Tech Transfer eNews Blog

Universities offer best practices for fast start-up license packages

By Jesse Schwartz
Published: May 5th, 2021

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Favorable deal terms and business development support were the focus in a discussion of best practices for quick start-up license packages at the 2021 AUTM annual meeting, held virtually this year.

Yale University developed its quick start-up license package eight years ago after finding that some negotiations with start-ups took up an inordinate amount of time, says John Puziss, PhD, executive director of business development in Yale’s Office of Cooperative Research.

“Faculty are not allowed to negotiate on behalf of the start-up, so we had to get someone to act as the entrepreneur, and in the absence of a seasoned entrepreneur this often fell to a student. So you had the administration of Yale negotiating against a student,” he says. “It led to some uncomfortable power dynamics, and we wanted to really streamline the process and make this very business friendly.”

Yale developed a template with a law firm that was representing some of the start-ups and wanted to work additional spinoffs from the university. The law firm did not represent Yale — and in fact was negotiating from across the table — but it worked cooperatively with the university to develop a template for a final deal that their lawyers would be comfortable presenting to start-up clients.

“The important thing is that this is no negotiation, take it or leave it as is. That has some benefits for the start-ups, in particular when we have faculty spinning out a company,” Puziss explains. “Otherwise they are not allowed to negotiate on behalf of the company, but here they can sign a license, take it to an entrepreneur or an investor and say they have a license.”

The license is designed to be business friendly, with “significantly watered down” due diligence requirements, Puziss says. The benefits to the tech transfer office are that it has accelerated the ability to get companies out the door, particularly with companies are that are essentially just the faculty member and a couple of students, he says.

“It allows them to have an incubation period within the university during which they can put together a pitch deck or a business plan, do some customer discovery and market discovery, and then they can sign a license and take this out to prospective investors,” he says.

The template has been used for software, research tool platforms, and similar engineering start-ups, and it has accelerated the TTO’s ability to support start-ups from the engineering departments, Puziss says. The template is not used for therapeutics because life sciences start-ups typically require much larger investments and investors expect a seasoned management team.

Washington University in St. Louis (WUSTL) has taken a similar path, says Leena Prabhu, PhD, associate director of the Office of Technology Management and Tech Transfer. WUSTL’s quick start licensing program was developed five years ago, also because the tech transfer staff was spending way too much time discussing licensing terms with start-ups, she says.

“We thought we could have this back-end loaded deal structure with favorable deal terms. We were very cognizant that we were leaving money on the table, but we wanted to enable the companies,” she says.

The template is non-negotiable, and Prabhu says there is an understanding between both parties that the deal is fair and reasonable. To qualify for the quick start license at WUSTL, the inventor must be a co-founder of the start-up and it must involve a single IP asset, Prabhu says. Software assets are excluded because — in contrast to the Yale model — the WUSTL non-negotiable template is designed more for therapeutic and diagnostic assets, she says.

“It also needs to be an early-stage IP asset,” Prabhu says. “The reason for that is that we waive patent expenses. If the IP asset is a provisional, non-provisional or a PCT filing, it will qualify for a quick start. In the post-nationalization stage, it wouldn’t because it would be deemed a mature asset where the patent expenses would be significant.”

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