An Angel’s Perspective on Tech Transfer

July 16 2010 No Commented

An Angel’s Perspective on Tech Transfer

I think tech transfer (TT) out of publicly-funded research organizations is really, really hard to do.    Here are a series of bullet points expressing my point of view on TT:

  • TT is essentially a person-to-person activity.  Innovator to businessperson.  It is not about legal documents, royalties or equity positions.  Transferred technology creates jobs, taxable income and wealth and often improves the standard of living of citizens.  Public money goes into research activities and the outcome should be jobs, taxes and improvements in standards of living for tax payers who, incidentally, funded the research.
  • We need to motivate TT officers to do deals.  Most are not.  Giving away innovations is fine as long as commercialization creates jobs, taxes and improvements in standards of living.
  • There are two models for TT – depending solely on the nature of the technology:
    • 80% is most appropriate when licensed into existing, larger corporations.
    • 20% or less is appropriate for new startups ventures.  And, for licensed startups, the following are generally true:
      • Technology is never worth more than 10% of the equity of the venture.
      • The key to the success of these new ventures is always the management team, not the technology.  It is all about execution of the business plan.
      • Very, very few investors walk the halls of laboratories looking for technology to commercialize.  We investors fund companies, not technology.
      • Most private sector investors (angels/VCs) ignore public sector technology.  TT is simply too difficult, due primarily to TT offices.  There are simply too many opportunities out there to consider busting our picks on laboratory TT.  In the US, we estimate that only 5 to 10% of VC funding goes into TT deals.  US VCs invest in about 1000 new companies per year – 50 to 100 of which are TT deals.
      • Angels and VCs invest in management teams (already in place) to fund implementation with customers and growth, not further product development.

 It is estimated that angels provide first-time, seed/startup funding to 20,000 companies per year in the US.  Only a tiny fraction (<1%) are TT deals.  Unfortunately, TT deals are just too difficult. 

Nonetheless…

It’s a GREAT time to be an angel.  Find a group and jump in!

Bill Payne is the 2010 BNZ University of Auckland Business School Entrepreneur In Residence. www.billpayne.com