otl startup guide
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S T A N F O R D
U N I V E R S I T Y
O F F I C E O F
T E C H N O L O G Y
L I C E N S I N G
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Overview
n the last several decades, over 6,000 companies were
ounded by members o the Stanord community. Most
o these businesses, including Hewlett-Packard and
Yahoo!, were started by Stanord aculty and students and did
not use intellectual property owned by the University. Other
start-up companies were ormed to commercialize inventions
that are subject to the intellectual property polices o Stanord
University ounding technologies that were created with more
than incidental use o Stanord resources or in the course o
the inventors institutional responsibilities or research and
education.
With all o this entrepreneurial activity, some people are surprised to learn
that only about 8-12 o OTLs licenses per year (approximately 10% o its
total licenses) are to start-up companies. Some examples o start-ups based
on intellectual property owned by Stanord and licensed through the Ofce o
Technology Licensing (OTL) include:
When Stanord intellectual property is the basis or a start-up company,
Stanords goal is to maximize the chances o successully transerring
the technology while prioritizing the Universitys missions o research and
education. This obligation is the shared responsibility o OTL and the start-
up entrepreneurs, especially i they expect to maintain connections to the
University (as aculty, sta or students) during the creation o the start-up
or ater it is launched. This guide summarizes some o these duties, but
individuals are expected to take responsibility or knowing and ollowing
Stanords policies about conicts o commitment and conicts o interest
and related matters. These policies can be ound at http://www.stanord.edu/
group/coi/.
OTL realizes that most Stanord technologies are early stage and require a
signifcant investment to bring them to the marketplace. To do this, start-up
entrepreneurs must have a passion that borders on irrational optimism and
aith in the technologies along with an eagerness to commit their own time
and resources to develop these inventions. OTL is willing to negotiate with
new companies to crat an agreement that is consistent with other licenses
and can help them succeed. We do not claim to know which new ventures
will be successul thats let to luck and hard work but we want to work
with these new companies so they can get a start.
AmatiCommunications
(acquired by Texas Instruments)
Amprius
Anacor
ASSIA,Inc.
BrionTechnologies(acquiredby
ASML)
C3Nano
CircuitTherapeutics
Coverity
Google
ImmuMetrix
iRhythm
KaiPharmaceuticals(acquiredby
Amgen)
KosanBiosciences(acquiredby
Bristol-MyersSquibb)
LynceanTechnologies
Lytro
MokaFive
Novariant
Personalis
Picarro
Rigel
StemCells,Inc.
SwitchGear
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Technology Transer at aGlance or Start-Ups
he technology transer process at Stanord can be
conceptualized as a continuous cycle wherein discoveries
in the laboratory are developed into licensed products
in the marketplace that then help und the next generation o
research and innovation. For the most part, the steps o the
cycle are similar whether the company commercializing the
technology is a new venture or an established one.
COM
MERCIAL
IZATION
RO
YALT
IES
RESEARCH
INVENTION
ASSE
SSMENT
INTELLECTU
AL
DISCLOSURE
PROP
ERTY
LICENSING
ALICENSEE FINDALICENS
EE
SELECTING MARKETINGTO
THE CYCLE
OF INNOVATION
Here weve highlighted some o the steps that may be particularly relevant to
entrepreneurs starting a new venture based on Stanord intellectual property.
OTLs Inventors Guide, http://otl.stanord.edu/documents/OTLinventorsguide.
pd, explains these general stages in urther detail.
1. RESEARCH
Observations and experiments during research activities oten lead to
discoveries and inventions or the development o sotware and other
copyrighted works. An invention is any useul process, machine, composition
o matter (e.g., a chemical or biological compound), or any new or useul
improvement o the same. Oten, multiple researchers including trainees
and research sta contribute to an invention and may be inventors.
2. INVENTION AND TECHNOLOGY DISCLOSURE
This written notice o invention to OTL begins the ormal technology transer
process. The Invention and Technology Disclosure (also known as an
invention disclosure) is a confdential document, and should ully describe
the new aspects o the invention, including the critical solution it provides
and its advantages and benefts over current technologies. Invention
disclosures can be submitted through OTLs Researcher Portal http://
otlportal.stanord.edu.
3. ASSESSMENT
The disclosure is assigned to a Licensing Associate who will review the
invention disclosure and evaluate the inventions commercialization
potential based on patent searches (i applicable), market analysis, existing
competitive technologies and other actors. This assessment guides the
licensing strategy.
I the inventors are contemplating starting a company around the
technology, it is helpul to inorm OTL about their plans during the
assessment stage. The OTL Licensing Associate will take this into
consideration when evaluating the technology and developing a strategy or
intellectual property (IP) protection, marketing, and licensing.
http://otl.stanford.edu/documents/OTLinventorsguide.pdfhttp://otl.stanford.edu/documents/OTLinventorsguide.pdfhttp://otlportal.stanford.edu/http://otlportal.stanford.edu/http://otlportal.stanford.edu/http://otlportal.stanford.edu/http://otl.stanford.edu/documents/OTLinventorsguide.pdfhttp://otl.stanford.edu/documents/OTLinventorsguide.pdf -
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4. INTELLECTUAL PROPERTY PROTECTION
(i appropriate, necessary, or warranted)
Patent protection, a common legal protection method, begins with the fling
o a patent application with the U.S. Patent and Trademark Ofce and,
when appropriate, oreign patent ofces. Once a patent application has been
fled, it requires several years and tens o thousands o dollars to obtain
an issued patent. Other common orms o IP protection include copyright
and trademark. Unique biological materials and sotware can oten be
successully licensed without ormal IP protection.
5. MARKETING
Stanord is committed to broadly marketing all technologies to appropriate
companies that could be interested in commercializing the particular
invention. With the inventors input, OTL creates a marketing overview o
the technology; identifes candidate companies (potential licensees) that
have the expertise, resources, and business networks to bring the technology
to market; and contacts those companies to generate interest and gauge
commercial potential.
To ensure air and open access to potential licensees, OTL markets all
Stanord technologies, including those with start-up interest. Broad
marketing helps the University nd companies who may be interested in
developing the technology and helps to mitigate and manage conficts-o-
interest i the technology is licensed to a start-up (see Particular Confict-
o-Interest Issues on OTLs website http://otl.stanord.edu/inventors/
resources/inventors_pcii.html). The marketing period typically lasts 2-3
months beore the Licensing Associate selects a licensee (i there is any
commercial interest at all). Sometimes entrepreneurial inventors receive
valuable industry eedback and begin to establish relationships with
potential partners during this process.
6. SELECTING THE BEST LICENSEE(S)
Typically, there is only one par ty or none at all interested in licensing. I there
are several parties interested in a license, OTL may grant non-exclusive
or feld-o-use licenses. I it is not possible to accommodate all interested
parties, OTL will license the company most committed and able to bring the
technology to the marketplace.
To choose the best licensee OTL evaluates which company is in the best
position to develop the technology and bring it to the marketplace. A
well-established company typically has resources, business networks
and product development experience but can lack commitment to the
technology. A small company o ten has the singular ocus and passion
o a technology champion, the drive and re in the belly to bring the
technology orward and see that it succeeds but insucient experience or
resources to make sure it can happen.
To assess the commitment o potential licensees, OTL asks companies or
a development plan with details about how they intend to develop and
market the technology. This plan should make the case that the company
and its leadership are the best choice or commercializing the invention. It
is important to note that inventors may not serve a management role in the
start-up company unless they plan to leave Stanord (either permanently or
on a leave o absence).
7. LICENSING
OTL negotiates and executes a license or option agreement. This agreement is
a contract between the University and a company in which certain University
rights to a technology are granted to a company in return or fnancial and other
benefts. Most start-ups request an exclusive license because they believe it is
required to raise unding or the company. Typical terms or an exclusive license
with a start-up company are described on page 21. They include equity,
royalties, diligence milestones and an assignment ee.
When Stanord inventors are involved in a start-up company, licensing
to that company raises concerns about conficts o commitment and
interest. The University needs to maintain an arms-length relationship
in all its business transactions (including license negotiations). The
nal license agreement must all within the normal range o terms and
conditions o similar licenses to non-inventor-associated companies (taking
into consideration the unique circumstances o each technology and
transaction). OTL cannot conclude any agreements until the appropriate
confict o interest reviews and approvals are completed. Additional
inormation about negotiations and confict issues can be ound in the FAQs
and Stanord Policies sections o this guide.
http://otl.stanford.edu/inventors/resources/inventors_pcii.htmlhttp://otl.stanford.edu/inventors/resources/inventors_pcii.htmlhttp://otl.stanford.edu/inventors/resources/inventors_pcii.htmlhttp://otl.stanford.edu/inventors/resources/inventors_pcii.html -
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8. COMMERCIALIZATION
Most University inventions are very early stage and require urther research
and development eorts. The licensee typically makes signifcant business
investments o time and unding to commercialize the product or service.
