You would think that in our line of work, we would have plenty of experience of dealing with Tech Transfer Offices (TTOs) and Institutional commercialisation entities. If so, you would be wrong. Usually, that is something that if it comes up at all, and many times it doesn’t, is usually just a consideration for the entrepreneur and his team.
That said, in recent times, they have become more prevalent in my thoughts. There are probably two reasons for this. As our profile in RebelBio grew in the UK, we started to attract more of what I could call traditional spin-outs. If you are wondering what I mean by traditional, perhaps read this recent piece from our friends in Y-combinator who articulate the newer form of a start-up in the area. Best thought of as professors or postdocs who want to spin out up tech while actually remaining part of their institutions and this can bring TTOs and other University commercialisation entities more into play.
In addition, Universities, prompted by organisations such as Innovate UK are making greater strides to both encourage entrepreneurship and to commercialise more Intellectual Property (IP). Many of these institutions have arrived into the field green behind the years or haven’t kept up with the times. The result is often a lot of eye-rolling from entrepreneurs or investors. By their actions, I’ve come to understand that the best, brightest and most successful enterprise centres/offices are also the most inconspicuous in our world. They do their jobs quickly and keep a low profile.
TTOs, in particular, are not very popular with new budding entrepreneurs. That's nothing new. One would hardly expect founders or indeed investors to be impressed by double-dipping (equity and royalties), chargebacks on IP costs without seemingly offering much going forward. Some have just accepted that TTO staff are like tax officers or street clampers. Doing a necessary job but not much fun at parties. Nice to know they are there but not nice to know well. We should just accept that these are people protecting returns for valuable state-funded institutions, shouldn’t we? I think that’s a naive view.
My experience of the tax office is that they are extremely efficient and as a body, they are largely consistent. On the contrary, I’ve been left utterly baffled by how some institutions negotiate IP and licensing agreements. My major complaint is that many of them can’t begin to value their IP properly.
Imagine that you own a “needle to an anchor” store selling a few valuable antique grandfather clocks right down to a few of those waving Chinese cats that are ubiquitous in tourist trap shops. Imagine now you didn’t know what the value any of these items are, so you ring up your neighbour who is a more established shopkeeper and ask him how much he charges for his most valuable item. You then proceed to charge this price for all the items in your store. That, folks, is how some TTOs justify high equity stakes.
When one considers all the IP (particularly patents) that are created in our field every year, only a small percentage of these have innate value. Most are not CRISPR or a therapeutic with a high Technology Readiness Level (TRL). Most IP is not that useful for a whole variety of reasons and will never return any money in any form to anyone. Some, however, are very important in getting their inventors off the first step in a very long journey to make a successful business.
Investors aren’t investing so much in the IP in this situation. They are investing in the individual, in their ability to solve a multitude of problems that will come their way. They are investing in people who will have to sacrifice a significant chunk of their lives to making a success of this. Someone who might have to suffer and might have to tolerate being very poor for quite a while. The long journey is ahead, not behind.
Before this article turns into a diatribe. I think it’s only fair that we consider the task facing the knowledge transfer teams in this specific regard. The following points are therefore worth considering.
- Ever heard of the Praxis Auril? Neither did I until I recently went to go speak at its conference in Leeds. While the name might sound like some bizarre ear affliction, it is, in fact, a body that represents the UK’s Knowledge Exchange Participants and organises its yearly conferences. A great place for Investors to go and get a fresh perspective (or an opportunity to have them all taken out in one go). The fact that I and many of my community know little about Praxis says as much about us as it does about them.
- Valuing tech and IP is quite difficult. There is a reason why the most experienced institutions tend to be populated with entrepreneurs, lawyers, scientists, business developers etc. Applying projections based on the start-up is crude and unhelpful as it implies the company is the specific IP in question.
- Professors, whose salaries are paid for by Universities often don’t see why their institution is entitled to anything.
- Commercialisation offices often have targets to hit. Those targets aren’t always in keeping with other aims or aspirations that the University may propose to have.
- What does it even mean to commercialise? To get more IP licenced, to get corporates involved, to create more startups locally or abroad? Or to train entrepreneurs?
Based on this, one can observe that university commercialisation done well is not that simple and needs a lot of expertise on many levels. Based on this, here is some advice from our side of the fence.
- Advice and guidance are always useful, as long as it doesn’t become meddlesome interference. Don’t decide as to when something is “too early” or “not investor-ready” especially if you don’t understand the technology in question. We could have saved a lot of people from writing very long well-manicured business plans if we got hold of them sooner. Investors will give their feedback on stuff anyhow. A lot of companies would benefit from talking to investors and outside parties sooner than many internal parties allow them to.
- At the same time, if your commercialisation strategy about photo ops with corporates, you probably need to put in a bit more effort. They are useful and of limited value to early-stage endeavours. Sometimes, they are actively not a good thing.
- Consider what you can offer going forward. Space, money?
- Consider whether you are part of a larger commercialisation hub. Is there a vibrant centre of many different actors, business mentors, investors, corporates all bound together such as might exist in Boston? If not, you really might want to think about more outreach.
- Be dynamic. Don’t be one of the 40%-ers, i.e. people who demand high equities from any startups which originated in the institution. That’s not a policy that’s applied in successful and experienced institutes. You have to be more competitive than them, not less.
By John Carrigan, Scientific Director at RebelBio
Have the science, but not yet the business case? — Let’s talk!
