McCormick Magazine

Growing Businesses

Farley Center for Entrepreneurship and Innovation spurs start-ups

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jim and nancy farley with dean ottinoEntrepreneurship — the spark of an idea, the excitement of innovation, the labor of love, the satisfaction of accomplishment — is central to any society, any future. At McCormick, where ideas and innovation abound but often need a little push, entrepreneurship recently got a big boost when Jim and Nancy Farley offered a significant donation to endow the Farley Center for Entrepreneurship and Innovation. The gift will help students, faculty, and alumni from across Northwestern take their ideas and turn them into reality.

"I was an entrepreneur, and we built our company from a dry start," says Farley, a McCormick alumnus and the retired chair and chief executive officer of the multinational corporation SpeedFam-IPEC. "I've been an entrepreneur interested in entrepreneurship for a long time, so when I heard Northwestern was considering starting this center, I knew it was an area I wanted to support."

Farley graduated from McCormick in 1950 with a degree in electrical engineering and started out as a test engineer for General Electric. He then worked as a sales engineer for a Milwaukee motor control manufacturer. In 1960, when he sold a control to the inventor of a new lapping and polishing machine, he joined the inventor's company as a minority investor. The business grew rapidly when Farley expanded it across the world. When the company reorganized in 1974, Farley took ownership of the machine-tool side of the business, then named SpeedFam Corporation and later SpeedFam International. In 1999 SpeedFam International merged with IPEC (Integrated Process Equipment Corporation) to become SpeedFam-IPEC, which Farley led until he retired in 2002.

"Northwestern gave me my start," Farley says. "Every quarter they gave me a $75 check — half of my tuition. They helped finance my education, so I owe a lot to the school."

All engineers have to be entrepreneurial, he says, even if they aren't interested in starting their own business. While he always relied on his engineering background, Farley says the classes that helped him the most involved business. "You have to speak the language of accounting, whether you're in business for somebody else or for yourself," he says. "If you don't talk their language, you won't get very far. The business side is very, very important."

Julio M. Ottino, dean of the McCormick School, says the gift will lay the foundation to foster both student and faculty entrepreneurship. "This center fills a very clear need for undergraduates and graduate students in engineering and across Northwestern," he says. "It is no exaggeration to say that the Farley Center, together with our emphasis in design-thinking, will move innovation to a new plane. The gift from Jim and Nancy is an investment in the future of innovation."

"It's exciting to have such a great endorsement from such a successful alumnus," says Mike Marasco, director of the center. "The gift will allow us to expand entrepreneurship beyond the school level."

The gift comes as the center completes its first year of operation. Its first class, NUvention: Medical Innovation, brought together 82 students from four schools to teach them how to develop medical devices and create business plans for the ideas (see McCormick magazine, spring 2008). The center received more than $225,000 from more than 10 companies and venture capitalists to fund the program, and 11 provisional patents were filed.

The center also created Principles of Entrepreneurship, a course taught by Marasco and William White, professor of industrial engineering and management sciences and an entrepreneur himself. More than 100 undergraduate students enrolled in the course, and more than 50 were placed on a waiting list. Students presented elevator pitches as their final exams, and the best pitches received more than $3,000 in prize money.

In addition to creating and offering courses, the Farley Center advises several entrepreneurship-focused student groups and has begun offering a portfolio of services to faculty to help them evaluate the commercial potential of research and build their innovations into businesses.

The center has created an advisory board that will advise it how to continue with the new funding from the Farleys. Marasco says the center is in the process of creating more interdisciplinary courses like NUvention: Medical Innovation that will focus on energy or web-related companies. The center would like to offer grants to students and faculty to launch their own businesses, and ideally it would like to create a venture capital or "pre-seed" fund that gives potential entrepreneurs funding in the early stages of business creation.

Marasco says the center could also connect alumni with students and faculty members through events and an "angel network" of potential investors. "There are tons of great ideas in these buildings, and very few get out," he says. "We would like the center to be a one-stop shop for how to evolve an idea into a business."

While the gift will give entrepreneurship at Northwestern a boost, the entrepreneurial spirit is alive and well in students, faculty, and alumni who are willing to make the jump from academia to business, as the following stories show.

Finishing studies, starting a company
nahlikDave Nahlik (MS biomedical engineering '08) spent most of the summer finishing up his master's thesis. This fall, while his peers search for jobs or go on to higher education, Nahlik has a different plan: He'll be running a company. "It's a daunting task," he says. "But I love this opportunity. I can't wait to get started."

The company, Onyx, grew out of an idea born in NUvention: Medical Innovation. Nahlik and a group of fellow students decided that surgical tools, which have changed very little over the past century, needed a better design. So they created two new surgical tools — the Shark, a scalpel, and the Raptor, a retractor — that "function as an extension of the surgeon," explains Nahlik. Both tools are more ergonomic than current models, with the Shark offering a nonslip grip and finger rests for added control, stability, and comfort, and the Raptor offering interchangeable retractor heads for quick and easy application adjustments.