These steps may entail regulatory approvals, sales and marketing, support,
training, and other activities. The licensee will be expected to meet
commercialization milestones described in the l icense.
It is airly common or licensees, particularly early stage ventures, to
evolve their strategy and development plans as the company grows, aces
technical challenges, and recognizes new market opportunities. OTL canwork with licensees to amend and renegotiate license agreements in
response to these changes i the request and reasons to renegotiate are
reasonable.
9. ROYALTIES
Royalties received by the University rom licensees are distributed annually to
inventors, departments, and schools according to Stanord pol icy. Royalties
include both cash and equity received rom licensees in consideration or
granting the license. The inventors, including those who are involved in the
start-up, will receive their share under the Stanord policy (see the Research
Policy Handbook).
10. REINVEST
Royalties shared throughout the University collectively oster the creation o
the next generation o research and innovation.
Getting the Businessto Take O
aunching a successul start-up company requires com-
mitment, dedication, and perseverance. Many companies
ail even i the core technology is innovative and
promising. However, when the right technology is implemented
at the right time, it has the potential to signicantly benet
society. Components o a successul start-up include a com-
pelling concept, a strong market opportunity, a competitive
advantage, a sound business and nancial plan, and an experi-
enced management team. Luck and timing are also important.
Entrepreneurs spearheading the new company ormation will be the key
champions or the technology and the start-up. In addition to navigating the
standard technology transer process, they are responsible or a variety o
tasks such as identiying the market opportunity, developing a business plan,
andpursuingnancing.Everystart-upfollowsitsownuniquepath.Butthere
are many common steps to get the business o the ground as outlined in thissection. Additional Resources are available on pages 37-42 to help guide
Stanord entrepreneurs through this process.
Oten an important immediate question or Stanord inventors is whether
they want to be involved in these tasks directly as part o the company team
or to continue in their Stanord roles as aculty, research sta or students.
Guidance about these decisions and inormation about options (e.g., taking a
leave o absence) is available rom School Deans and the Dean o Research.
Also, aculty mentors oten share their personal experiences with other
inventors.ThereisadditionalinformationaboutStanfordsBestPracticesfor
Start-ups on pages 29-35 o this booklet.
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NETWORK AND SEEK INPUT
Throughout the start-up process, advice and mentorship are invaluable in
building the oundation or a successul business. Stanord cultivates a strong
entrepreneurial spirit and has many resources to help with networking and
provide guidance or a path to commercialization. Stanords ormal programs
and entrepreneurship classes, combined with inormal advice rom advisors,
riends, and colleagues, can help shepherd entrepreneurs through all acets o
the start-up process such as writing a business plan, building a management
team, attracting board members, and meeting potential investors.
Entrepreneurs should be careul to separate their outside start-up activitiesrom their Stanord responsibilities. For example, aculty are expected to use
the time they are allowed or outside proessional activities, typically 13 days
a quarter (see the Research Policy Handbook), and students need to consult
with advisors overseeing their academic progress.
Stanord Entrepreneurship Network (SEN)
Stanord entrepreneurs searching or advice, mentors and networking
opportunitiescanstartattheStanfordEntrepreneurshipNetwork(SEN).
SENservesasasinglepointofcontact,bringingtogetherabouttwo
dozen entrepreneurship-related campus programs under one umbrella
organization.SENofferseducationalandnetworkingevents,hostsan
annual Entrepreneurship Week, and holds Coaches-on-Call ofce hours
or students to gather advice rom industry proessionals. Inormation about
additionalSENprogramsandresourcesisavailableatsen.stanord.edu.
DEVELOP A BUSINESS CASE
A thoughtul business case must be developed to understand the market
potential, competition, and unding needs. This should include a plan or
developing the technology and attaining sufcient revenue to sustain and
grow the company. This plan will be useul when meeting with investors and
pursuing unding.
Several key actors should be considered when deciding to orm a start-up
company:
Technology innovation and patent/IP position Is broad patent coverage
possible? Are there background patents owned by others? Will the company
have reedom-to-operate to develop the product?
Development risk How ar along is the technology? How much time and
money is required to bring a product to market?
Development costs versus investment return Can investors obtain their
required rates o return (e.g. 10X initial investment in 5 years)?
Product strategy Does the technology lend itsel to opportunities or
multiple products/platorms?
Market size, dynamics and potential Is the market big enough? Is it
controlled by a ew players? Is there a healthy growth trend?
Financial potential What market share can be obtained? Is it worth the
eort?
A business plan should be clear and concise. It will be easier to sell the
vision to investors and attract management talent with a ormal business
plan. Investors are interested in investing in start-ups with high growth
potential. The business plan should address what investors want to know:
the compelling concept, competitive advantage (including patent/IP position),
market and fnancial potential, and proven management team. The business
plan is generally a confdential document and should be careully distributed.
Components o a typical business plan include:
Company name
Mission statement A guiding vision or the company.
Current market situation How big is the market? What are its critical
problems and shortcomings? How is the landscape changing? Who is the
competition? Is it a consolidated or ragmented industry?
The companys solutions Which products or methods will be developed?
How long will it take? What are its applications? What are the companys
unique advantages and are those advantages sustainable? How will the
current market change due to the companys products, methods, etc.?
Patent/IP landscape
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Marketing and sales strategy Pricing, Product, Placement. How will the
target market know about the product? Which sales distribution channels
will be used?
5-10 year strategic/fnancial plan:
FinancialprojectionsWhenwillthecompanybreakeven?
Keymilestonesrequiredtomeetnancialprojections.
Keymetricstobemeasuredandtracked.
Keyassumptionsandhowtheychangebasedonacompetitorsresponse.
Fundingrequirements.
Management team Members with resumes/CV and roles.
Timeline and key milestones
Risk actors and mitigation measures
The Resource Guide o this booklet contains a list o reerences that provide
additional inormation about writing business plans.
PURSUE INVESTORS/FUNDING
Commercializing technology is typically a capital-intensive process, with the
exception o some sotware companies. Entrepreneurs need to present their
opportunity to people with the unds to help them make it happen: typically
these are venture capitalists, angel investors and perhaps in the initial
stages riends and amily. Using Stanords network is one way to star t the
personal introduction process that can help get the attention o angel and
venture capital investors.
There is a rich history o start-up investing in Silicon Valley with a broad
network o investors. The most common orms o technology start-up unding
are angel investing and venture capital (VC). In very early stages o start-ups,
entrepreneurs raise unds on their own and through riends and amily unds
(FFF). However, technology commercialization oten requires multiple rounds
o unding rom multiple sources.
Angels and Venture Capitalists (VCs) are private investors who take on high
risk ventures with goals o high returns. Return requirements vary based
on industry and stage o unding, but many investors seek 10x their initial
investment over 5 years.
Angel Investing
Angel investors are typically high-net-worth individuals who have a personal
interest in unding new companies. They are oten willing to invest in earlier
stages and with smaller amounts o money than VCs, in exchange or equity.
They can take passive or active roles in the start-up and typically have a
longer investment horizon than VCs. According to the Center or Venture
ResearchattheUniversityofNewHampshire,totalAngelinvestmentsin
2011 were $22.5 billion to a total o 66,230 entrepreneurial ventures.
Venture Capital
Compared to angels, venture capitalists can invest larger amounts o money
(usually millions o dollars) in a company and in exchange they tend to
receive more equity. VCs also exercise control and bring experienced
management talent to help guide and grow the company. Sometimes they
invest in several rounds o unding and are part o a larger consortium o
investors in the company. According to PriceWaterhouseCoopers (www.
pwcmoneytree.com), the U.S. total o VC investments in 2011 was $29.118
billion rom 3,752 deals, with $11.931 billion and 1,183 deals in the
Silicon Valley alone.
