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
http://www.stanford.edu/group/coi/http://www.stanford.edu/group/coi/http://www.stanford.edu/group/coi/http://www.stanford.edu/group/coi/


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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
http://sen.stanford.edu/http://sen.stanford.edu/


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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
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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

[email protected]

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:[email protected]://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:[email protected]://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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Documents

OTL Startup Guide