19,000 startups: The small firms born from federal labs since 2001

Between 2021 and 2025, universities, hospitals, and nonprofit research institutes averaged more than 19,000 income-generating licenses annually. This figure represents approximately twice the annual average recorded in the early 2000s. These licenses serve as the primary mechanism for transferring technology from academic institutions to the commercial sector. Most of these agreements involve startups and small companies, accounting for about 70 percent of all university licensing deals.

The legal foundation for this exchange is the Bayh-Dole Act, a bipartisan law passed by Congress in 1980. Before 1980, the federal government held patents to 28,000 discoveries made with federal research dollars. It licensed fewer than 5 percent of those patents for commercial use. The act changed this dynamic by allowing universities, nonprofit research institutions, small businesses, and federal laboratories to retain patent rights to inventions developed with federal support. This shift created incentives for institutions to license discoveries to small firms, which could then use the patents to attract capital and invest in further development.

Since 2001, this system has helped launch more than 19,000 startups. Regional breakdowns show more than 5,400 of these companies formed in the South and Puerto Rico. The West region saw more than 4,900 startups, while the Northeast accounted for more than 4,800. The Midwest contributed nearly 3,800 firms. These businesses have generated substantial economic activity. Since 1996, the system has contributed up to $1.7 trillion to U.S. gross domestic product and supported up to 7.6 million jobs.

Prominent technologies trace their origins to this framework. FluMist, smartphone cameras, and cryptocurrency platform technology all stem from federally supported research. The search algorithm that became the foundation for Google was developed by two Stanford graduate students under this system. Despite this track record, the legal landscape for Bayh-Dole has become uncertain in recent years. Some policymakers are debating changes that could reduce startups' access to innovative research. One proposed rule change would allow the government to cancel long-term research funding based on political discretion.

Another agency adopted guidelines that require product-access plans for industry licenses. These plans allow for the revocation of licenses even after products have been developed. Critics argue this requirement directly violates the intent of Bayh-Dole. Startups often build their entire business models around a single unproven invention. They have fewer resources than larger corporations to absorb the risks of developing and marketing new products. If small companies cannot reliably protect their patent rights, it becomes harder for them to raise the investment needed for testing and manufacturing.

The Small Business and Entrepreneurship Council argues that policymakers must preserve the existing framework rather than altering it. Data indicates that Bayh-Dole remains a major driver of American entrepreneurship. Protecting this framework ensures that startups can continue turning federally supported discoveries into new companies, jobs, and technologies. The administration has also supported startup growth through the Working Families Tax Cuts Act. This legislation made the 20 percent small-business deduction and personal tax rates permanent. It also included investment incentives designed to boost small-business investment and innovation.