This graphic is an example o a start-up fnancing cycle using traditional unding sources, throughan initial public oering (IPO). There could be more or ewer rounds o unding. The 1st, 2nd,and3rdroundscanbeequivalenttoSeriesA,B,andC.(Source:StartupCompanyWikipedia,
The Free Encyclopedia. Wikimedia Foundation, Inc. 11 March 2009. Web. June 2012 < http://en.wikipedia.org/wiki/File:Startup_fnancing_cycle.svg>)
Revenue
BREAKE
VEN
TimeValley o Death
1st
2nd
3rd
Mezzanine
SecondaryOerings
Public Market
Angels, FFF,Seed Capital
VCs, Acquisitions/Mergers,Strategic Alliances
IPO
START-UP FINANCING CYCLE
http://www.pwcmoneytree.com/http://www.pwcmoneytree.com/http://en.wikipedia.org/wiki/Filehttp://en.wikipedia.org/wiki/Filehttp://localhost/var/www/apps/conversion/tmp/scratch_7/Startup_financing_cycle.svghttp://localhost/var/www/apps/conversion/tmp/scratch_7/Startup_financing_cycle.svghttp://en.wikipedia.org/wiki/Filehttp://en.wikipedia.org/wiki/Filehttp://www.pwcmoneytree.com/http://www.pwcmoneytree.com/ -
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Non-traditional Funding
Start-ups may also investigate and pursue unding rom non-traditional
sources. Some examples o these are:
Government grants Certain research grants are available through
programssuchasSBIR/STTR(SmallBusinessInnovationResearch
andSmallBusinessTechnologyTransferhttp://www.sbir.gov/) or the
Department o Energy (https://arpa-e-oa.energy.gov/).
BanksBanksdonotusuallyparticipateinequityinvestmentsin
new companies, but they are a source o loans, par ticularly or capital
purchases when there is some kind o collateral (such as large equipment).
Crowdunding Various companies enable entrepreneurial und-raising bypooling small investments rom a network o individuals.
HOW INVESTORS EVALUATE A COMPANY
Investors listen to pitches constantly and only a small portion o start-ups
get unding. The investors will determine i the star t-up meets their strategic
and fnancial goals and i the company fts into their current portolio o
investments. VC unds are targeting at least an overall 20% annual return on
the und which is signifcantly higher than other investment vehicles such as
stocks and bonds.
Investors typically perorm due diligence beore unding new opportunities,
and they oten view the act that a new company is working with Stanord
OTL positively in this analysis. For example, OTLs involvement may provide
an extra measure o reassurance to investors that IP rights are being properly
securedbythecompany.(Bearinmind,however,thatOTLwillcarefully
evaluate the patentability and commercial potential o an invention beore
embarking on the costly and lengthy process o obtaining patent protection.)
TheIPMarketingBlogoffersTenTipsforstart-upvaluationhttp://www.
ipmarketingadvisor.com/content/2009/10/27/ten -tips-or-start-up-valuation/.
EXIT STRATEGY
Investors plan to recoup their investments via exit strategies. Typically, a
VC hopes to sell its equity in a por tolio company within 3-7 years, ideally
through an initial public oering (IPO). Another exit strategy could be through
mergers and acquisitions (M&A) instead o an IPO.
PITFALLS
Newcompanyformationisahighriskproposition.WhilemanyStanford
start-ups are successul, others are not. Some common problems that can
cause academic start-ups to ail are:
Inexperienced management A strong, experienced, cohesive team is
required or a successul start-up company. Problems can arise i ounders
or other members o the team do not have enough start-up and business
experience or i ounders, new management, and investors do not have the
same strategic vision.
Lack o unding A start-up needs sufcient capital to overcome technical
challenges, reach critical business milestones, and progress to the nextphase o development. To attract investors the company must have a solid
business plan and a strong management team.
Technology does not meet commercial need Sometimes the science is
innovative and exciting but does not correlate to a critical commercial need,
or current solutions are still better than the new technology.
Timing Even when a commercial need exists, the company may miss the
market. Sometimes this is because the market is not ready or a product,
e.g. too early, still too expensive, unrecognized need. Sometimes it is
because the product is too late to the market and the need has al ready
been flled by a dierent technology or competitors have leaprogged over
the company with an even better product.
Marginal Niche I the target market is smaller than expected the
company may not meet its fnancial targets.
Bad luck Sometimes events outside o the entrepreneurs control can
negativelyimpactacompany.Butevenfailureisoftenseenasoneof
Silicon Valleys greatest strengths.
Additional inormation about why University start-ups ail can be ound
at http://www.technologytransertactics.com/content/2010/07/14/survey-
suggests-top-10-reasons-university-start-ups-ail/. Also, Innovation Daily
oers advice about Ten Common Arrogance Traps or Star tups to Avoid
http://www.innovationamerica.us/index.php/innovation-daily/19683 -ten-
common-arrogance-traps-or-startups-to-avoid.
http://www.sbir.gov/https://arpa-e-foa.energy.gov/http://www.ipmarketingadvisor.com/content/2009/10/27/tenhttp://www.ipmarketingadvisor.com/content/2009/10/27/tenhttp://www.technologytransfertactics.com/content/2010/07/14/surveyhttp://www.innovationamerica.us/index.php/innovation-daily/19683http://www.innovationamerica.us/index.php/innovation-daily/19683http://www.technologytransfertactics.com/content/2010/07/14/surveyhttp://www.ipmarketingadvisor.com/content/2009/10/27/tenhttp://www.ipmarketingadvisor.com/content/2009/10/27/tenhttps://arpa-e-foa.energy.gov/http://www.sbir.gov/ -
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is one way o being a good steward o the technology and managing
institutional conicts o interest. Also, because o its non-proft status, the
University must avoid privileged access to its intellectual proper ty (IP).
Marketing mitigates allegations o no bid contracts and allows all interested
parties to have an oppor tunity to learn about new technologies rom Stanord
and to negotiate a license. In a air and open process, the best licensee can
be chosen.
Inventors should cooperate in good aith with OTLs marketing eorts.
Inventors should share inormation with potential licensees to help them
determine i they are interested in investing resources to develop the
technology. Inventors oten beneft rom such interaction by learning more
about the commercialization processes and the type o inormation that a
company needs to evaluate a technology. Even i Stanord ultimately grants
a license to the inventor start-up, inventors oten get a better sense o the
marketplace, or even fnd potential partners, rom Stanord marketing the
technology.
With a transparent process, the University can be confdent that, in the
unbiasedprofessionaljudgmentofOTL,thebestlicenseeisdevelopingthe
technology.
HOW MUCH CAN I TELL POTENTIAL INVESTORS ABOUT THE INVENTION?
First and oremost, research at Stanord must comply with Stanords
Openness in Research Policy (see the Research Policy Handbook). In
particular, research results the underlying data, the processes, and fnal
results o research must not be secret and must also be accessible by al l
interested persons. For the purposes o investment discussions that occur
prior to public dissemination o their work under Stanords research policies,
entrepreneurs will need to describe the general aspects o the invention
to potential investors in order to generate any interest. Inormation can be
shared with investors, but entrepreneurs are not permitted to delay disclosure
o their research results by postponing presentations or slowing down the
process o manuscript submissions.
Frequently Asked Questions
HOW ARE ENTREPRENEURIAL INVENTORS INVOLVED IN THE LICENSING
PROCESS?
OTLs relationship with inventors becomes more complex when inventors
want to start a company. Inventors are the source o Stanords inventions
and copyrighted works. In a sense, they produce the product OTL is
trying to sell. OTL works closely with our inventors because we rely on
their participation in the patenting and marketing process. OTL encourages
inventor input: or leads on potential licensees; or inormed assessments o
the technical and market easibility o the invention; and or suggestions on
which licensing strategy would best commercialize the technology.
However, inventors do not par ticipate in the actual negotiation o license
agreements with potential licensees. OTL gives careul consideration to
inventors input and strives to keep them inormed throughout the process.
But,theconictsthatmayarisefromaninventorsmultiplepotential
roles and relationships University researcher, royalty recipient, company
consultant, company board member make such participation unwise.
Direct involvement in negotiation places a aculty inventor in a management
role or the new company, which is not permitted by Stanord policy.
DOES OTL GIVE ANY SPECIAL CONSIDERATION TO INVENTOR START-UPSWHEN SELECTING A LICENSEE?
Stanord does not give preerential treatment to its inventors and their start-
ups. However, OTL and the University do recognize the importance o the
inventors role in helping to transer technology and in evaluating the ability
o a potential licensee to develop licensed products.
Inventors who are interested in starting a company or who have a strong
preerence or a particular company can be wary o Stanords policy to
market all inventions. Sometimes inventors worry that their baby will be
given away to a stranger. However, Stanord eels strongly that marketing
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Some entrepreneurs are more comortable sharing details o an invention
ater a patent application is fled. A patent fling allows the inventor to claim
and prove a fling date or his/her idea as described in the application, which
can be useul. However, a patent application does not provide the rights o an
issued patent to prevent others rom practicing the invention.
