From Research to Business

by Stephen Day

We often see great innovations developed by research centers, universities and government agencies like NASA, or by a couple of crazy visionaries working in a garage. Let us see what could come up out of this.

Licensing Technologies for Startups

You would think that the research center innovations would be the most successful, but that is just not always the case.  Too often, the institutions are forcing the researchers to seek grant funding prior to starting the projects classic examples of “You eat what you hunt.”

The problem is that the researcher is usually inept at chasing funding and naïve as to commercialization.  But, why should we expect it to be any different? These skillsets are not part of most researchers’ experiences or training. As a result, these researchers are being set up for failure.   When it comes to grant funding, we have seen too many try to satisfy what the grant committee wants to see, rather than presenting a compelling plan for their application.  Hence, what started out as a bold new innovative concept can quickly get diminished by the requirements to get fundedThe garage guys developing technology on their own often are funding everything themselves, and usually have a better sense of the commercial value of their research.

We recently spent one hour with a research scientist who had no idea of how he could turn his technology into a commercial product.  He had not even thought about it.  It occurred to me that he was assuming that the commercialization office would enabling him to get more funding for research.   The university commercialization office was attempting to license it but it was several years before it would be ready, if ever. What made matters worse was that the information presented by the commercialization department listed various agencies who were working with the technology, which was false. This was not just an exaggeration; it was just a plain ….well, you can choose the word.

Too often, we have been presented with ineffective technologies that government agencies developed and attempted to license.  Some institutions seem afraid to admit that their research ended in a dead-end.  So we have seen quite a bit of research that claimed to be effective but did not work in the real world.  I have had scientists try to convince me that their tech was both effective and commercially viable.  But then I discovered that they would not receive any more funding if they could not show their current work was licensed.

Some research centers and universities do a great job at determining whether research is ready for commercialization.  Tech Transfer offices like David Day’s University of Florida Innovation Square not only screens the prospective technologies but also assists in getting them commercialized, very professional and effective.

Usually, when a company licenses a university technology, it is safe to assume that  some additional work will follow to prepare it for the marketplace.  This is especially true in biotech and pharma. We expect this. But we get exasperated when researchers or institutions attempt to commercialize too early.  Researchers need to understand the difference between grants and investments.

Making Technology Work

In spite of all I have written here, licensing a technology can be a great way to start a business or add depth to your existing company. 

Here are a few tips:

  • DON’T fully believe the researcher.  Trust but verify.
  • Do your own research on the marketability of the technology.
  • Verify if more work or research is needed to mature the tech.
  • Meet with the researcher(s) and determine if they believe the tech is completed.
  • Determine if your company is the right one to take this to market.
  • Option the technology license for 90 days for due diligence. And, DO IT.
  • If more work is necessary, ask yourself if you have the resources to finish the work?
  • Licensing fees can be negotiable. The more work you need to do, the less fee you should be willing to pay.
  • Most licensing deals require some level of royalty. Again, everything is negotiable.  
  • Ask if the institution or state has available funds to match your investment.
  • Write a separate business plan with capitalization requirements. This will convince the licensing team that you are the one that deserves their license.

There is so much more that we could discuss here, but this primer will prep you for the use of technology transfer.

If you are considering a licensing deal and need some counsel, please contact me at sday@daycap.com

Posted on August 20, 2016 .