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Entrepreneurship 101: Introduction to Technology Commercialization
Entrepreneurship 101: Introduction to Technology Commercialization
Entrepreneurship 101: Introduction to Technology Commercialization
Entrepreneurship 101: Introduction to Technology Commercialization
Entrepreneurship 101: Introduction to Technology Commercialization
Entrepreneurship 101: Introduction to Technology Commercialization
Entrepreneurship 101: Introduction to Technology Commercialization
Entrepreneurship 101: Introduction to Technology Commercialization
Entrepreneurship 101: Introduction to Technology Commercialization
Entrepreneurship 101: Introduction to Technology Commercialization
Entrepreneurship 101: Introduction to Technology Commercialization
Entrepreneurship 101: Introduction to Technology Commercialization
Entrepreneurship 101: Introduction to Technology Commercialization
Entrepreneurship 101: Introduction to Technology Commercialization
Entrepreneurship 101: Introduction to Technology Commercialization
Entrepreneurship 101: Introduction to Technology Commercialization
Entrepreneurship 101: Introduction to Technology Commercialization
Entrepreneurship 101: Introduction to Technology Commercialization
Entrepreneurship 101: Introduction to Technology Commercialization
Entrepreneurship 101: Introduction to Technology Commercialization
Entrepreneurship 101: Introduction to Technology Commercialization
Entrepreneurship 101: Introduction to Technology Commercialization
Entrepreneurship 101: Introduction to Technology Commercialization
Entrepreneurship 101: Introduction to Technology Commercialization
Entrepreneurship 101: Introduction to Technology Commercialization
Entrepreneurship 101: Introduction to Technology Commercialization
Entrepreneurship 101: Introduction to Technology Commercialization
Entrepreneurship 101: Introduction to Technology Commercialization
Entrepreneurship 101: Introduction to Technology Commercialization
Entrepreneurship 101: Introduction to Technology Commercialization
Entrepreneurship 101: Introduction to Technology Commercialization
Entrepreneurship 101: Introduction to Technology Commercialization
Entrepreneurship 101: Introduction to Technology Commercialization
Entrepreneurship 101: Introduction to Technology Commercialization
Entrepreneurship 101: Introduction to Technology Commercialization
Entrepreneurship 101: Introduction to Technology Commercialization
Entrepreneurship 101: Introduction to Technology Commercialization
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Entrepreneurship 101: Introduction to Technology Commercialization

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The lecture covers topics such as: …

The lecture covers topics such as:
* Which is best - licensing or start-up?
* Who owns my invention?
* How do I work with my Tech Transfer Office?
More information: http://www.marsdd.com/Events/Event-Calendar/Ent101/2007/introcommercializing-20071107.html
Speaker: Tom Corr, Associate VP Commercialization, University of Waterloo Office of Research

Published in: Business, Technology
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  • 1. ` ONTARIO RESEARCH INSTITUTION COMMERCIALIZATION Presented by: Dr. Tom Corr CEO – Waterloo Research and Technology Park Accelerator Centre & Associate Vice President, Commercialization – University of Waterloo tcorr@uwaterloo.ca November 7, 2007
  • 2. TOPICS • Research Funding • Who Owns the Intellectual Property? • Commercialization Options • Dealing with VCs • Outcomes of Commercialization Efforts
  • 3. Research Funding • Where does the funding come from (OCE, NSERC, CIHR, etc.). • Governments spread around the $ (federal and provincial) usually based upon competitive applications. • Range from $10K POP grants to multi-year, multi-million long term funding. • Most researchers spend a lot of time applying for grant $ to fund their research (i.e. pay for equipment, students, and conferences).
  • 4. • At research institutions in Canada - typically the researchers own the IP, or the institution owns the IP, or some combination of the two. • Institution owned: McMaster (researcher can negotiate with the university for ownership and commercialization rights) • Researcher owned: Waterloo • Joint Ownership: UHN (1/3 to researchers, 1/3 to UHN, and 1/3 to researchers department) • Joint Ownership: UofT (50/50 - Researchers/UofT) until Disclosed, and then Researcher has the option to own. IP Ownership Policies
  • 5. IP Commercialization if University Involved in Commercialization • Waterloo: 25% to University and 75% to Researchers • UofT: 60% to University and 40% to Researchers IP Commercialization if University NOT Involved in Commercialization (i.e. researchers commercialize on their own IP) • Waterloo: 0% to University and 100% to Researchers • UofT: 25% to University and 75% to Researchers These are just 2 examples – all universities have their own ownership and commercialization policies. .
