Tech Transfer eNews Blog

Rogue EIRs and mentors can bring trouble, need limits and guardrails

By Jesse Schwartz
Published: June 22nd, 2022

A detailed article on working with entrepreneurs-in-residence and other university start-up mentors, and ensuring they adhere to university policy and act in the best interests of the founder and the university, appears in the June issue of Technology Transfer Tactics. To subscribe and access the complete article, or for further subscription details, click here.

Entrepreneurs-in-residence and mentors play important roles in guiding university start-ups, but the same independent streak responsible for their success can sometimes lead them to do things that are contrary to the university’s policies or expectations. Experts say tech transfer programs need to establish guidelines and guardrails to keep EIRs in their lane.

A rogue EIR can bring plenty of trouble for a tech transfer program and its start-ups, says K. Lance Anderson, JD, member and deputy CEO with the law firm Dickinson Wright in Austin, TX. He represents licensees and universities, and he previously worked in tech transfer from the university side.

“An entrepreneur-in-residence is a double-edged sword. It is so valuable to have that mentorship and perspective, but it can sometimes trigger things that are traps for the unwary,” he says. “That ranges from breaches of confidentiality to full-on circumvention of opportunity. While that often is not intentional, EIRs come from a perspective of private sector business and sometimes that does not mix well with innovation in an academic setting.”

EIRs typically are highly motivated people, which is part of what made them successful in business and why they are valuable as role models and mentors, Anderson notes. That can lead to conflicts of interest, however, with EIRs taking pieces of deals or having a consulting role that allows them to capitalize and benefit from the relationship to the exclusion of the university, he says.

“The EIR can be thinking that this is totally normal behavior, and from their perspective it is. But the university may have quite a different expectation,” Anderson says. “There ensues the drama.”

Anderson recalls one horror story in which an EIR claimed an inventorship position on the IP being developed. It created joint and several ownership, so if the relationship soured and an application were filed, that EIR would have rights in the IP — not at all what the university desired when connecting the EIR and the start-up.

“It was hard to tell if that was the EIR trying to get a piece of it in an illegitimate way or just interpreting the law, but because things like that are often done without a consulting agreement that has work-for-hire provisions, it can become a big problem,” he says. “Often you are talking about innovators coming from academic settings who have only nascent businesses at that point or perhaps no business at all, and they are trying to link up with EIRs, mentors, and other supporters of the cause.”

Anderson also has seen cases in which an EIR shepherds an investment round and essentially leverages control of the company, with the inventors cast aside.

Questionable relationships with EIRs can be a byproduct of the lean start-up methodologies that encourage operating with minimal structure and governance, Anderson says. The companies are bootstrapping and spending little or no money on consulting agreements, governance agreements, equity incentive plans, or profit-sharing agreements, he explains.

Under those formal arrangements, an EIR’s role as a consultant would be well documented, he says. “Instead, they are getting significant access to the new venture through these entrepreneurship programs without much constraint or defined limits,” Anderson says. “Most programs have them sign general confidentiality agreements and some statements about roles and responsibilities, and to some extent that’s helpful. But you can see where there are opportunities for a pretty big grey area.”

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