Understanding that delays must be avoided, i an inventor or entrepreneur
wants to discuss the details o a technology while the work is being prepared
or publication and prior to fling a patent application or other IP protection, a
Non-DisclosureAgreement(NDA)isoftenusedtofacilitateopendiscussions
and to prevent the loss o patent rights rom inadvertent disclosure. OTL can
provideNDAsforcompaniesthatareevaluatingthetechnologyforpotential
licensing. The start-up management or its legal counsel typically handles
NDAsfordiscussionsofthetechnologyonbehalfofthecompany(e.g.with
potentialinvestorsorcorporatepartners).KeepinmindthatmanyVCsand
strategiccorporateinvestorsdonotsignNDAsbecausetheyfearitwould
constrain their existing portolio technologies or uture opportunities.
SampleNDAagreementsareavailableonOTLswebsite:http://otl.stanord.
edu/industry/resources/industry_res.html.
WHEN CAN THE START-UP MANAGEMENT NEGOTIATE A LICENSE?
Ater broadly marketing the invention, i the start-up is the best choice or
commercializing the technology, OTL will negotiate with a representative
o the company to grant a license to the new company. Stanord markets
its inventions because it is committed to looking or the best licensees to
transer technology rom Stanord to the marketplace or the public beneft.
Also,undertheBayh-DoleAct,theUniversityhasanimplicitobligationto
ensure that inventions unded by the Federal government are eectively
commercialized. Under Stanord policy, aculty, sta and students cannot
represent the company in negotiations due to conicts o interest.
WHICH COMES FIRST, THE LICENSE AGREEMENT OR THE FUNDING
AGREEMENT?
This is a chicken and egg scenario. Investors usually want to be sure the
entrepreneur has an option or license to the technology beore investing in
the company but the entrepreneur oten does not know what kind o license
(feld o use, fnancials, etc.) the investor requires. One solution is or an
entrepreneur to take an option to a license, with the terms o the license to
be negotiated later. The negotiations or an option/license and investment
unding agreement will oten occur in parallel.
WHAT IS AN OPTION AND CAN A START-UP TAKE THAT INSTEAD OF A FULL
LICENSE?
An option agreement is oten used to reserve rights in an invention while a
company evaluates the technology, explores unding oppor tunities and raises
the capital needed to ully license the rights in question. Option agreements
include fnancial consideration to Stanord in order to reserve those rights.
Start-up companies sometimes preer this route and OTL may grant options
or any time period up to one year in duration, most oten in 6-month
increments.
When a technology is either optioned or licensed to an inventors start-up
company, the inventors are required to stop initiating new work on that
technologyatStanford(thatis,usingUniversityresources).Subjecttoconict
o interest (COI) review, the fnal separation between a company and Stanord
is determined on a case by case basis, but it must be completed within 12
months. It is important that inventors plan accordingly and begin to wind
down Stanord activities beore either the licensing or optioning takes place.
HOW LONG DOES IT TAKE TO LICENSE TECHNOLOGY FROM OTL?
The time it takes to license an invention varies. Ater the technology is
disclosed to OTL it could take several weeks to a ew months to review
the invention and then apply or a patent application (i OTL eels fling an
application is appropriate). OTL will also need about 2-3 months to market
the invention to other potential licensees and assess licensing interest rom
the broader community. I other companies express interest, the marketing
period may be longer.
During this time, the entrepreneur(s) could begin to develop other aspects o
the new venture to better position the start-up as a potential licensee (e.g.
develop a business plan, research entrepreneur resources, begin seeking
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WHAT ARE TYPICAL LICENSING TERMS FOR STANFORDS AGREEMENTS WITH
START-UP COMPANIES?
License agreements have both fnancial and non-fnancial terms. These vary
based on the particular set o acts or each agreement or example, the
stage o development, the feld o use, and the commercialization risks are all
taken into consideration. Typical terms consist o:
Negotiatednancialtermsincludingissueandannualfees,payments
when technical milestones are achieved, royalties on product sales, and an
assignment ee. Exclusive licensees are generally expected to pay patent
expenses. Financial terms may also include a small, minority share o
equity in the company.Fieldofuserestrictions,sinceastart-upcompanyoftendoesnothavethe
resources to develop all the applications o an invention.
Diligencetermstoensurereasonableprogressinthegrowingthecompany
and commercializing the invention.
Many entrepreneurs are concerned that the fnancial terms are overly onerous
and unreasonable. OTL has completed hundreds o agreements with start-
ups and understands the constraints they have. OTLs goal is to negotiate
an agreement that is air and reasonable based on our experience, on the
industry and on how the Stanord technology fts into the ultimate product.
BecausetheUniversityneedstomaintainanarms-lengthrelationshipinall
its business transactions, license negotiations and the fnal license agreement
or Stanord-associated companies must all within the normal range o
terms and conditions o similar licenses to any other company (taking into
consideration the unique circumstances o each technology and transaction).
There are several documents on OTLs website that provide urther
inormation about valuations and provisions ound in standard license
agreements:
HowOTLThinksabouttheValueofaLicensehttp://otl.stanord.edu/
documents/termslicensevalue.pd
SampleOptionAgreementhttp://otl.stanord.edu/documents/
shorteroption1.pd
SampleExclusivelicensethatincludesequityhttp://otl.stanord.edu/
documents/equityexcl.pd
investors) but there is no guarantee that the new venture will get the exact
license they want. I OTL decides that the start-up company is the best
possible licensee, negotiations with OTL or a license could take several
weeks to many months. However, some negotiations may only take a ew
days i both par ties can agree to terms easily. Inormation about streamlining
these negotiations can be ound at http://otl.stanord.edu/documents/
streamlining_negotiations_with_otl.pd.
In addition, licensing to start-up companies usually presents conict o
commitment (COC) and conict o interest (COI) issues that must be
disclosed by inventors and managed by the University (see the Research
Policy Handbook). Conict o commitment and interest policies are
determined by the Faculty Senate. The School Deans, the Dean o Research
and the Provost have responsibility or their implementation. I aculty, sta
or students propose to have a management role in the start-up company,
approvals or leaves o absence must be obtained. OTL cannot conclude any
agreements until the appropriate COC and COI reviews and approvals have
been completed. This review can take place in parallel to l icense negotiations
and can begin once the basic parameters o the license are decided and the
aculty member submits the required ad hoc COI disclosure to the appropriate
Deans. More inormation about COC and COI can be ound on pages 25-27.
http://otl.stanford.edu/documents/termslicensevalue.pdfhttp://otl.stanford.edu/documents/termslicensevalue.pdfhttp://otl.stanford.edu/documents/shorteroption1.pdfhttp://otl.stanford.edu/documents/shorteroption1.pdfhttp://otl.stanford.edu/documents/equityexcl.pdfhttp://otl.stanford.edu/documents/equityexcl.pdfhttp://otl.stanford.edu/documents/streamlining_negotiations_with_otl.pdfhttp://otl.stanford.edu/documents/streamlining_negotiations_with_otl.pdfhttp://otl.stanford.edu/documents/streamlining_negotiations_with_otl.pdfhttp://otl.stanford.edu/documents/streamlining_negotiations_with_otl.pdfhttp://otl.stanford.edu/documents/equityexcl.pdfhttp://otl.stanford.edu/documents/equityexcl.pdfhttp://otl.stanford.edu/documents/shorteroption1.pdfhttp://otl.stanford.edu/documents/shorteroption1.pdfhttp://otl.stanford.edu/documents/termslicensevalue.pdfhttp://otl.stanford.edu/documents/termslicensevalue.pdf -
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DOES THE UNIVERSITY TAKE EQUITY IN START-UPS?
Stanord can accept equity (typically no more than 5% ownership) as part
ofthenancialtermsofthelicense.Becausemoststart-upcompanieshave
limited cash, equity is oten substituted or some o the cash consideration.
Equity is also a way or the University to share some o the risk associated
with the start-ups. A decision to take equity must make sense or both the
University and the company.
In addition, when OTL enters into an exclusive license agreement with a
privately-held company (such as a start-up), the standard contract allows
Stanord to participate as a co-investor to purchase additional equity in thecompanys private fnancing rounds prior to initial public oering (IPO). This
decision is made by the Chie Financial Ofcer o the University according
to established criteria and is independent o OTL. As a co-investor, Stanord
does not negotiate the terms o uture private investments; it takes the same
terms that the lead investor negotiates.
