Gates Family Legacy Spans Generations in Championing Caltech's Entrepreneurial Spirit
The Gates Investment Fund is the latest gift helping the Institute translate ideas into commercial and societal impact.
Caltech has pioneered technologies that have influenced industries and even created new ones: integrated circuits, GPS, and digital imaging, just to name a few. Yet the spirit of entrepreneurship did not fully flourish at the Institute until Caltech Life Trustee Charles C. Gates, Jr. made a pivotal investment. His gift in 1990 created the Gates Grubstake Fund providing funding for faculty to help establish proof of concept of emerging ideas. Since its inception, the fund has awarded 65 grants in areas ranging from DNA mapping and protein-inhibiting therapeutics to biosensors and solar energy.
Gates came up with the grubstake title, sharing with then Caltech President Thomas E. Everhart, its connection to his family's history. "The association of the request is with my father and uncle, who started The Gates Rubber Company in 1911 after running an adventurous course as young mining engineers in the west during the beginning of the 20th century," Gates wrote of his family's Colorado roots. Grubstakes were the early equivalent of seed capital, where investors took a chance backing cash-strapped miners and entrepreneurs as they explored the West with the hope of an eventual motherload or return. Gates added, "Hopefully, the fund will grow through appreciation, but the return of some of the object proceeds, much like a sourdough starter, will keep the flavor of the concept alive and add to the resources for the next grubstake."
Nearly four decades later, Gates' legacy continues with a new generation of support spearheaded by his daughter, Diane Gates Wallach. Through the Gates Frontiers Fund, the Institute has received an $11 million gift to infuse $10 million in venture capital for equity investments in its startups and another $1 million to the Gates Grubstake Fund. Two-thirds of initial investment returns will be reinvested into these funds.
"Members of the Gates family over the generations have been formidable advocates for Caltech, helping us to translate innovation into real-world impact," says President Thomas F. Rosenbaum, the Sonja and William Davidow Presidential Chair and professor of physics. "It is in recognition of Charlie's exceptional vision to grow the entrepreneurial spirit at Caltech that we are honored to rename the Caltech Seed Fund as the Gates Investment Fund."
Settlor's Intent
Wallach recalls her father's own entrepreneurial start at an early age. In search of spending money, young Charlie and his brother decided to sell eggs to their neighbors. "They started with two chickens, and then they got to 10," says Wallach. "At one point they had 250 chickens living in a hutch up behind the house, until my grandmother put her foot down. And that was the end of the chicken business."
The family's enterprising nature began with Charles Gates Sr. who bought Colorado Tire and Leather Company with his life savings of $700 and a loan of $2,800 in 1911. It would become the world's largest non-tire rubber manufacturer. When Diane's father led its merger in 1996, the Gates Corporation employed more than 14,000 people. The creation of the Gates Family Foundation following World War II also provided the family with the ability to invest in areas it valued most: education, natural resources, and community development.
Wallach serves as managing partner of MCT Incorporated and is a former trustee and chair of the Gates Family Foundation. She describes the mission of the Gates Frontiers Fund—which is affiliated with but separately directed under the family foundation—as one that reflects her father's philosophy of taking big bets for greater impact. "My father was a doer and risk-taker. He believed in free enterprise and the business world and making the world a better place," says Wallach. "He also believed in giving people tools (not easy answers) to create success, sometimes a grubstake, sometimes building space like Gates-Thomas."
Through this recent gift, she is honoring her father's settlor's intent in general and specifically for Caltech—Charlie Gates' original intention for the fund to provide enough support to build an entire ecosystem designed to nourish new ideas and bring them to market.
Developing the Caltech Ecosystem
In late 1994, nearly five years after Gates' catalytic gift, the Office of Technology Transfer was formed to further bridge faculty research and industry investment. Two decades later, the renamed Office of Technology Transfer and Corporate Partnerships (OTTCP) hired its first Entrepreneur-in-Residence to support founders from ideation to implementation. In 2009, the Rothenberg Innovation Initiative was created to increase competitive grants for early-stage research, followed in 2020 by the launch of the Caltech Seed Fund.
