The Evolution of the OTC

A comprehensive approach to technology commercialization

The Texas A&M University System

Research and Commercialization in Universities

FY 2007 Statistics• $48 billion in research at US universities• $3.4 billion in industry funded research, a 15%

increase over FY 2006• Almost 20,000 invention disclosures• 3,622 newly issued patents• 555 new start-ups based on university

technology• Approximately 13,000 active licenses

Overview at Texas A&M System

OTC Facts

Evolving Demands

The Three Paths to Commercialization• Direct Licensing• R&D Alliances• Start-Up Formation

Partnership

The Office of Technology Commercialization

Since its founding, the OTC has:• Processed more than 2,400 inventions created

by A&M System faculty and staff • Filed more than 2,700 patent applications• Completed more than 1,700 License

Agreements and Material Transfer Agreements • Generated revenues exceeding $60 million

related to intellectual property rights

The Office of Technology Commercialization

Revenues have gone to support:• More than $20 million in sponsored research• Retention of important faculty • Support for more than 800 faculty and staff

inventors• Sharing arrangements with co-developers like

USDA and other universities

The Office of Technology Commercialization

The OTC:• Became the youngest technology transfer office

in the top 25 in North America in revenues• Is in the top ten in the number of license

agreements producing income• Does two-thirds of its license agreements with

small businesses• Files a patent every other day • Completes a license agreement once a week

In 2005 OTC Defined Commercialization Broadly

Licensing alone has minimal impact on the mission of the university• Education• Research• Public Service/Public good

University commercialization must be broader than licensing• Industry-university partnerships are key to

commercialization success

Office of Technology Commercialization

OTC is a matchmaker between System members and commercial partners• Single point of contact for partners• OTC works across silos

OTC defines commercialization broadly• Licensing• New venture creation• Increased research flow• Assist with new research infrastructure

Evolving Demands

OTC’s strength has been direct licensing

This is one of three basic activities that any technology commercialization office must be proficient in

As Texas A&M becomes more sophisticated, the OTC is challenged to improve in other areas

The future of the OTC lies in improving our abilities in the other two sectors of activity

Scope of OTC Services

Direct Licensing

Research and Development Alliances• Industry• State/Federal

Start-Up Formation

Improving Direct Licensing

Triage and Assessment• Preliminary Reports• Interview Reports

Communication of Commercialization Plan• Intellectual Property Strategy• Marketing Strategy

Disciplined selection of opportunities

Follow-through

Transparency

Technology Evaluation Matrix

Quicklook Reports Help to Manage Risk

TAMUS OTC Licensing Metrics

FY 2009 - $8.7 million in license revenue

How is the money divided up?• $1 million for patent expense reimbursement• $1.9 million to run the OTC• $2.9 million to inventors• $2.9 million to TAMUS System Members

Start-Up Formation

Creating companies • to allow us to move disruptive technologies

forward• to allow us to get a greater return on new

technologies

In the past, reliance on entrepreneurial faculty to initiate these

Currently, have a dedicated team that focuses on formation of start-ups

OTC and Start-up Creation(Establishing New Business Entities)

Identify opportunities with start-up potential for equity investmentAssist with market research, business planning and partnering (Commercialization Services)Partnering with early stage capital funds, investors, and strategic partners• Focus on the relationship and be demand

driven

Provide incubation possibilities at Texas A&M or with partners• Be born big with international presence from

the beginning

TAMUS Approach

Inventor led spin-out vs. university led spin-out• Small equity stake vs large equity stake• No investment vs cash investment• No university business involvement vs university

board seats• Part time professor CEO vs full time CEO• Small university upside vs large university

upside

What Are Spin-Out Opportunities?

Goldilocks technologies• Not developed enough to attract licensees• Developed enough to attract angels

Next steps usually involve further research at the university

Value add step is relatively inexpensive

Large market – fundable, exit strategy

Opportunity Review Process

Opportunities identified by licensing staff• Internal review of opportunities• Internal pitches of the vision of a company• Internal analysis of “why a spin-out”?

