BRC MANAGEMENT CORP.
www.bluerockcapital.com
16 Guaranteed Ways to Avoid the Hassle of
Commercializing University Technology
Through Equity Licensing Deals
Examples collected by Terry Collison, Blue Rock Capital
MAY BE FREELY QUOTED, EXCERPTED OR REPRODUCED WITH PROPER
ATTRIBUTION.
1. Have no defined policy or procedure at all on commercializing
university technology.
Defining the groundrules, requirements, and procedures could cause
a lot of debate and disagreement. Allow faculty members to be creative.
(The university’s rights and responsibilities can always be figured out
later if you need to.)
2. If you have a technology policy and a procedure, make sure nobody
in the university community actually understands what it is. Complexity
is good.
3. If you have a technology policy and a procedure, allow word
to get around campus that the department heads, academic senate, and/or
administration view the commercialization of university-generated technology
as not quite in keeping with the university's academic mission.
4. If you have a technology policy and a procedure, apply them
inconsistently.
Nobody's going to notice if certain researchers or other participants
seem to get a "good deal" while others seem to have a far tougher time
of it. If you are the Licensing Officer, amuse yourself with your ability
to influence what happens. Be arbitrary. Or sometimes you can have fun
simply by dragging your feet. Most people will get fatigued and turn their
attention to less arduous tasks. (Besides, this "window of opportunity"
stuff probably doesn't mean too much anyway.)
5. If you have a technology policy and a procedure, they should
not be equitable.
An equitable commercialization policy typically will allocate equal
shares from successful technology commercialization (1) to the faculty
researcher(s), (2) to the department of the researcher(s), and (3) to the
university. Cutting out one or two of these entities entirely — or, alternatively,
severely restricting any benefit that might go to the faculty researcher(s)
— is usually enough to prevent any type of ongoing program at your university.
6. Limit the licensing of university technology to large companies
only.
Although young entrepreneurial companies are generally more flexible,
more innovative in their thinking, have vastly lower costs of operation,
and far greater incentives to make a novel technology work in the marketplace,
young companies are fragile entities that will almost surely require greater
attention if they are to survive long enough to stand any chance of succeeding.
The fact that the potential pay-off from a start-up can be enormous should
not influence your university's thinking. Stick with licensing to large
established companies because the record demonstrates that large companies
always succeed.
7. Find a single out-licensing model and stick with it for all
situations.
The process for licensing medical technology or biotech is familiar
enough to most university licensing offices. Why not simply apply this
same approach to commercializing technology from your engineering schools
(all of them), to university generated software, and to your business school
(just kidding, of course; nothing coming out of your business school could
possibly be the basis for launching a new company because it isn't technology,
right?).
8. Don't bother with understanding "market-based" royalty rates,
third-party working relationships, or generally observed business Terms
and Conditions.
You are the University. If you deign to mess around with commercialization
at all, then you will damn well call the tune. If your potential collaborators
don't want to collaborate as you dictate, you probably wouldn't have wanted
to get involved with them anyway.
9. Do not allocate university resources to pay for stuff like intellectual
property protection, market analysis, writing a business plan, or getting
knowledgeable individuals involved either as advisors or as paid professional
consultants. Especially don't do this up front. It won't add value to your
deal.
This stuff is all window dressing anyway. Who needs it!
10. Never allow researchers from other schools who have made it
big as founders of successful young companies to visit your campus. Or,
if they do visit, make sure that they don't actually talk to your
faculty members.
Why seek trouble? Who knows what strange tales might be told.
11. Keep those folks in your business school away from the researchers
in your science faculty, the staff of your engineering schools, and anybody
in your university's hospital. Gosh, imagine what a mess it could be if
they each had part of a powerful commercialization idea?
12. Never, never develop relationships between your university
and private investors, venture capitalists, consultants, or lawyers and
accountants who are involved in real-world deal-flow. Speaking engagements
are a no-no.
13. If an entrepreneur-wannabe from your faculty somehow gets
through the previous 12 barriers, make sure that he or she cannot get time
freed up to work as an employee, a consultant, or a founder involved with
a start-up.
Keep 'em in the classroom where they belong. After all, what could
possibly be learned in a start-up technology company? (And that goes double
for students.)
14. OK, if somehow all your planning fails and someone somehow
creates a company, makes it wildly successful and either sells it for a
big pay-off or takes it through an astronomical IPO, do everything in your
power not to allow them back on campus to talk about it.
If the word ever got around, somebody else might actually try to do
it with their promising new technology. And then, you'd just never
be able to stop it.
15. Some time after the university accepts equity in return for
licensing technology into a promising young company, make sure that the
local paper writes an article questioning the propriety of licensing technology
in exchange for equity rather than for a royalty (after all, it's simply
not traditional, is it?!).
16. Establish an unofficial (but inviolate) rule that any equity-based
licensing of university technology must go through an intermediary who
will control the terms of the deal (and who just happens to be an alumnus
and long-term donor and who, magically, will always seem to end up with
an equity piece of each such company).
Well.... you can't say you weren't warned.
You say you’ve uncovered Strategies #17, #18 and #19 at your campus?
Please send them along so we can update this list (confidentiality guaranteed).
Virginia G. Bonker
230 Lackawanna Dr.
Andover, N J 07821-4113
Tel 973 426-1767 Fax 973 426-0224
virginia@bluerockcapital.com
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Terry Collison
5700 Kennett Pike
Wilmington, DE 19807-1312
Tel 302 426-0981 Fax 302 426-0982
terry@bluerockcapital.com
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