HOW DOES OTL MANAGE THE EQUITY GRANTED AS PART OF A LICENSE
AGREEMENT?
The distribution o equity diers slightly rom distribution o cash royalties.
Ater 15% is deducted or OTLs administrative ee, inventors ordinarily
receive their proportional share (1/3) o equity directly rom the licensee. The
remainder is earmarked to split between the OTL Research and Fellowship
Fund (administered by the Vice Provost and Dean o Research) and the Vice
Provost or Graduate Education/OTL Graduate Education Fund (administered
by the Vice Provost or Graduate Education).
The University share is managed by the Stanord Management Company
which generally liquidates equity as soon as a public market exists. I
Stanord holds equity in a company that conducts a clinical trial at Stanord,
the University may divest itsel o the equity and earned royalties or
institutional conict o interest reasons. The license will include language
providing or this divestiture o equity.
DOES STANFORD TAKE A SEAT ON THE COMPANY BOARD?
No,nordoesStanfordtakeanactiveroleinmanagingthecompany.
WILL STANFORD ASSIGN THE PATENT TO A START-UP (OR EXISTING
COMPANY)?
No,StanforddoesnotassignortransferIPrights.Whenappropriate,Stanford
can grant an exclusive license ater marketing and deciding that the star t-up
is the best candidate to commercialize the invention.
WHAT HAPPENS IF THERE ARE FOLLOW-ON PATENTS TO THE ORIGINAL
PATENT?It depends on who owns the ollow-on patents. Typically, Stanord will have
fled the initial patent application that is exclusively licensed; the exclusive
licensee provides input or the prosecution o this original patent. Follow-on
inventions conceived by the licensee without Stanord involvement usually
belong to the licensee. These patents must be fled by a dierent law frm
than the original patent (to avoid the conict o interest caused by the
attorney representing both Stanord and the licensee). Follow-on inventions
based on work at Stanord will be owned by Stanord and the licensing o the
new invention will be handled by OTL as i it were a new disclosure. In other
words, the existing licensee will not be automatically granted a license to the
ollow-on invention.
CAN A START-UP GET A LICENSE WITHOUT BEING INCORPORATED?
Thecompanyisnotrequiredtobeofciallyincorporated.But,itshouldhave
a name and place o business. OTL must sign an agreement with an entity,
not individual inventors. Stanord employees may not sign an agreement on
behal o the company nor have positions/titles at the company that imply a
management role.
IF THE START-UP IS BASED ON AN INVENTION JOINTLY OWNED BY STANFORD
AND ANOTHER INSTITUTION, WHAT HAPPENS TO THE INVENTION?
Typically, OTL enters into an Inter-Institutional Agreement whereby one o
the institutions will take the lead. This way a company can negotiate a single
agreement with an exclusive license to both par ties IP rights.
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IF A START-UP NEEDS TECHNOLOGY FROM ANOTHER INSTITUTION BESIDES
STANFORD, BUT THE TECHNOLOGY IS NOT JOINTLY-OWNED WITH STANFORD,
WILL THE COMPANY NEED A SEPARATE LICENSE?
Under most circumstances the company will need to negotiate separately
with the other institution or a license. However, schools do sometimes
package their technologies together in a single license agreement. For
complicated technologies, the company will need to conduct a reedom to
operate (FTO) analysis and confrm that the company has a path to acquire
all the necessary IP components the start-up will need to make its proposed
products.
IF THE INVENTION IS UNPATENTED SOFTWARE, WILL THE START-UP STILL
NEED A LICENSE?
Yes, a copyright license is required i the sotware alls under Stanords
ownership policy (see the Research Policy Handbook).
CAN I CONTINUE TO DO RESEARCH AT STANFORD ON THE TECHNOLOGY THAT
IS THE BASIS OF A START-UP?
Stanord always reserves the right to practice its own inventions or research
purposes. However, researchers are not permitted to continue to develop
technology at Stanord or the beneft o a start-up in which the researcher
has a fnancial interest. See the next section (Stanord Policies and Conict o
Interest) or urther details.
Stanord Policies,Confict o Interest, andConfict o Commitment
INTELLECTUAL PROPERTY POLICY AND OWNERSHIP
Stanords intellectual property policies are outlined in the Research
Policy Handbook: http://rph.stanord.edu/. For new companies started by
Stanord aculty, sta, or students with technology created at Stanord andalling under Stanord policy, ownership o IP Rights (IPR) will be with the
University. This ownership policy applies to any sort o intellectual property,
including: patents, copyrights on sotware, semiconductor maskworks,
tangible research property and trademarks.
MANAGING CONFLICT OF INTEREST AT STANFORD
OTL works with Stanord inventors both to acilitate technology transer and
to manage the licensing process. In the case o Stanord-afliated start-ups,
this process oten raises issues regarding conicts o interest (COI). A ull
explanation o Stanords policies and procedures or managing COI can be
ound at http://www.stanord.edu/group/coi/.
OTL must be particularly sensitive to public perception when a potential
licensee is a Stanord-afliated start-up or a aculty-associated company.Marketing inventions and negotiating rom an arms-length relationship are
two ways that OTL manages potential COI (see Particular Conict o Interest
Issues at http://otl.stanord.edu/inventors/resources/inventors_pcii.html and
theBestPracticesofFacultyandStudentStart-upsfoundinthisguide).
In addition, ad hoc disclosures are required whenever a current or
prospective relationship creates the potential or COI (e.g., when there
are additional fnancial relationships proposed between a aculty member
and a prospective licensee or research sponsor). A COI occurs when there
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is a divergence between an individuals private interests and his or her
proessional obligations to the University such that an independent observer
might reasonably question whether the individuals proessional actions or
decisions are determined by personal fnancial considerations. A COI depends
on the situation and not on the character or actions o the individual.
A resource page or COI is available at http://www.stanord.edu/group/coi/
and a guide to ad hoc COI disclosures can be ound at http://www.stanord.
edu/dept/DoR/ad_hoc.html. COI reviewers are concerned with whether or not
a researcher/aculty member can separate University research rom company
research, provide unbiased and appropriate guidance and support to
students, maintain academic integrity in research and education, and adhere
to government mandated policies. OTL cannot conclude any agreements until
the appropriate COI reviews and approvals have been completed.
CONFLICT OF COMMITMENT
Stanord aculty members owe their primary proessional allegiance to the
University. Their primary commitment o time and intellectual energies
should be to the education, research, and scholarship programs o the
institution.
Conicts o commitment usually involve issues o time allocation. I a
situation raising questions o conict o commitment arises, aculty should
discuss the situation with their department chair or school dean, or the Dean
o Research. More inormation about University policies concerning conicts
o interest and commitment can be ound at http://www.stanord.edu/group/
coi/andintheBestPracticessectionsofthisguide.
CONSULTING AND OWNERSHIP OF INTELLECTUAL PROPERTY
Start-up companies may hire Stanord inventors as consultants. Since the
University does not ordinarily review consulting arrangements, inventors
should be clear about the delineation between University work and private
consulting. Stanord inventors cannot enter into any agreement that creates
copyright or patent obligations that conict with their SU-18 agreement to
assign their rights to Stanord. Faculty members must separate and clearly
distinguish on-going University research rom work being conducted at the
companyasoutlinedintheBestPracticesforFacultyStart-upsinthisguide.
Stanord will ordinarily presume that intellectual property developed 1) whilea aculty is consulting at the company and 2) on an on-going company
program (e.g., drug development, medical device, chip development,
sotware issue, or any other specifc company research or design activity)
belongs to the company as long as there has not been more than incidental
use o Stanord resources. Stanord resources are considered to include
acilities, equipment, the time and expertise o students and post-doctoral
ellows and research sta, but do not include use o personal computers,
telephones, or libraries.
When a aculty member is consulting or a start-up company with which
he or she has another fnancial relationship, it is par ticularly important to
make certain that the separation between consulting activities and the aculty
members academic program, including research and teaching activities,
is clear to all parties. These policies also apply during sabbatical leave.
Inormation on requirements or aculty consulting activities and agreements
can be ound at http://rph.stanord.edu/docs/consulting_requirements.
pd. When a question arises as to the appropriate delineation between
a researchers University responsibilities and a researchers consulting
obligation, the researcher should discuss the situation with his or her
cognizant dean. I there is a question o IP ownership, the IP should be
disclosed to the University.
