Venture Development Process
When a new technology is submitted to the Office for Technology Development (OTD), it is evaluated by a technology analyst who interviews the inventors and then checks for prior art, which comprises academic literature, patents, and other publications in various public and private subscription databases.
The technology is reviewed by the OTD licensing and Venture Development staff for commercialization potential, including patent possibilities, likely interested parties for licensing, or potential for placement into a start-up company project.
Those technologies that seem to have the special potential to become part of a new commercial entity are selected by the Technology Commercialization group to become a new venture project, and a licensing associate takes responsibility for it.
In the following weeks and months the licensing associate will investigate the potential market, comparable companies in the space, commercialization investments in similar other technologies, and other resources that are useful in establishing a start-up based on the core technology.
At some point, a start-up entrepreneur is identified by the licensing associate. The licensing associate serves as the start-up manager for the internal development phase until an entrepreneur is found who will take on the many tasks needed to take a new company forward. Some of the entrepreneur’s activities include writing a business plan, locating a permanent chief executive and other members of the management team and staff, locating financial backers for seed money, arranging for workspace, retaining legal counsel, and negotiating the terms of a license from UT Southwestern to the newly forming company.
Technologies are licensed into the start-ups from the University in exchange for cash and/or equity in the company. The licenses typically include additional payment obligations to UT Southwestern in the form of milestone payments, royalties, or other forms of payments. The license equity and revenues are shared with the inventors. In addition, the University may receive additional equity as founders’ equity for value added into the start-up through the company formation and business development work.
Unlike the University license equity, University founders’ equity is not shared with inventors but rather is retained by the University as a means of defraying its sunk-in costs related to forming the company. Inventors may, on a case by case basis, receive their own founders’ equity for their own efforts in getting the newly formed company started, or if their continued participation in the company is required. Decisions on granting such founders’ equity to inventors are at the discretion of the newly formed company’s management and investors, not the University. The start-up process operates with a team, typically led by a member of the Technology Commercialization group working with other members of the group, the faculty inventors, outside entrepreneurs, attorneys, advisors from industry, seed money investors, and others as needed.
1. Identify one or more technologies that may justify a start-up project.
2. Develop the description of how the invention is going to generate value, working with the inventors, Technology Commercialization, outside entrepreneurs, and advisors.
3. Recruit an entrepreneur.
4. Develop the terms of the start-up structure and the technology licenses.
5. Execute licensing in parallel with the development of the seed funding.