Tuesday, July 19, 2016

6 Steps to a Successful University Spin-Out

The University of Minnesota just celebrated its 100th start-up spin-out  in ten years. Since its formation in 2006, the Venture Center at the Office for Technology Commercialization has focused on producing successful startups. In fact, the University of Minnesota was recently ranked fifth in the nation for technology commercialization initiatives by Nature Biotech.

We sat down with Dale Nugent, a Venture Development Executive at the Office for Technology Commercialization’s (OTC) Venture Center to get some insight into their process for developing successful start-ups out of the university. He outlined for us the “University Start-up Pipeline” and discussed how start-ups go from idea to reality. There are 6 stages of the pipeline, and the rate of flow between these stages is a good indicator of start-up’s potential for success; if there isn’t momentum, it’s usually a sign of a deeper problem. However, if the start-up follows these steps and pivots when the flow slows down, it is likely to add to the group of 100 start-up spin-out successes.

1. Seek and document new ideas
Start thinking with an entrepreneurial mindset. As you research and innovate, take the time to assess the contexts in which your findings might be marketable.Think about unmet needs in your field. Note your most surprising results. These are hallmarks of valuable innovations. Make a point of writing down your entrepreneurial ideas and schedule in some time to review your notes and bounce ideas off of your colleagues. When you do this, be careful not to reveal any secrets that might be patentable. Often you can talk about the benefits of your new idea without specifying how it does it.  If you think you’re really onto something, you need to think about protecting your idea. University researchers can contact OTC’s for help with this. If you think you’re onto something, go with it!

2. Evaluate commercial potential and IP position
Now you’ve got an innovative idea and want to move forward. It’s at this stage where you must evaluate whether or not this idea will sell. This is where many researchers get hung up because although their findings may be groundbreaking, it doesn’t always mean their idea is commercially viable or protectable. Here are some tools to help you decide if your idea has commercial potential:

3. Develop market analysis & financial analysis
The next step is to find the business model that makes the most sense for your technology. Oftentimes, licensing the technology to an established company with resources and infrastructure allows the technology to enter the market more quickly. However, with more disruptive technologies, a startup model can be a better route to prove acceptance for a technology so that the commercial potential is clear. Check out these market and financial analysis tools to help you determine your technology’s market potential:

As focus is redirected from the invention to the business plan in stages 2, 3 and 4 many innovators slow down in their flow between stages. As a researcher, you must thoroughly assess your own skills, experience and capacity for new work to decide if you are the right person to continue spearheading the commercialization effort. If not, think about adding another person to the team to develop the business relationships and provide the executive leadership necessary for success. The Venture Center will encourage innovators to be realistic about their involvement early on in the pipeline stages. Unless a researcher intends to leave the University to work at their start-up full-time, it is highly recommended that they look for an individual who can partner with them, lead the business, and drive progress on business (versus technical) tasks.

4. Develop business plan and presentation
A compelling speaker and “face” of an organization is key for this step. You need to get people excited about your idea by communicating a clear value proposition that puts your innovation above competitors. You must also have a coherent strategy for bringing the technology to market. Here is a powerpoint with a couple of tips for writing a business plan and related documents to communicate what your company will do.

5. Negotiate business and legal terms
When you’ve reached this phase, the goals of your start-up are clear, now you need “freedom to operate” using the intellectual property the company will revolve utilize. Know that this process takes time. Even for experienced business people, a technology license agreement has “a lot of moving parts”. The Venture Center at OTC exists to help start-ups get through this process smoothly as possible. You will also want to have a good business lawyer and other outside advisors helping you at this stage.

6. Execute license to start-up
When the negotiation is complete, the final step is to sign the licensing agreement for a newly formed start-up to use the developed technology. The startup then acts as a separate, wholly-owned entity that can fund itself through equity, grants, loans, etc. as it enters a new phase of growth.