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OBLIGATION TO SPONSORS
Inventors should take particular care in disclosing all sponsors, including
companies whose unding or materials led to the invention. Sponsored
research agreements speciy what rights a sponsor has in any IP developed
as a result o the sponsored research. Under most circumstances, Federal
unding o research leading to an invention will not impose signifcant
impediments on commercializing the invention via a start-up. Funding
or materials provided by other entities (such as companies) may result in
license rights to those entities, limiting the license rights available or a
start-up. Corporate sponsors are typically granted rights to negotiate a license
or any IP arising rom sponsored research, but sponsorship agreementsvary widely. The Licensing Associate responsible or the invention reviews
the research agreements listed on the invention disclosure to identiy any
licensing restrictions on the invention.
For Faculty:Best Practices or Start-ups
aculty-associated start-up companies1 (Start-ups)
are both opportunities and challenges or Stanord.
Stanord has had a long history o entrepreneurial
activity by aculty, sta, students and alumni and the University
is, in general, supportive o its entrepreneurs.
On the other hand, Stanord is an institution o public trust, with education
and research as its mission, and a requirement to maintain openness in
research. Thereore, entrepreneurial activity must be balanced by careul
review o the proposed relationships, which may or may not be allowed,
and which may require active management to assure openness in research,
academic reedom or trainees and clear understanding about how conicts
o interest are to be managed.
Stanord is committed to avoiding either perceived or actual conict o
interestissueswithrespecttofacultyStart-ups.BothStanfordandfaculty
have responsibilities to optimize technology transer and mitigate COI whenlicensing Stanord IP to a Start-up is considered.
UNIVERSITY/OTL RESPONSIBILITIES
OTLmakeslicensingdecisionsbasedonitsprofessionaljudgmentabout
technology transer to achieve the best possible beneft to the public, without
undue inuence rom internal or external parties.
1 Faculty-Associated Start-up is defned as a company where the original intellectual propertyoriginates with the aculty, where the aculty is a ounder and has a signifcant equity position inthe company, and oten has an inuential role in determining the direction o the company.
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OTL takes several steps to eectively transer the technology while managing
conict o interest. First, OTL markets all Stanord technology to ensure air
and open access to potential licensees aculty Start-ups should not receive
or be perceived as receiving preerential treatment. Second, Stanord aculty/
employees are not allowed to represent the potential licensee and must
not negotiate directly with OTL. Third, OTL licensing agreements may be
exclusive or non-exclusive depending on what is most suitable or a given
technology. Finally, the aculty members School Dean and the Dean o
Research must review any actions that present a potential conict o interest,
specifcally:
If,afterthoroughmarketing,OTLdeterminesthatafaculty-afliated
company is the appropriate licensee, then it documents its marketing results
and summarizes the rationale or its licensing decision or the Deans.
Thefacultymembermustdiscloseanyinterest(consultingfeesand/or
stock options) in the Start-up to the Deans.
ThefacultymembermustagreetoseparateUniversityresponsibilities
rom company responsibilities according to the criteria l isted under Faculty
Responsibilities.
OTLmayproceedwithlicensingonlyiftheconictisdeemedmanageable
by the Deans (based on the aculty members plan or separating
responsibilities).
FACULTY RESPONSIBILITIES
Faculty members are responsible or separating University duties or research
and education rom personal fnancial interests in the company.
Faculty must
Separateandclearlydistinguishon-goingUniversityresearchfromwork
being conducted at the company.
Limitconsultingforthecompanytoamaximumof13daysaquarter,per
University policy.
Serveonlyinadvisoryorconsultativerolesatthecompany[asopposed
to managerial roles or titles (e.g., CTO) suggesting management
responsibility].
Takealeaveofabsenceifengaginginamanagementrole.
Faculty must not
NegotiatewiththeUniversityonbehalfofthecompany.
Receivegiftsorsponsoredresearchfromthecompany.
InvolveresearchstafforotherUniversitystaffinactivitiesatthecompany.
Company personnel cannot be afliated with the University.
InvolvecompanypersonnelinStanfordresearch.
Involvecurrentstudentsincompanyactivities.Ifastudentaskstotake
a leave o absence to participate in the company, the student should
be reerred to the School Dean who will review the request and oer
independent advice.
Involvejuniorfacultythattheysuperviseincompanyactivities.Evenifthe
aculty member does not have a supervisory role, he or she should avoid
situationsinwhichjuniorfacultymightfeelexpectedtobeinvolvedinthe
company.
UseUniversityfacilitiesforcompanypurposes.
UndertakehumansubjectsresearchattheUniversityasPI/protocol
director.
SupervisefacultywhoarePI/protocoldirectorsforhumansubjectsresearch
related to the company.
Pipelining. Many times, the aculty member wishes to continue to do
research at Stanord in the area o interest to their Star t-up. Stanord is
particularly concerned that University resources will be used to beneft the
company, especially new companies that do not have their own acilities
or many employees (i.e., the virtual company). Stanord should not
be the research or development arm o a Start-up. I a new ollow-on or
improvement invention is developed ater the original dominating technology
has been licensed to the Start-up, OTL will still market it to all potentially
interested parties. Exclusive licenses will not always be granted to the Start-
up, even i there is no other interest. In cases where the original technology
dominates the subsequent developments, sometimes a nonexclusive license
will sufce. I, in the interest o eective technology transer, it is reasonable
to grant an exclusive license to the ollow-on technology, the exclusivity may
be mitigated by a shor ter term o exclusivity, limited feld o use, increased
diligence,etc.,subjecttoconictofinterestreviewandapproval.
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For Students:Best Practices or Start-ups
nnovation and the translation o inventions into products
that serve the public are deeply ingrained in Stanords
culture and we have beneted greatly rom it. Stanord
is supportive o aculty and students becoming inventors and
starting companies whether or not these companies are based
on Stanord technology. In addition, Stanord is committed to
avoiding either perceived or actual confict o interest issues
with respect to start-ups. When licensing Stanord intellectual
property to a start-up, both Stanord and its entrepreneurs have
responsibilities to optimize technology transer and mitigate
confict o interest (COI).
OTLmakeslicensingdecisionsbasedonitsprofessionaljudgmentabout
how to achieve the best possible beneft to the public, without inappropriate
inuence rom internal or external parties.
To eectively transer the technology in an unbiased way:
OTLmarketsallStanfordtechnologytoensurefairandopenaccessto
potential licensees
Start-upsshouldnotreceiveorbeperceivedasreceivingpreferential
treatment.
Studentinventors(orfaculty)involvedinastart-upmaynotnegotiate
with the University on behal o the company unless they are on leave
rom Stanord.
OPTION AND LICENSE AGREEMENTS TO FACULTY START-UPS
Faculty-inventors are expected to wind down on-going research in the
particular area that is going to be commercialized by the aculty-inventors
Start-up. COI ofces will also review this with inventors, and it will become
part o the record.
An option agreement is oten used to reserve rights in a technology so that
the company can begin exploring unding opportunities in order to actually
acquire the rights in question. A start-up company sometimes preers to
take an option to a license, rather than an outright license itsel. OTL may
grant options or any time period up to one year in duration, most otenin 6-month increments. Inventors are required to stop initiating new work
on the technology at Stanord (that is, using University resources) when
the technology is either licensed to a company or has been optioned to a
company.Subjecttoconictofinterestreview,thenalseparationbetween
a company and Stanord may take up to 12 months, the period to be
determined on a case by case basis. Since it may take several months to
wind down ongoing research, it is important that inventors plan accordingly
and begin the wind-down o the Stanord activities beore either the licensing
or optioning takes place.
Its important or inventors to understand that this policy covering options
and licenses is intended to enable inventors to succeed in translating their
technologiesintousewithoutjeopardizingthemissionorfundingstatusof
Stanord University. Stanord has a rich history o translating inventions, and
these practices are designed to build on that strong base.
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If,afterthoroughmarketing,OTLdeterminesthataninventor-afliated
company is the appropriate licensee, OTL documents its marketing
eorts and summarizes the rationale or its licensing decision.
IftheinventorisatStanford,theinventorsSchoolDeanandtheDeanof
Research will review any actions that present a potential conict o interest
Theinventormustdiscloseanynancialinterest(consultingfeesand/or
stock options) in the start-up to the Deans.
Studentinventorsmustdescribe
1) how they will separate and clearly distinguish their on-going activities
as students (e.g. thesis research) rom work being conducted at the
company and
2) measures that will allow them to avoid all use o Stanord acilities
and personnel or company purposes, e.g. availability o o-campus
ofce or R&D space and support personnel. Ideally, the separation
between Stanord and the company will occur contemporaneously to
any ormal option or license agreement. However, in some cases, a
transition period o up to 1 year might be acceptable.
