University and Lab Spinoffs

Introduction

Technology licensing (#technologylicensing) or "tech transfer" (#techtransfer) can be an exciting way to accelerate the innovation at your startup. It can also lead to a never ending series of experiments and unforseen problems. The term I used here "Ph.D. Sensor" was coined by team of us at Motorola back in the 1990's. It was primarily cynical- PhD students would create 1 sensor that seemed to work in their lab, write a paper, make a presentation, and garner lots of temporary attention. But once that sensor (or any other product) was taken out to the lab, many things would and do go wrong. In this post I'll try to talk a bit out some strategies for licensing the "tricky bits" that you might need to make your vision a reality. But hold to you wallets and expectations- rough sailing ahead. I also suggest you review this recent article about university spinoffs. There are some good recommendations and conclusions based on sound analysis.

The Main Idea

Tech Licensing is dish best served with healthy dose of skepticism

During my work as a strategic marketer I participated in a substantial number of possible university and lab technology transfers- most of them were either unsuccessful or we decided to back away from the lab/university demands. I and others pursued these relationships at startups and at larger firms. The data on university spinouts is not promising but it is something to consider. All of the other concepts we've discussed so far in this blog will also help us understand why this particular pathway (university spinoff) is a pretty small area of tech startups.

University spin-outs vs licensing

Two activities relevent to this blog occur at universities and research labs. The first is a spin-out. A researcher will take leave from teaching and research to commercialize her work. Maybe they will raise some external venture capital to get them into their own facility, buy equipment etc. The other activity is licensing. Private firms contact the researcher, try to learn more about the applicability of the research to the firm's needs, and see if a match can be made.

It is actually quite difficult for a tenured professor to start a company while they continue to teach and do sponsored research. Their way to "wealth creation", ahem, is to try and strike a lucrative licensing deal with a major firm. These researchers generally have a lot of say in how their research gets used, but it can be very difficult if not impossible to find a path forward.

Licensing of innovations from labs and universities goes on continuously. Some universities have seen enormous revenue streams from a single patent. The most prominent of these may have been the original patent for the polymerase chain reaction (PCR)- now a staple of forensic TV shows. This innovation generated hundreds of millions of dollars for the university. But this is indeed a rare and highly improbable event. My advice- forget this as an example for your startup. Focus on the basics- solving a customer problem and only license what you absolutely must have to make your idea go forward.

Can you trust the researcher?

I hate to even bring this up, but licensing a technology from a university is fraught with moral hazard. Once you sign the papers and pay your money, the burden shifts to you. If the researcher has not been completely straight with you, or, you ignored all the things I and other authors have warned you about, then you can be stuck with a challenging technology that is only half-baked, sorry for the metaphor.

My question is here not about the researcher's character but about their data, their methods, and all the know how. I would consider everything the researcher tells you as a hypothesis- show me the data. Like the adsorptive capacity discussion in other blog posts, not every university knows how to help license it's researchers' inventions. Like many other problems related to large organizations, its the institutions (informal and formal rules) that will trip you up. Sometimes, universities simply hire the wrong people for tech transfer.

I accompanied my manager on a trip to a major university to study a researcher's claims about liquid sensors. The researcher's lab had published a lot stuff at academic conferences and the university had sent out a lot of "click-bait" to try and attract potential licensees. We began a relationship and immediately asked for a working sample. This was actually a test. Turns out they could not delivery a sample unless it was connected to a hombrew instrumentation setup from the lab. The data, as yet unverified, suggested that these new sensors might be useful.

We met with licensing officer of this university. We were ushered into a huge well appointed office and met this 30 something guy dressed in a very expensive suit. My first reaction was: uh oh. We introduced ourselves as being from Motorola. This fellow then states "if we are not talking about a multi-million dollar license, then we are not interested". My manager at the time was very smooth, did not react to this, and we promptly thanked him for his time and left. At the airport we had a very different discussion. The end of this story is like a lot of these exercises. We assigned a very smart and capable woman to the project. She was sent to the University to observe for several weeks. After her return, it was pretty clear. There really was nothing that worked in that lab that we could move into any of Motorola's manufacturing processes.

Summary

Is licensing of university or lab tech a way to move your idea forward? Maybe and maybe not. It really depends on the lab and its management and your insight into how the tech might fit in to your product plans. This is not a path for newbies. Get some help from an tech transfer specialist to increase your chances of success.