  • 6. IP Ownership is a HUGE issue when it comes to commercialization…. Who owns what…future development • Researchers are typically obligated to DISCLOSE their research to the institution with the institution keeping rights for further research and teaching only. • Many times disagreements between researchers as to who invented what, and the % of any proceeds from commercialization that should go to each– especially difficult to deal with when researchers include profs and their students. • Clear ownership is needed before investors will fund or they will walk away from the deal. • Future development of same IP is also a big issue as some researchers (students) may come and go, which may result in issues about assigning interest in new but related IP at a future date.
  • 7. What are a lot of professors focused on? • Younger profs concerned about getting tenure. • How do they get it: - Publishing papers - Doing more research - Teaching Commercialization of IP is not always high on their list – has implications for businesses who want to license/buy the IP and move the IP forward in conjunction with the researchers.
  • 8. What’s in it for the researchers? - Royalties (At UofT 60%-75% of royalties go to the researchers, at UW 75%-100%) - Equity in start-up - More $ to do research - Peer recognition Does little to get tenure other than as a result of the papers that may be published on the on- going research, and sometimes publishing in itself is a huge problem in commercialization.
  • 9. What do Technology Transfer operations at Universities do in the commercialization process? • Pay to Protect IP – patents, trademarks, copyrights. • Assist in the developing of Business Plans and commercialization strategy. • Assist in getting additional grant funding to further develop IP (sometimes mandatory that the technology transfer office is involved NSERC –i2i). • Create start-up company when appropriate vehicle for commercialization. • Assist in raising financing for company. • Negotiate agreements with licensees.
  • 10. Why do some research institutions only commercialize ~10% of the researchers inventions? • Intellectual Property (IP or Invention) is pure research with no market potential. • Market is too small to bother going after. • Existing patents may not allow for the IP to be practiced. • Researchers have unrealistic expectations that the institution cannot meet (e.g value of IP) However, researchers can take ownership of their IP and commercialize it themselves should they choose.
  • 11. Commercialization Options: Spin-Off’s versus Licensing Pros and Cons
  • 12. Licensing Typical Agreement Terms and Conditions: • Licensing (to start-ups or large corporations): - royalty paid to researchers (and university if they are involved in the commercialization) based upon sales attributable to IP – typically around 5% of sales. • Milestones – if license is exclusive then minimum royalties typically apply as well as development milestones (especially in drug development).
  • 13. Spin-Off Company New Company Created to: • License researchers technology and build a company around it. • Fund further research at institution with the aim of developing/improving technologies for license by the company.
  • 14. SPIN-OFF’s - Company formed in which researchers may be a shareholder. - Typically key researcher will be acting head of R&D (most researchers don’t want to leave the university except temporarily on paid sabbatical). - Given priorities of researchers it is sometimes problematic to get them on the critical path to commercialization – they sometimes get in the way and slow the commercialization process.
  • 15. Spin-Off’s • Until mid-1990s most research institutions IP was licensed to large companies (i.e. not spin- offs) that were in business related to the IP. • Some research institutions still have policy not to license IP to spin-offs (risk involved in licensing IP to under-funded start-up).
  • 16. Industry Need • Some large established companies not well suited to generating new lines of business and divisions. • Large companies look to M&A (Mergers and Acquisitions) as an alternative. • Companies will pay premium for small companies that are synergistic with their business mission.
  • 17. What to consider when looking at the Spin-Off alternative to licensing? • Lack of suitable receptor capacity (licensee) for IP. • Is IP a solid foundation for a new company and potential platform for additional synergistic IP? • Potential to be a $50 million+ public company? • Can funding and management be attracted to spin- off. • Potential return to inventors, research institution, and investors.
  • 18. Other Factors • Spin-offs may create more value quicker, as the potential value of shares may have more upside than licensing. • Royalties may flow sooner on licensing deals. • Licensing will have lot of up-front work but less than spin-off once agreements negotiated. Bottom Line – Spin-offs take more effort than licensing, but have the potential for bigger upside in the long term.
  • 19. Research Institutions Potential Role in Spin-Offs • Impetus may come from the research institution, inventors, or investors to create spin-off. • If formed by research institution, there is the need for a “champion” to be identified to look after everyone’s interest. Must have the skills to deal with start-up companies. • Provide patent and legal financing. • Research Institutions role may range from very little, to creation and on-going management of company - especially until funding and management in place.