TheSchoolDeanandDeanofResearchmustalsoreviewandapproveany
conict o interest under policies that apply to aculty i Stanord aculty are
involved with and have a fnancial interest in the start-up company.
OTLmayproceedwiththelicensingonlyifallconictsaredeemed
manageable by the cognizant Dean and the Dean o Research. OTL options
and licensing agreements may be exclusive or non-exclusive depending
on what is most suitable or achieving technology transer and the best
possible beneft to the public.
OPTIONS AND LICENSES
An option agreement is oten used to reserve rights in a technology so that
the company can begin exploring unding opportunities in order to actually
acquire the rights in question. A start-up company sometimes preers to
take an option to a license, rather than an outright license itsel. OTL may
grant options or any time period up to one year in duration, most oten
in 6-month increments. Inventors are required to stop initiating new work
on the technology at Stanord (that is, using University resources) when
the technology is either licensed to a company or has been optioned to a
company.Subjecttoconictofinterestreview,thenalseparationbetween
a company and Stanord may take up to 12 months, the period to be
determined on a case-by-case basis. Since it may take several months to
wind-down ongoing research, it is important that inventors plan accordingly
and begin the wind-down o the Stanord activities beore either the licensing
or optioning takes place.
Its important or inventors to understand that this policy covering options
and licenses is intended to enable inventors to succeed in translating their
technologiesintousewithoutjeopardizingthemissionorfundingstatusof
Stanord University. Stanord has a rich history o translating inventions, and
these practices are designed to build on that strong base.
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OTL and Entrepreneurs
tanords approach to educating entrepreneurs is to
provide an environment that encourages networking
and collaboration across disciplines and industries; to
oer opportunities or testing ideas; to be open and welcoming
to new and experienced entrepreneurs and investors; and tomaintain transparency regarding University policies. OTL is one
small part o Stanords entrepreneurial culture, with over 200
companies started around technology licensed through the
oce.
OTLs goal is to have Stanord inventions commercialized or societys use
and beneft. When an entrepreneur is passionate and committed to making
that a reality, we are willing to work with them to negotiate an agreement to
help them succeed.
RESOURCE GUIDE
Stanord has a wealth o entrepreneurial history and knowledge. Some
entrepreneurs are already aware o the various organizations, classes
and websites that are available to them. Below is a list o resources, both
on- and o-campus that can educate and guide Stanord entrepreneurs
through the start-up process or help them network and gain eedback or
their new company.
ORGANIZATIONS AND PROGRAMS AT STANFORD
Association o Industry-Minded Stanord Proessionals (AIMS)
AIMS is the postdoc link to entrepreneurship and industry. Their main goal
is to create a ertile networking environment or entrepreneurially minded
postdocs and ease the transition between postdoc and industry
http://aims.stanord.edu
Business Association o Stanord Entrepreneurial Students (BASES)
BASESisanonprot,student-runorganizationthathasgrownfromve
ounding engineering students in 1996 to more than 5,000 members,
including undergraduates, graduate students and aculty rom all seven
schools at Stanord. It is a community that encourages learning, osters
innovationandinspiresthenextgenerationofentrepreneurialleaders.BASES
sponsors annual business plan competitions, the E-Challenge and SocialE-Challenge. During these competitions, industry experts, venture capitalists
andlawyersjudgeandcoachstudentsontheirideas,plansandpresentation
skills.BASESalsoorganizesworkshopsandotherprogramsthatassist
students in employment and business plan development. It has unding
relationships with several leading venture capital frms.
http://bases.stanord.edu/
Center or Entrepreneurial Studies at the Graduate School o Business (CES)
CES was ounded in 1996 to build understanding o the issues aced
by entrepreneurial companies and individuals. It provides personalized
http://aims.stanford.edu/http://bases.stanford.edu/http://bases.stanford.edu/http://aims.stanford.edu/ -
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counseling, introductions between edgling entrepreneurs and the venture
capital community, liaison between experienced and new entrepreneurs or
mentorshippurposes,andsupplementaryfundingtorst-yearMBAstudents
who fnd summer employment with an entrepreneurial company that cannot
pay competitive wages. The CES also col laborates with aculty, students,
alumni and the broader Silicon Valley community to create events that
support entrepreneurial activities.
http://www.gsb.stanord.edu/ces/
Entrepreneur Club at the Graduate School o Business
TheGSBEntrepreneurshipclubisoneoftheoldeststudent-run
entrepreneurs clubs in the nation. It ocuses on the interests o risk-seeking
students who want to build and manage new organizations.
http://www.gsbeclub.org/
Innovation Farm Teams (iFarm Teams)
The iFarm Team program, begun by OTL in 2011, is an experimental
initiative that aims to accelerate the commercialization o new Stanord-
invented technologies (particularly physical sciences inventions) while
providing a unique educational experience to iFarm Team participants. Each
iFarm Team consists o current Stanord community members (students,
aculty, alumni), relevant industry experts, and an OTL licensing associate.
iFarm Team activities may include business activities such as due diligence
research or technical development such as prototyping.
http://www.stanord.edu/group/iarmteams/
SPARK
SPARKisapartnershipbetweenStanfordUniversitySchoolofMedicine
andvolunteersfrombiotech,pharma,andhealthcareinvestment.SPARK
is working to make translational medicine a reality by promoting innovative
research; educating students in technology, drug discovery and drug
development; creating partnerships between scientists and entrepreneurs;
and bridging basic science and pre-clinical studies with exper tise in clinical
testingandproductdevelopment.SPARKprovidesfunding,education,access
tofacilities,expertadvice,andmentorshiptoresearcherswhoseprojects
show promise as uture medical therapies.
http://sparkmed.stanord.edu/
Stanord Angels & Entrepreneurs (SA&E)
SA&E seeks to strengthen Stanords entrepreneurial community by ostering
relationshipsamongpotentialinvestorsandentrepreneurs.Beyondfunding
start-ups, SA&E supports both angels and entrepreneurs through educational
programs and access to the Stanord entrepreneurial network.
http://stanordangelsandentrepreneurs.com/
Stanord Biodesign
StanfordBiodesigntrainsstudents,fellowsandfacultyintheBiodesign
Process: a systematic approach to needs fnding and the invention and
implementationofnewbiomedicaltechnologies.Biodesignadministersseed
fundingfromseveralsourcesformedicaldeviceandinstrumentationprojects
and provides mentoring and networking with relevant experts in the medical
technology, venture and legal industries.
http://innovation.stanford.edu/bdn/index.jsp
Stanord Entrepreneurship Network (SEN)
SENisafederationoftwodozenentrepreneurship-relatedcampus
organizations that conduct research, teach courses and provide outreach
services.SENorganizesEntrepreneurshipWeek,oneofthehighlightsofthe
academic year.
https://sen.stanord.edu/
Stanord Technology Ventures Program (STVP)
STVP is the entrepreneurship education center located within the Universitys
School o Engineering. STVP is dedicated to accelerating high-technology
entrepreneurship education and scholarly research on technology-based
frms. They oer Stanord Universitys Entrepreneurship Corner with 2000
ree videos and podcasts, eaturing entrepreneurship and innovation thought
leaders. In addition, STVP has an entrepreneurship concierge that is charged
with developing programs and building Silicon Valley relationships that serve
Stanords entrepreneurship community.
http://stvp.stanord.edu/
http://www.gsb.stanford.edu/ceshttp://www.gsbeclub.org/http://www.stanford.edu/group/ifarmteamshttp://sparkmed.stanford.edu/http://stanfordangelsandentrepreneurs.com/http://innovation.stanford.edu/bdn/index.jsphttps://sen.stanford.edu/http://stvp.stanford.edu/http://stvp.stanford.edu/https://sen.stanford.edu/http://innovation.stanford.edu/bdn/index.jsphttp://stanfordangelsandentrepreneurs.com/http://sparkmed.stanford.edu/http://www.stanford.edu/group/ifarmteamshttp://www.gsbeclub.org/http://www.gsb.stanford.edu/ces -
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StartX
StartX is a non-proft organization organized and run by Stanord students.
Its mission is to accelerate the development o Stanords top entrepreneurs
through experiential education. StartX companies receive mentoring, advice
and other resources.
startx.stanord.edu
ENTREPRENEURSHIP CLASSES OFFERED FOR STANFORD STUDENTS
Stanord oers a wide variety o classes on entrepreneurship which reside
acrosstheUniversityintheLawSchool,theGSB,theSchoolofEngineering
and the School o Medicine. For example:
Entrepreneurial Design or Extreme Aordabilityisacoursejointlyoffered
bytheGSBandtheSchoolofEngineering(http://extreme.stanord.edu/).
