University Equity in Start ups for IP Licensing - Lebret - nov 2013


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How much equity universities take in start-ups for a license of intellectual property? It is sometimes not to say often a hot topic and information is not easy to obtain. Howeever there are some standards or common practice.

University Equity in Start ups for IP Licensing - Lebret - nov 2013

  1. 1. How much Equity Universities take in Start-ups from IP Licensing? Historical data Hervé Lebret November 2013
  2. 2. NB: this was not an easy exercise and I would not claim it is mistake-free. You should read it as indicative only, hopefully it is accurate! Indirectly related with Equity sharing through 200+ start-ups - October 2013
  3. 3. Lessons learnt Assuming the data are accurate:       Universities own about  10% at creation or  5% post –series A (average: $5M)  Universities keep a 1-2% equity stake at exit,  Worth a few $M (Median is $1M) With an average of $70M VC investment, And market value in the $1B range (Median is $300M) Royalties are in the 1-4% range. Median values are as important as Averages. All this is consistent with information in Appendix
  4. 4. Appendix Concept & Examples
  5. 5. General concept “The license issue fee typically ranges from $10,000 to $50,000, but can be as high as $250,000 for an especially promising technology that is close to market. Royalty rates are typically 2% to 5% but can go as high as 15%.” […] “Recently, licensing managers have begun to take equity in start-up companies in combination with, or in place of, license issue fees or royalties. In a typical arrangement the university takes a 5% equity position in the company in place of the license issue fee.”
  6. 6. More considerations
  7. 7. Stanford University
  8. 8. Carnegie Mellon
  9. 9. Massachusetts Institute of Technology MIT Typical Terms • • • • • • • Exclusive Field of Use: Limited License Issue Fee: $25 - $100K Royalty: 3-5% Minimum annual royalty: escalates over time Equity: 5% after significant funding Patent expense reimbursement
  10. 10. Caltech