Most people know Google started when its founders were at Stanford, but did you realize it was actually commercialized through the university's tech transfer department?
Here's the quick story.
Larry Page and Sergey Brin were Ph.D. students when they developed a search algorithm called PageRank as part of their research. This algorithm formed the basis for what would become the Google search engine. Recognizing the potential of their technology, they sought to commercialize it.
Page and Brin disclosed their PageRank invention to Stanford University's Office of
Technology Licensing (OTL). Stanford OTL then negotiated the terms for commercializing the technology. In 1996, the university granted Page and Brin the rights to their invention.
Page and Brin went on to found Google Inc. in 1998 to commercialize their search engine technology. They initially operated out of a friend's garage before securing significant venture capital funding.
As part of the licensing agreement, Stanford University received 1.8 million shares of Google stock. This stake represented an investment in the company's potential growth. When
Google went public in 2004, the IPO price was $85 per share. This significantly increased the value of Stanford's equity.
Shortly after the IPO, Stanford sold its Google shares, reaping substantial financial benefits.
While the exact sale amount is not publicly disclosed, it's estimated Stanford made approximately $336 million.
The funds from selling the Google stock were reinvested into Stanford's research programs, supporting further innovation and development in various fields. The financial gain also contributed to the university's endowment, enhancing its ability to fund scholarships, faculty positions, and campus improvements.
This is probably the best-case scenario for tech transfer, but when done successfully year after year, decade after decade, you can understand how tech transfer can be such an important part of the connection between universities and the business community.
Opportunities for Entrepreneurs and Universities
I've been spending time familiarizing myself with tech transfer over the past month, and I think there's a lot of opportunity for entrepreneurial third parties like Exit Lab who have an interest in developing and commercializing new technologies.
This research started because another one of my businesses, the Urban Farming Initiative, is seeking grant funding, and I'm learning about opportunities available for commercial enterprises like mine when licensing technology coming out of higher education institutions. Specifically in Ohio, these are called TVSF grants.
Being at the University of Cincinnati's 1819 Innovation Hub gave me access to speaking with their tech transfer team, which was a starting point for a connection between myself and a professor with technology the Urban Farming Initiative may be interested in licensing. I'm grateful for the time and knowledge shared by the UC tech transfer team.
Based on these conversations and my own research from industry publications and discussions with experienced faculty members, here's a quick primer on what tech transfer is, why it matters, and what I learned.
Tech transfer, or technology transfer, is the process of transferring scientific findings, inventions, and innovations from research institutions (such as universities and government labs) to the private sector for commercialization and practical application. This process bridges the gap between academic research and industry, facilitating the development of new products, services, and technologies that can benefit society.
Key Steps in Tech Transfer
Invention Disclosure: Researchers disclose their inventions or discoveries to their institution’s technology transfer office (TTO). This involves a formal report detailing the innovation, its potential applications, and any supporting data.
Evaluation: The TTO evaluates the disclosed invention to determine its commercial potential. This includes assessing the market demand, the novelty of the technology, and potential challenges in development.
Protection: If the invention has commercial potential, the TTO works to protect the intellectual property (IP). This often involves filing for patents or other forms of IP protection to secure exclusive rights to the technology.
Marketing: The TTO markets the technology to potential licensees, including companies and entrepreneurs who might be interested in developing and commercializing the innovation. This can involve showcasing the technology at conferences, networking with industry contacts, and leveraging industry partnerships.
Licensing: The TTO negotiates licensing agreements with interested parties. A license grants a company the rights to use and develop the technology, often in exchange for upfront fees, milestone payments, and royalties on future sales.
Startup Formation (Optional): In some cases, the inventors and the TTO may decide to form a startup company to develop and commercialize the technology. This can involve securing venture capital funding, assembling a management team, and developing a business plan.
Commercialization: The licensee (or startup) develops the technology into a marketable product or service. This process includes further research and development, product design, testing, regulatory approval, and marketing.
Revenue Sharing: Revenue generated from the commercialization of the technology (through licensing fees, royalties, or equity in startups) is typically shared between the inventors, their research department, and the institution. This incentivizes further research and supports the institution’s mission.
How tech transfer goes seems to be dependent on each individual campus, its programs, colleges, grant funding, and researchers. So, while the structure may be similar, each institution does need to be treated as its own market. That said, here are some key learnings coming from an external entrepreneur, looking at where there's overlap between my work and theirs.
Learning #1: Spinning out "Startups" is a huge component of how Tech Transfer departments are ranked.
According to the Milkin Institute, 35% of how tech transfer departments are ranked is based on startups that are created using institutional IP. But what constitutes a startup? Is it a funded VC-backed entity? Or is it a company that licenses their IP to others who build around it?
The biggest bang for tech transfer dollars spent on securing patents and other IP is usually a VC-backed business because one success, like Google, as rare as it is, can set up a tech transfer office for life.