After the course ended last spring, Nahlik took a lead role in making sure the ideas didn't die. He and other members of the team met with government agencies and nonprofit organizations to solicit help in forming a company. Now they're in the process of incorporating, after which they'll seek some outside funding.

While everyone on the team wanted to stay involved — either working on it part-time or making a financial commitment — Nahlik prepared throughout the summer for his full-time gig in the fall. He contacted insurance companies, set up meetings, and started to develop a web site so when his master's thesis is finished he can "go right in and work on the company full-time," he says. As the company's sole full-time employee, he'll act like a CEO but will also continue to design new surgical tools. "I've always had the dream of running my own company," he says. "It's stressful, but everyone in the group is very excited and passionate about making this work. And as an engineer, it's fun to see your work come to fruition."

Along the way, Nahlik says faculty and staff within the Farley Center for Entrepreneurship and Innovation have provided guidance and suggested business contacts. That kind of knowledge is needed for the group's ambitious first-year goals.

"At the end of next year we hope to have a full suite of five to eight production-ready surgical instruments that we can sell or license to another company," Nahlik says. "Eventually I'd like Onyx to be a household name in hospitals. But we'll see how the first year goes."

Teachers, scholars — and CEOs
olsonWhile McCormick faculty members primarily serve as educators and researchers, often they'll develop an idea that's just too good to pass up: It's new, it has a market, and they — or, in many cases, enterprising graduate students — think they might have what it takes to make it work.

When Greg Olson, now the Wilson-Cook Professor of Engineering Design, came to the University 20 years ago, he brought along a research group with the capability to create computationally designed materials — high-performance steels, in particular. Olson had helped develop software that took the performance requirement of a new material and integrated it into a modeling software system that accelerated the design and development of new materials.

Olson was content to use this software in research until PhD student Charles Kuehmann came along. "He had already started a company when he was an undergraduate," Olson says, "and he was very interested in exploring the ways that this design technology could be commercialized. The company wouldn't have happened if the right graduate student hadn't come along. I think that developing student entrepreneurship is key — that way the faculty member can stay at the University and teach while the student runs the company."

After Olson and Kuehmann reviewed several business concepts created as class projects by Northwestern undergraduate and graduate students, QuesTek was born a little more than a decade ago. Kuehmann, the enterprising student, started as president and CEO. "Our idea was, in the long term, to be a company that creates new materials, and in the short term, to supplement it with a services business," Olson says. "And that's what we have done."

QuesTek's first creation was a high-performance gear steel that was designed at Northwestern and licensed to the company. That steel has found an unusual market: Baja 1000 racing, where QuesTek's materials have led to better final drive gears for off-road racers, as demonstrated by the top five finishers of the 1600 class for the past several years. "That's helping to get the word out that our designed materials actually work," Olson says.

The company has also created the first stainless steel aircraft landing gear — a move funded by the federal government under a program designed to reduce pollution from military technology. Such landing gear can replace cadmium-plated landing gear, which poses an environmental hazard. Air force flight qualification testing has been fully completed, and the new steel is expected to take to the sky this year. QuesTek has also worked with the Navy to develop high-strength, high-toughness alloy steels for carrier-based aircraft components. Over the past four years, the company has become profitable. It now has 17 employees and does nearly $5 million a year in sales.

"My vision was to help bring about this computational materials design revolution and to get this new technology out in the world," Olson says. "I believe that if you really care about engineering, you have to start a company to do engineering. That experience helped me identify the sort of science we should be doing and teaching at the University."

Optimizing everything from tires to electricity delivery
nocedalAt the dawn of the new millennium, Jorge Nocedal, professor of electrical engineering and computer science, and his research group created software called KNITRO that performed complicated optimization calculations. "I realized what we were doing was new and powerful and had many applications," Nocedal says. "But it was going to be difficult to improve if we didn't have professional developers with us."

Nocedal, too, had a graduate student with the entrepreneurial spirit that spearheaded the jump from innovation to business. That student, Richard Waltz, was "very energetic and really wanted to do something to show how far this software could go," Nocedal says.

When the two partnered with Bob Fourer, professor of industrial engineering and management sciences, Ziena Optimization Inc. — which specializes in nonlinear optimization — was born. "We had no idea what we were doing," Nocedal admits of the early days. "But we didn't want any outside investment because we wanted complete control over the technology. What we didn't see is that we had to come up with so many solutions to unforeseen problems. We didn't know that we would need so much imagination to survive."

Fourer, who had experience with a start-up software company before, helped navigate the industry. "I knew what the products were and what their successes had been," he says. "This kind of business interested me because it really gets you involved with people who are trying to solve actual problems."