GSB oers 20 courses related to entrepreneurship. For example, STRAMGT 356
(Creating Startup I & II)isaGSBclasswiththeobjectiveforstudentstolearn
about and practice the creation o a start-up (http://www.gsb.stanord.edu/ces/
teaching/356_description.html ). The CES website has a Road Map that outlines
entrepreneurialcoursesforgraduatestudentsattheGSBandacrossStanford
generally (http://www.gsb.stanord.edu/ces/students/courses.html ).
Lean LaunchpadisaclassbyProfessorSteveBlank(http://stanord.edu/
group/e245/cgi-bin/2012/) that was designed or scientists and engineers
but open to all Stanord students. It provides real world, hands-on learning
on what its like to actually start a high tech company. Students learn how to
use a business model to brainstorm each part o a company and customer
development research to see whether anyone will use the product. Students
learn frst-hand how agile development can help a company rapidly iterate
a product to build something customers will use and buy. This class was
adoptedbytheNationalScienceFoundationasthecurriculumforits
Innovation Corps. Many o the course materials can be ound on Steves
website (http://steveblank.com/slides/).
STVP oers over 30 courses to students across campus including MS&E273
(Technology Venture Formation). This class provides a learning experience
that simulates the process o star ting a high-tech company. Students work
in teams on a business plan or a star t-up and present it to a panel o
experienced Venture Capitalists (http://www.stanord.edu/class/msande273/).
OUTSIDE RESOURCES
BayBio
BayBioisNorthernCaliforniaslifescienceassociation.Theysupportthe
regional bioscience community through advocacy, enterprise support, and
enhancement o research collaboration. They also support entrepreneurship,
scienceeducationandlifesciencecareerdevelopmentthroughtheBayBio
Institute.BayBiosNetworkforEntrepreneurialStrategies&Tactics(NEST)
provides lie science entrepreneurs with the tools and resources needed to
succeed.
http://www.baybio.org
Entrepreneurship.org
CreatedbytheEwingMarionKauffmanFoundation,Entrepreneurship.
org was ormed as a ree, online international resource designed to help
build entrepreneurial economies. This site eatures a vast array o content
and resources to assist entrepreneurs, business mentors, policy makers,
academics and investors through each phase o the entrepreneurial process.
http://www.entrepreneurship.org
innovation DAILY
innovation DAILY is an electronic newsletter with selected innovation-related
articles rom around the world. The ar ticles are related to innovation and
unding or innovative companies, and best practices or innovation based
economic development. Users can access articles at the website or register to
receive the ree newsletter daily.
http://www.innovationamerica.us/index.php/innovation-daily
http://localhost/var/www/apps/conversion/tmp/scratch_7/startx.stanford.eduhttp://extreme.stanford.edu/http://www.gsb.stanford.edu/ces/teaching/356_description.htmlhttp://www.gsb.stanford.edu/ces/teaching/356_description.htmlhttp://www.gsb.stanford.edu/ces/students/courses.htmlhttp://stanford.edu/group/e245/cgi-bin/2012http://stanford.edu/group/e245/cgi-bin/2012http://steveblank.com/slideshttp://www.stanford.edu/class/msande273http://www.baybio.org/http://localhost/var/www/apps/conversion/tmp/scratch_7/Entrepreneurship.orghttp://localhost/var/www/apps/conversion/tmp/scratch_7/Entrepreneurship.orghttp://localhost/var/www/apps/conversion/tmp/scratch_7/Entrepreneurship.orghttp://www.entrepreneurship.org/http://www.innovationamerica.us/index.php/innovation-dailyhttp://www.innovationamerica.us/index.php/innovation-dailyhttp://www.entrepreneurship.org/http://localhost/var/www/apps/conversion/tmp/scratch_7/Entrepreneurship.orghttp://localhost/var/www/apps/conversion/tmp/scratch_7/Entrepreneurship.orghttp://localhost/var/www/apps/conversion/tmp/scratch_7/Entrepreneurship.orghttp://www.baybio.org/http://www.stanford.edu/class/msande273http://steveblank.com/slideshttp://stanford.edu/group/e245/cgi-bin/2012http://stanford.edu/group/e245/cgi-bin/2012http://www.gsb.stanford.edu/ces/students/courses.htmlhttp://www.gsb.stanford.edu/ces/teaching/356_description.htmlhttp://www.gsb.stanford.edu/ces/teaching/356_description.htmlhttp://extreme.stanford.edu/http://localhost/var/www/apps/conversion/tmp/scratch_7/startx.stanford.edu -
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SVForum
SVForum osters innovation, entrepreneurship and leadership within the
Silicon Valley ecosystem o individuals and businesses participating in
emerging technologies. They create connections and community, provide
education and access to resources, link the global business community to
Silicon Valley, and acilitate the exchange o unbiased knowledge, insights
and best practices.
http://www.svorum.org
Venture Capital Firms and Service Providers
There are many VCs and business service providers who have worked
with Stanord start-up companies in the past. OTL Licensing Associates or
Liaisons can provide a partial list o these frms to Stanord inventors as
needed.
WRITING A BUSINESS PLAN
The ollowing publications and websites provide guidance or writing a
business plan:
CES Business Plan Resources includes video presentations, books
availablefromtheGSBlibraryandexternalwebsites.
http://www.gsb.stanord.edu/ces/resources/business_plans.html
innovation Daily http://www.innovationamerica.us/index.php/innovation-
daily/23021-a-business-plan-is-or-you-frst-then-or-investors
Lean Launchpad the course materials rom this class by Proessor Steve
Blankprovideguidanceondevelopingbusinessmodels.
http://steveblank.com/slides/
MS&E 273 Technology Venture Formation Class Resources
includes books, additional reading, links and fnancial models.
http://www.stanord.edu/class/msande273/resources.html
Osterwalder and Pigneur, Business Model Generation: A Handbook for
Visionaries, Game Changers, and Challengers (Wiley, 2010).
http://www.businessmodelgeneration.com/
OTLs New Company Prospectus http://otl.stanord.edu/industry/
resources/industry_ncprospectus.html
Small Business Association http://www.sba.gov/category/navigation-
structure/starting-managing-business/starting-business/writing-business-plan
STANFORD UNIVERSITY
OFFICE OF TECHNOLOGY LICENSING
1705 EL CAMINO REAL
PALO ALTO, CA 94306-1106
PHONE: (650) 723-0651
FAX: (650) 725-7295
info@otlmail.stanford.edu
otl.stanford.edu
www.stanford.edu/group/ICO/
Published December 2012
http://www.svforum.org/http://www.gsb.stanford.edu/ces/resources/business_plans.htmlhttp://www.innovationamerica.us/index.php/innovation-daily/23021http://www.innovationamerica.us/index.php/innovation-daily/23021http://steveblank.com/slideshttp://www.stanford.edu/class/msande273/resources.htmlhttp://www.businessmodelgeneration.com/http://otl.stanford.edu/industry/resources/industry_ncprospectus.htmlhttp://otl.stanford.edu/industry/resources/industry_ncprospectus.htmlhttp://www.sba.gov/category/navigation-structure/starting-managing-business/starting-business/writinghttp://www.sba.gov/category/navigation-structure/starting-managing-business/starting-business/writingmailto:info@otlmail.stanford.eduhttp://localhost/var/www/apps/conversion/tmp/scratch_7/otl.stanford.eduhttp://www.stanford.edu/group/ICOhttp://www.stanford.edu/group/ICOhttp://localhost/var/www/apps/conversion/tmp/scratch_7/otl.stanford.edumailto:info@otlmail.stanford.eduhttp://www.sba.gov/category/navigation-structure/starting-managing-business/starting-business/writinghttp://www.sba.gov/category/navigation-structure/starting-managing-business/starting-business/writinghttp://otl.stanford.edu/industry/resources/industry_ncprospectus.htmlhttp://otl.stanford.edu/industry/resources/industry_ncprospectus.htmlhttp://www.businessmodelgeneration.com/http://www.stanford.edu/class/msande273/resources.htmlhttp://steveblank.com/slideshttp://www.innovationamerica.us/index.php/innovation-daily/23021http://www.innovationamerica.us/index.php/innovation-daily/23021http://www.gsb.stanford.edu/ces/resources/business_plans.htmlhttp://www.svforum.org/ -
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