In University Technology Transfer: Smart Managers Do Creative Deals, we visited two technology transfer models; learned how technology transfer deals were managed in the past; reported why startup companies are a powerful launching vehicle for new discoveries; and inspected some of the newer ways forward-thinking technology transfer managers are using to construct creative deals.
According to Garold Breit, executive director at the University of Manitoba Technology Transfer Office, university technology transfer managers are now taking dilution prevention into account. They’re structuring deals in such a way that the university’s final percentage ownership may increase or decrease, depending on
But if you think that the technology being transferred is the key to successful commercialization, think again.
One experienced angel stresses that the technology is never worth more than 10 percent of the equity of the venture. The key to success is always the management team, not the technology. It’s all about the team’s ability to execute.
Breit also avows that “a single patent or a single technology is not going to be adequate to build a successful company.”
A vast majority of VCs and angels invest in people rather than technology; even promising technologies will be abandoned if the company and management team aren’t already in place.
Investors fund growth and customer acquisition, not product development.
An angel also points out that most private sector investors, i.e. angel investors and VCs, ignore public sector technology.
Lawrence M. Murphy of National Renewable Energy Lab (NRWL) and Peter L. Edwards of Altira Group explain why in their report, “Bridging the Valley of Death: Transitioning from Public to Private Sector Financing”:
The public sector makes early stage, high risk investments in promising innovative technologies that can address public good needs of energy diversity, national and energy security, environmental quality, and economic sustainability.
Private sector investors, on the other hand, focus their resources and efforts on market focused businesses with good profit potential – not technologies.
Hence, once these technologies have been created, many challenges in attracting private sector investors remain, since a technology does not [make] a product, business, markets, and profits.
To enhance the probability of successful commercialization, and to help the startup withstand the rigors of the marketplace and the demands of the regulatory agencies, a collaboration between investors, companies, entrepreneurs, and research organizations etc. is required, states Breit.
He further suggests that flexibility in deal structures is a must in attracting new commercialization partners. Ownership (final equity positions) should be determined only when the process is moving towards real commercialization.
If you’re interested in technology transfer, take a read of “Bridging the Valley of Death: Transitioning from Public to Private Sector Financing” [PDF]. It does a good job in helping investors, entrepreneurs, and technology transfer managers understand the challenges in transferring and commercializing technology, and proposes possible solutions to close the gap and improve commercialization efforts.
* For series, references are published in the last installment of the series.