The team muddled through a mass of paperwork and found some funding through the National Science Foundation's Small Business Innovative Research grants. "That provided capital without strings attached," Nocedal says. "And the prestige we received from the NSF endorsement was crucial."

Slowly the business organized itself, and the team used its scientific contacts throughout the world to shape the company and create distribution agreements. Now the software is used in the energy, oil, auto, and financial industries to optimize everything from grooves on tires to the production and delivery of electricity. At Northwestern, Nocedal's PhD students use the software to develop new ideas, which they publish as part of their dissertations.

Along the way, the company has had its share of surprises. "Creating software is difficult because there are many areas to attend to," Fourer says. "You have to make sure it works for the customers."

The company has also faced competition from companies like IBM, which distributes similar software for free with the goal of selling customers a consulting service. "We have to be substantially better to compete," Nocedal says. "It's clear that if you're not highly innovative and energetic, you won't last. It's an incentive to make bigger ideas and implement them."

Sorting through the tiny world of nanotubes
hersamWhile the companies of Olson and Nocedal and Fourer continue to grow, other McCormick faculty businesses are just getting off the ground. Mark Hersam, professor of materials science and engineering and chemistry, and his research group have developed a way to sort carbon nanotubes by diameter as well as by chiral angle, which describes the arrangement of carbon atoms along the length of the nanotube. Those parameters determine a carbon nanotube's properties, and since there is no technique for creating an identical population, sorting them could potentially be big business.

Hersam and his group use density gradient ultracentrifugation, a process in which researchers fill a centrifuge tube with a fluid that varies in density, load it with nanotubes, and spin it until the nanotubes reach their isopycnic point — the point where a nanotube's density matches the fluid's density. The relationship between a nanotube's density and its structure and properties can be engineered through the use of appropriate surfactant chemistry, so ultracentrifugation possesses great flexibility in sorting.

"While carbon nanotubes have great potential," Hersam says, "there is no large-scale technology based on them because of this sorting problem. We published a paper on the process, and the response was overwhelming. I stopped counting the number of requests for samples when it exceeded 100. The overwhelming demand suggested to me that there was an opportunity for commercialization."

After he filed a patent with the help of the University's Technology Transfer Program, Hersam found investors that shared his interest in scaling up the ultracentrifugation process. NanoIntegris was incorporated in January 2007, and since then researchers have achieved a 100-fold scale up. "Many people doubted we could do that," Hersam says. "Customer feedback has been positive thus far, so we anticipate further growth in the demand for our material."

Like other faculty members with start-up companies, Hersam considers himself a professor first and an entrepreneur second. But entrepreneurship has brought him challenges and experiences that he can teach his students. "It's exposing me to the real world," he says. "It helps me educate students and show how we can impact society more immediately than we can by simply publishing papers. When you publish a paper, it often just sits in the literature, and maybe somebody reads it, and maybe it will influence a business decision. But then the product won't come out for another five years, if not longer."

Hersam says McCormick is becoming a place where entrepreneurship is encouraged. "At Northwestern and in Chicago, there hasn't historically been a strong culture of high-tech start-ups," he says. "But I think things are changing for the better. You need to have that culture to cultivate these companies."

A new kind of diagnostics
"There are many ways for a researcher to have an impact," says Chad Mirkin. "One is to publish a really important paper. A second is to build an operation that takes your ideas and refines them, engineers them, and turns those ideas into a robust technology that can be distributed to the masses. A start-up is a natural outlet for innovations."

Mirkin knows entrepreneurship. A professor of materials science and engineering and of medicine and the George B. Rathmann Professor of Chemistry, he has cofounded two companies: Nano-sphere, a nanotechnology-based health care company that does diagnostic testing, and NanoInk, which commercialized dip-pen nanolithography, a groundbreaking nanoscale fabrication and analytical tool. Both have already had successes, and Nanosphere went public last year, raising $113 million.

Mirkin wasn't always the savvy entrepreneur. When he started Nanosphere eight years ago, he admits he was "clueless." But he started knocking on doors at the Kellogg School of Management and, through an entrepreneurship class taught by Barry Merkin, created a business plan for his idea. That led Mirkin to create the Small Business Evaluation and Entrepreneur's Program through his Interna-tional Institute for Nanotechnology, in which a team of Kellogg students researches and assists scientists in developing business plans to present to potential investors. Such plans help researchers commercialize their projects while giving Kellogg students experience with actual businesses. Fifteen companies have launched, thanks to the program.

"The biggest problems scientists and engineers have is that they don't always feel comfortable around business people. They're worried that they're going to get cheated or that it's not going to be a good deal for them," Mirkin says. "But if you don't get a deal done, it's not a good deal for anybody."

