in farm-gate sales in 2011. Oregon beef topped the list as the state’s most valuable agricultural commodity. Ranchers have a long history of working with OSU researchers through Agricultural Experiment Stations in animal and rangeland science on feed, herd health and cattle management.

Impact also comes from fledgling startup companies like Trillium. Over the past eight years, new OSU-assisted companies have raised $160 million in private investment and created 350 jobs, says Rick Spinrad, vice president for research. New businesses proceed through stages, he adds, from research-inspired startup to venture-funded, revenue-producing and growth-focused.

At every step is a major hurdle: money to pay for product development, market analysis and management expertise. Among the sources of funding that help young companies transition from one stage to another are the Oregon Nanoscience and Microtechnologies Institute (ONAMI), the Oregon Built Environment and Sustainable Technologies Center (BEST) and the OSU University Venture Development Fund. The latter leverages tax-deductible contributions from private citizens. The OSU Foundation conducts fundraising, and the OSU Research Office manages investments. Recent examples include:

• Ultra-high-temperature water pasteurization for another startup, Home Dialysis Plus ($182,700)
• Market analysis of a landmark new LCD display by Inpria Corporation ($100,000)
• Development of a thermal energy storage system by a new company, Applied Exergy ($148,514)
• Proof-of-concept display for a new type of diode that could replace silicon and reduce energy, leading to a new company, Amorphyx ($150,000)

Trillium FiberFuels, meanwhile, announced in April 2012 that it received a $150,000 Small Business Technology Transfer grant from the U.S. Department of Energy (DOE) to develop a commercial-scale enzyme production process for the cellulosic biofuels industry. Based on manganese peroxidase, which is found naturally in white-rot fungi, the new process emerged from the lab of OSU researchers Christine Kelly and Curtis Lajoie. The company has also received funding from sources such as the U.S. Environmental Protection Agency, the National Science Foundation, U.S. Department of Agriculture, ONAMI and Oregon BEST.

“There is a reason to invest in research in biofuels,” says Remcho. “It will play a role in U.S. and worldwide energy needs in the future. So it’s coming. We just need to do it intelligently.”

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The Oregon State College of Engineering partners with businesses from HP to Azuray Technologies to deliver solutions for product development.