Analyze the technology, market, intellectual property, and internal support for a spin-out

Start-up Development

Phase I – Project Screening

Work done by Licensing Staff

Invention Disclosure

Technology Assessment

Identification of Products and Services enabled by the technology

Engagement as Potential Start-Up Project• Determination of inventor interest• Determination of Member interest

Phase I – Project Screening

Work completed by New Ventures Team

Market Analysis • Size of market(s)• Size of market segment(s)

Competitive Analysis (per market segment)• Competitors (sales of products/services)• Research competitors

Integrate information to create Assessment Report on Start-Up Potential• Inventor and Member interest• Market Analysis• Competitive Analysis

Go/No Go Decision

Phase II – Company FormationBusiness Plan Development• Rationale• Milestones• Funding needed• Licensing Terms• Exit Strategy

Internal Fundraising (cash for equity)• OTC• Members• External parties

Team Formation• Scientific Advisory Board• Research Team (e.g. TAMUS researchers who will develop research proposals

and conduct the research)• Management (external)

Phase II – Company Formation

Creation of Start-Up Proposal• Business plan• Risk profile• Expected research and equity upside potential

Submission of start-up proposal for approval (must be approved by Chancellor)

Drafting corporate documents

Filing for incorporation of the new company

Founding investment made

CEO contract signed

Execution of license

Phase III – Business Plan Execution

Fundraising by management• Assistance from OTC• Short time line with specific goals

o $1,000,000 within 12 months

• Fundraising success leads to success fee for CEO

After funding

R&D as needed

Completion of milestones

Achievement of objectives of exit strategy / termination of license

Typical Deal Breakdown

Caveat is that all deals are different

Starting point is a total investment of $75,000• OTC invests $25,000• TAMUS member invests $25,000• Research Valley Angel Fund invests $25,000

Starting point for equity break down is:• OTC 5% set aside for commercialization services• Inventors 10% set aside to keep their interests• Each of the 3 investors receives 28.33%• CEO is compensated 5-20% equity upon funding

Industrial R&D Alliances

Finding corporate partners to bring technology development forward

In the past, reliance on faculty to initiate these

Currently, members of licensing staff dedicate time to pursuit of industry alliances

UNIVERSITIES AGENCIESHEALTH SCIENCES

Scope of System Capabilities

11 Universities and the Health Science Center• Campuses in Texas and the Persian Gulf state of Qatar

7 state agencies27,000 faculty and staff • Performed $637 million in externally funded research

Physical and Program presence in all of the state’s 254 countiesIn 2008 the A&M System• educated 106,000 students in degree programs

o 22,888 degrees awarded* * More than 1 in 5 students enrolled in a public university in Texas is attending an

A&M System institution• Agencies trained hundreds of thousands more students through practical

extension programs

Single Point of Contact

The need is clear, but how?

The System was the only organization which spanned the Members• OTC’s business focus made it a natural fit for

the jobo Referred clients to appropriate Members/laboratorieso Worked across siloso Recognized synergies between industrial clients and

multiple Members

Initially organized under Business Development in OTC

OTC and Business Development(Philosophy of working with the Marketplace)

Understanding commercial needs and demands can uncover collaboration opportunities and potential funding• Offer need-driven research opportunities to the

researchers

Collaboration opportunities are an outcome of researchers gaining an understanding of commercialization

Long-term commercial partnerships lead to research funding opportunities

Start Small - Build Upon Success

Bio-energy efforts were greatly assisted by OTC

Worked closely with AgriLife Research and AgriLife researchers• Led to millions of dollars in sponsored research• Enabled AgriLife to pay for dedicated Corporate

Relations staff• Has led to many more deals in AgriLife with

large industrial partners

Model is Evolving

Moving towards a distributed Corporate Relations model• Multiple offices/people in each of the major

Member organizations

Created a new Associate Vice-Chancellor for Economic Development• Coordinates efforts and helps to create bridges

between organizations

Corporate Relations Benchmarks

University of Wisconsin, MadisonOffice of Corporate Relations, Wisconsin Alumni Research Foundation, Research Park, WiSys

Purdue UniversityOffice of Engagement, Office of Technology Commercialization, Research Park, PURE Database

University of MichiganAcademic and Corporate Relations Center

Operational Model

State and Federal R&D Alliances

Finding state and federal sponsors to bring technology development forward

These alliances may include industry partners as well

In the past, reliance on faculty to initiate these

Currently, senior staff dedicate time to pursuit of these alliances

Results of Defining Commercialization Broadly

$100 million + in new revenue since 2006◦ State – industry – university research institutes◦ State - industry – university partnerships to attract

star researchers◦ Industry – university multi-year research programs

Direct impact on the mission◦ Education, research, public good

Keys to SuccessTop administrator support for

commercializationKey staff are from industry and speak the

language of businessCommercialization becomes part of the

project designIndustry partners know their ultimate goal is

important to the university as wellThinking beyond licensing to other possible

business support◦ Development funding◦ New venture creation

Get Involved Early

Build a team of Trusted Technology Advisors for our two customer bases: • University researchers • industry/investment partners

Long-term commercial partnerships can lead to research opportunities

Collaboration opportunities are an outcome of researchers gaining an understanding of commercialization

“Our goal is not only to discoverknowledge, but to apply it,”

Chairman Bill Jones Board of Regents