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VCU Ventures shakes up standard start-up development process


By Jesse Schwartz
Published: November 28th, 2018

Aggressive licensing terms and a customized pre-accelerator program that includes a faculty/entrepreneur “dating service” and the early use of end-user feedback are among the features that VCU Ventures plans to use to promote start-up development at Virginia Commonwealth University in Richmond.

VCU Ventures, the new sister organization to VCU Innovation Gateway, is designed to complement the technology transfer office, providing a path to commercialization for technologies that the TTO has tried to license but can’t because they are too early stage or disruptive.

“We saw significant potential for start-up opportunities — enough potential to merit an office dedicated to supporting start-up activity based on faculty and staff intellectual property,” explains Nicky Monk, BS, MBA, director of VCU Ventures. “Obviously, start-ups are one of the major pathways to commercialization, but especially in the healthcare field, where we have a large slice of our pie.”

This drive to increase start-up activity begins with highly favorable licensing terms, which VCU Ventures makes publicly available. “Some universities remain a little close to the vest about terms and negotiate hard on start-up licenses,” points out Monk. “That can make talented entrepreneurs shy away from working with universities. Having favorable terms encourages trust in the university so that experienced entrepreneurs are more willing to take options to evaluate technologies. We want to attract people who have the experience and interest in taking the next steps for these technologies.”

The VCU Ventures website lays out its “Founders First Express Licensing” terms point by point, as well as providing a brief explanation of the reasoning behind each requirement. Highlights of the non-negotiable terms include the following:

  • VCU receives 5% ownership/common equity;
  • VCU gets an assignment fee of 5% of the transaction value if the start-up assigns or transfers the license;
  • The company can sublicense;
  • VCU doesn’t receive any royalties, milestone payments, or sublicensing fees; and
  • The company has one to three years to pay back VCU’s documented patent prosecution costs for licensed patents and will pay all ongoing patent costs as well.

VCU Ventures conducted an extensive listening tour to guide its decision-making process, says Monk. “We talked to faculty members, entrepreneurs who had worked with the university, entrepreneurs who had not worked with the university, early stage investors, and later-stage investors,” she explains. “Our goal was to understand their perception of working with university start-ups, what they would tolerate, and what they felt may inhibit the growth of a start-up.”

The specific licensing terms that VCU Ventures developed as a result of that listening tour should avoid key scenarios that would challenge growth, such as the university taking cash that may need to be reinvested in the company, says Monk. “These licensing terms allow companies to be successful and attract downstream investment without renegotiation of the terms.”

A detailed article on VCU’s Founders First Express Licensing model appears in the November issue of Technology Transfer Tactics. To subscribe and get the full article, as well as the publication’s subscriber-only archive filled with hundreds of best practices and success strategies for TTOs, CLICK HERE.

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