  • 20. Research Institutions Potential Role in Spin-Offs • Determine financing alternatives and pursue them (government, angels, VCs). • Promote the spin-off and potentially look for other IP. • Continuously consider the value of its shareholding, the impact of decisions on its share value, and look to maximize value and for exit strategy (IPO or company sale).
  • 21. Cross Cultural Issues Investors need to understand: • IP requires time and investment before ready to market. • Likely a requirement to fund on-going commercially relevant IP research and development. • Researchers want freedom of research and control over their IP. • Researchers need to publish results.
  • 22. Cross Cultural Issues Researchers need to understand: • Focus on marketing and market related issues is essential. • Market considerations require attention when R&D is underway. • Significant funds need to be raised and invested to develop products and to market them. • Companies need to operate at an accelerated time scale compared to academia.
  • 23. Spin-Offs vs. Licensing - Summary • Spin-Off’s are time consuming, risky, and take up a lot of time that may or may not, be better spent on licensing the IP if that option available. • Have potential for big upside under right circumstances. • Decision to do spin-off needs careful consideration and commitment from all parties involved.
  • 24. It takes 10 times more time to manage a spin-off than it does a licensing transaction
  • 25. Investors – what do they think? • Attitude is everything…unless the company is paramount in mind of entrepreneurs and researchers - don’t invest. • Getting customers and learning from them is the best way to guide commercialization – not just doing more research without industry input.
  • 26. Investors – What do they think? • Close governance is extremely important to force focus. • Dilution is forgotten if successful and irrelevant if a failure. • While plans change (and so they should), having one is helpful.
  • 27. Recurring pitfalls and themes • Overestimating the science/technology and one’s capabilities – Lack of realism regarding the actual stage of development of the science/technology • Poor understanding of the customer and his/her value chain – Proactive ignorance of challenges involved in developing and realizing value • Disconnect between business and the science – Underweighting of importance of demonstrating progressive commercial achievement
  • 28. • Late stage grants (OCE, NSERC). • Some granting agencies getting wiser and some of them fund the companies licensing the IP – not funding the researchers as they want to see commercialization of the IP nor more research done. • Angel Investors – typically invest in start-ups where they have had prior experience with their marketplace (www.tvg.org). Valuation issues – convertible debt. • Funding also comes from start-ups and large corporations. • Spin-offs – funding from shareholders/early stage investors Where does the money come from at this EARLY stage?
  • 29. - typically look to make minimum investment of $1 - $5 million (over time) and want to do later stage deals (revenues, customers) - Looking to get 10 times their money back in 5 years - Fund based upon milestones and future valuations based upon milestones (beware the ratchet) Later Stage VC Funding
  • 30. Later Stage VC Funding - Initial valuations based upon all the classic models (e.g. sales multiples, DCFs. earnings multiples, etc) don’t work. However forget all that as most start-ups are worth $1.5 - $2 million to VCs – very rarely do you see exceptions. - Important that expectations are agreed to by both sides – you have both got a new partner in your life.
  • 31. Deal and Negotiation - steps/process/documentation • Business plan development • Who to take to • Negotiations • Term Sheet • More Negotiations • Close REMEMBER – 1 deal in 100 – 200 that looks for VC funding actually gets funding. The majority should forget about VC funding and try bootstrapping – read ART OF THE START by GUY KAWSAKI.
  • 32. Why deals fall apart - Investors don’t have comfort in IP ownership - Investors don’t realize that they are dealing with research – as opposed to detailed business plans and products that are ready to go. - Long time to market which equates to lots of investment – especially for life sciences deals – regulatory issues.
  • 33. Why deals fall apart - Researchers don’t invest time that is required. - Researchers lose interest in the research and move on to other areas of research interest or move to other institutions. - Patents get rejected (more important in institutional research than in typical IT deals). - Expectations that grant $ will fund operations which it seldom does
  • 34. SUMMARY - Most Canadian research institutions have a researcher friendly policy which allows the researcher to gain most of the financial upside from their inventions. - There is a lot of commercialization assistance available for researchers who are coachable (MARS, Accelerator Centre in Waterloo, OCE, technology transfer offices, etc). - The investment community is always looking for good IP to invest in but don’t just focus on VCs for funding.
  • 35. SUMMARY - Successful research typically leads to more funding for on-going research – huge focus on commercialization outcomes by granting agencies. - More funding is being put into Canadian research and commercialization than ever before. There has never been a better time for commercialization in terms of the support and funding available.
  • 36. QUESTIONS

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