Or why a bird in the hand is worth less than two in the bush….
Unconventional wisdom of technology transfer suggests projects are easier, cheaper, quicker and less risky if in part or whole, they are licensed to a 3rd party rather than becoming a spin-out company. This is akin to the early days of Google, when Larry Paige and Sergi Brin stomped around Silicon Valley trying to sell their (Page Rank) algorithm for $1m on a licensing deal only to be turned down by everyone, including Yahoo!
Hindsight tells us this was extremely naïve of Larry and Sergi, but at the time with high debts and no revenue, it probably seemed like the best idea. Fortunately for them others saw the value in Page Rank and Google and the rest, as they say, is history.
Universities have a quite different raison d’être with their main focus being delivering the best academic outcomes for students, and rightly so. This is how they (in the main) are measured and funded and so focussing on being an educator makes sense.
However, an upshot of education is research and development (R&D) and the value of R&D is in the intellectual property (IP). This raises the question: “if your focus is on being the best educator that you can be, but you have a by-product in the form of R&D/IP, how do you best manage the expectations of your academics who have developed this R&D/IP without committing scarce resource that could and should be focused on teaching?”
The university innovation team or TTO assist academics to realise their aspirations for the R&D/IP, however, with their resources in terms of personnel and finance are often quite limited. This can result in finding the quickest and lowest cost method of validating the commercial value of R&D/IP and moving projects to a commercial outcome, which is where licensing becomes an attractive option.
It is true that licensing an R&D/IP project:
- is relatively easy
- can be relatively quick
- is essentially low cost
- low risk
- requires little involvement from the academic.
All in all, it feels like a quick win. However, commercial arrangements of this type can turn out very differently indeed.
Licensing deals can take many, many months and sometimes years to conclude. Often the initial deal requires re-negotiation because the commercial party has to invest more in development than assumed and any royalties that may be expected can be offset against costs for years on end, meaning the academic and the university receive very little commercial reward.
When considering spinning out R&D/IP as a funded company the university innovation team or TTO may see:
- the “huge” amount of work required
- pitching to investors
- setting up companies
- managing shareholders
- legal arrangements
- building management teams and so on.
The process may seem painfully difficult and slow, often taking many months, costing large sums, requiring significant academic input, high risk and potential pain.
However, with the right approach, these spin-out companies can evolve, thrive and produce significant value without the need for excessive cost, academic input or involvement and go on to generate significant shareholder value and exit opportunities for the university.
At The Pipe Company our clear systematic process ensures universities generate the best return on investment for their R&D/IP in a timely and cost effective manner, please contact us to explore how we can help you achieve this.
In our next blog we will compare and contrast the different approaches. Sign up to our website in order to receive notification of when the next blog is available.