In medical device and life sciences, creating billion-dollar companies is a real possibility, but just like any startup, it's really challenging to achieve that end game. University spin-outs still have to raise funds, build a team, and go through hypergrowth challenges to get to that point, even with solid IP at its foundation.
But still the question remains: How are startups being created through tech transfer?
EIRs or Entrepreneurs in Residence within university programs tend to help potential startups through an accelerator or similar type of programming, at the end of which the potential commercial entity may have an opportunity to add an EIR as a founding team member. In some cases, this is a "venture studio" or "venture lab" model. In other cases, it's merely relationship development that turns from mentoring to business partnership.
Licensing agreements between tech transfer and a new entity can sometimes mean the university and its inventors can receive cash for their inventions while letting another entity figure out how to wrap a business around it.
We're also thinking through some entrepreneurial programs Exit Lab can offer to help bridge gaps between our institutions and new businesses. Check out more below.
Learning #2: Tech Transfer departments have a lot to do with limited resources.
This one's probably a "no duh" statement, but still deserves to be called out. Universities have a lot going on. At large universities, you're talking about hundreds and even thousands of experienced professionals who have different interests and agendas - aka politics - and sometimes tech transfer is stuck in the middle.
It's not an easy job and often has a lot to do with relationship development and understanding the needs of those who have innovative research and potential IP on one side and industry applications and entrepreneurial talent on the other side.
There's more work than tech transfer staff has time and availability for, which means they are setting up systems and processes to make their programs reach out to as many people as possible while making it easy for a lot of folks to move through their processes. It's a tricky balancing act and often is dependent on the resources available to the department that allows for scale and reach deep into the university.
Learning #3: Opportunities often reside in new markets, not necessarily the most obvious vertical.
Product/Market Fit is harder to prove than you'd think. Most startups define their target market but take a couple of years and millions of dollars to prove their product/market fit.
For startups and technologies being licensed out of tech transfer, there is often an analysis done on the right types of commercialization partners for the technology. From conversations with experienced faculty, their assessment was a slightly more rigorous market analysis can reveal markets that aren't as obvious but may need the technology in a new, novel way that creates huge upside opportunities.
Again, when tech transfer departments are strapped for time and resources, these deep analyses are often challenging to complete. But third parties with market theses in certain industries may be able to spot the opportunities more clearly. This is another area of opportunity where external parties may provide a missing piece in the tech transfer supply chain.
What's The Winning Recipe?
We're still learning more in each conversation about what tech transfer departments are doing well, so this answer won't go into a white paper style review. That said, we're starting to see some consistencies that well-regarded and successful tech transfer departments are implementing.
Several Complementary Programs
Researchers and inventors can go through a series of programs that range from 101-style 5-week educational programs on starting a company to accelerators that include limited investments, all the way through later-stage customer and product testing collaborations. Rather than a one-size-fits-all approach, the complementary approach means university innovators can enter the right program that fits their mentality and stage of company development.
Multi-college Collaboration
Like any successful program, you need reach and marketing. Making sure you are a collaboration center between different parts of the university is important to building the reputation of tech transfer across campus. Having a College of Medicine or College of Nursing collaborating with Colleges of Business and/or Engineering makes the job of innovating using all available resources much easier than the siloed approach.
Thriving Third Party Entrepreneurial Relationships
We mentioned Entrepreneurs-in-Residence (EIRs) earlier as a strategy that many are employing to have a stable of experienced entrepreneurs who can guide businesses and potentially help run some that spin out. With the prevalence of venture labs and other studio-style business models, every community has a chance to get deeper into their local business community through the entrepreneurs who are already growing businesses and know what it takes to operate and commercialize great tech.
Introducing Exit Lab's University Programs
So, what's the relevance of this information for Exit Lab's active network? Well, smoothing out the innovation process, of course!
Our expertise as entrepreneurs leading Exit Lab is finding the right way to bring a concept or project to market. Two of our Exit Lab team members, Mick Hopkins and Dr. Arash Babaoff, have been decades-long innovators in the healthcare space, starting within a large institution and ultimately spinning out their own innovations.
It's not an easy process, but one that can be done with the help of those who have done it before. After putting our heads together on some offerings we believe can add value in the tech transfer and university innovation supply chain, here are the programs we came up with:
Partner with Exit Lab to help your university teams, innovation groups, university funders, and others come together with our project management. As trusted third parties, we can rise above any internal challenges that may be a roadblock to uniting all innovation groups on campus.
Partner with Exit Lab so we can bring your technologies through our commercialization and startup launching processes. Then, leverage our active network like all other inventors and startups do: to showcase what's been built to those in the active network who can help advance the innovation as a business.
Let us showcase the great tech you already have to an active network across your institution.
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