While the Gates Grubstake provides funding as grants to labs, the Caltech Seed Fund, now renamed the Gates Investment Fund, provides support through equity investments in new companies coming out of Caltech. More than 30 investments have been made in the last five years, and the fund has spent or committed more than $8 million. This investment has allowed Caltech companies to raise more than $130 million at the seed stage from a wide range of early-stage investors, including the Institute's co-investment fund, Wilson Hill Ventures.
"Our success in building the infrastructure to support Caltech entrepreneurs is due in no small part to Charlie Gates' original vision and support," says Provost David Tirrell, the Ross McCollum-William H. Corcoran Professor of Chemistry and Chemical Engineering and holder of the Carl and Shirley Larson Provostial Chair. "It is evident today in the Caltech Innovation Center, our student competitions and entrepreneurship internships, and in the ever-increasing number of successful companies emerging from our campus."
The Caltech Innovation Center provides a physical space for startups to develop concepts in a collaborative environment. Plans to expand Caltech's facilities include a new research and development innovation center with laboratory space. Such resources are essential for startups, but even more so for companies emerging from the Institute featuring fundamental—or deep—technology, observes Kaushik Bhattacharya. "It's not like creating a new app where you launch it and it takes off," says Bhattacharya, the Howell N. Tyson, Sr. Professor of Mechanics and Materials Science and former vice provost of research. "Many of our faculty are doing something fundamentally different, and the transition from proving a concept in a model in the lab to a product which has commercial value is challenging."
What also sets Caltech apart, adds Bhattacharya, is its small size. While it fosters interdisciplinary collaboration, it can also have its drawbacks. "One way of growing Caltech without growing Caltech is creating a large scientific and technological ecosystem around the campus," he says.
Fred Farina, chief innovation and corporate partners officer who worked closely with Bhattacharya in building out this ecosystem, agrees.
"Pasadena is one of the hubs of innovation in LA, and we want to keep companies here by investing in them and providing access to the specialized facilities they need," says Farina. "We are at a tipping point. And my bet is within a few years we will be recognized as one of the premier innovation hubs in the country."
The OTTCP's Entrepreneurs-in-Residence, otherwise known as EIRs, are another way the Institute supports founders. With diverse experiences in industry, venture capital, and as founders and CEOs, EIRs are embedded in the Institute to help identify and nourish nascent ideas, analyze potential markets, and collaborate with founders to build out viable teams while also navigating the venture funding landscape.
"There's a saying that startups create products, and university startups create new industries. I feel like that's definitely true from our perspective," says Mary Beth Campbell, an Entrepreneur-in-Residence and a physicist by training. "Caltech is a very special place. All the technologies are top notch, but because they're so cutting edge, they need shaping. And that's where the EIRs play a role—in helping those 'proto startups' get off the ground. Programs like Gates Grubstake and the Rothenberg Innovation Initiative are crucial tools for us in that process."
Crossing the Valley of Death
In venture capital parlance, there is a critical time in the life of a startup between receiving initial funding and generating revenue, known as the Valley of Death. It is at this high-risk stage that access to resources like the Gates Investment Fund make the difference. "The venture capital market has become more risk averse over the last 20 years," adds Farina. "Philanthropy helps bridge the gap. It can make a technology more interesting to the commercial sector, so that it has a chance to help society."
One Gates Investment Fund startup that has successfully crossed the Valley of Death is PrismML which recently announced the world's first commercially viable 1-bit large language model. Co-founded by Babak Hassibi, the Mose and Lillian S. Bohn Professor of Electrical Engineering and Computing and Mathematical Sciences, Reza Sadri, director of Caltech's AI Bootcamp Program, visiting researcher Omead Pooladzandi, and alumnus Sahin Lale, the startup portends a future where powerful AI can run locally and efficiently on your phone or laptop.
The drive to chart new paths in innovation is not new to Caltech. However, the appreciation for resources to help translate ideas into real-world impact has grown. One only has to sit in on the third annual Bill Gross Business Plan Competition to see a thriving community of student entrepreneurs. This year's competition featured pitches that ranged from a microbial solution to safely extract minerals to an AI negotiating agent. The ultimate winner was Foundation, a startup led by a Caltech graduate student and visiting researcher at NVIDIA addressing the demand for computing processing power.
"There's more of an understanding of the culture of innovation and startups," adds Campbell. "I also think that there's a realization that this doesn't distract from great science. It's really one of the key pathways to make sure that the excellent science and engineering happening on campus has societal impact."