Scientists and engineers must not be so immersed in their research that they can't be bothered to see it to development, Mirkin says. But researchers can't let the business side consume them and take priority over their scientific development. "It's a balance," he says.

Building up after the dot-com bust
dibachiWhen Rhonda Dibachi (BS nuclear engineering '83) and her husband, Farzad, started the software management company Niku in 1998, times were good. Within two years, it had grown to 1,200 employees, and the company went public in February 2000. The NASDAQ peaked a month later, and their stock prices were up to more than $100 a share.

Then the dot-com boom went bust.

"Watching our stock prices go from over $100 to less than $1 was really tough," Rhonda says. "It was a very, very long process of making the company viable again. And we did, and in the end we were very proud of our accomplishment."

When Dibachi graduated from McCormick, she didn't plan on becoming an entrepreneur. She got her MBA and worked for several different companies and, because nuclear engineering wasn't in demand at that time, she got into software engineering. After working for start-up Webvan — an online grocery business that became a notorious example of the dot-com bust — she got the start-up bug. "I was bored with industry," she says.

So Dibachi and her husband started Niku Corporation. When they first began, they took several wrong turns, and it took a year before their business model was solidified. Those kinds of twists and turns can make entrepreneurship lonely, she says, since many people will tell you you're making the wrong decisions. "If you enjoy being a part of clubs and surrounding yourself with like-minded people, you'll fail as an entrepreneur," she says. "If you enjoy being different, then that will make you succeed."

And working with her husband? "It was great," she says. "If you can find a family member that you can stand to look at 24 hours a day, it's by the far the best thing. At some point, though, you have to say at dinner, 'We're just not going to talk about the stock price tonight.'"

In 2002, tired of the long hours, the Dibachis left the company and took several years off. "Then we were bored, so we started another company," she says. That company is Noribachi, which is developing a new solar architecture for solar applications and products. "I didn't know anything about solar when we started a year ago — I just knew how to create and run a company," she says. "It's exciting to have your own little way of trying to solve a little bit of the world's problems, though. Software just didn't have that emotional ring."

Your virtual health coach is calling
herculesJesse Hercules (BS industrial engineering and management sciences '01) was never one to just sit around at Northwestern. After learning how to write a business plan in a McCormick course, he and three other Northwestern students started a web site design business that catered to local businesses. "It was back in the mid-90s, when the Internet was new," he says. "But we really learned a few things about business, even as teenagers."

He first followed a traditional real-world path — after graduating in 2001 Hercules worked in industry at General Electric before enrolling in law school to become a patent attorney — but the entrepreneurial spirit never left him. While his peers did clerkships the summer after their first year of law school, Hercules spent his time thinking about how computers could be used to help people become healthier.

"People know they should be getting more exercise and eating better, and they're supposed to hold themselves accountable," he says. "In the business world, when you're on a team, there's external accountability, so tasks are accomplished. That kind of support is needed to be healthy as well."

So Hercules designed a software application for himself on his home computer that would call him on the phone and ask if he had exercised that day. It would then keep score of how often he exercised and whether he reached his goals. The idea could be scaled up to call many people, he thought, and instead of selling a gadget that would motivate people to exercise, he could just use the software to motivate them using gadgets they already had — their cell phones.

"That's when I knew I was going to make a business out of this," he says. After finishing law school and obtaining a patent on his invention, he moved the business to an incubator in Memphis and hired his first two employees. Earlier this year Extracon Science rolled out its first product: EcFit.

The software program allows users to sign up online with a weekly exercise schedule and a goal of completing, for example, 80 percent of their workouts. The system can then call the customer to remind them to exercise, ask whether they completed the exercise, and calculate whether the customer is reaching their goal. Boosting Hercules' idea was a recent study that showed a telephone system did just as well motivating people to exercise as another human. "So many people would say, I need another human being to motivate me," he says. "But the study shows the computer is as effective."

Hercules is marketing the product to employee wellness programs and to the fitness industry. "For me it's amazing that we haven't had any competitors pop up," Hercules says. "I feel like every day we're adding to our head start."

Hercules also hopes to expand the idea to automated coaching by phone for other health-related areas like diet and smoking. In the meantime, William White, professor of industrial engineering and management sciences and one of Hercules's former teachers, plans to use Extracon Science as a case study in his Organizational Behavior course.

"It comes full circle," Hercules says. "From IEMS classes to real-world application and back again."

As the Farley Center for Entrepreneurship and Innovation moves forward, Jim Farley expects his donation to help produce more entrepreneurs like these.

"I hope it will provide a long-term, successful way to promote entrepreneurship throughout the entire school," he says. "I certainly didn't have the feeling I would be an entrepreneur when I left school. I was going to be an engineer. But I've been much happier being in the business network."

—Emily Ayshford