Pure License or Equity Stake?

Most Universities are not optimizing value from their technology portfolios.

In the last 10 years, University technology has become a primary driving force in finding much-needed revenue for university budgets. Many universities have established technology transfer offices to handle licensing, primarily to large pharmaceutical companies, but increasingly to start-up companies. However, most universities are not getting maximum returns on their technology portfolios for two primary reasons:

1. Valuations are often difficult ( asset valuation ), and

2. Universities have been reluctant to take equity stakes in start-up companies or to capitalize their own companies with vastly greater upside potential.

The university research environment represents a rather unique opportunity because the university can provide a small company with a turn-kay technology. Because most of Big Pharma has become hollowed- indeed much of big industry has become hollowed-the companies have become extremely inefficient at basic research and in many cases, development. Often because the company does not have expertise in areas which are rapidly emerging, there is an opportunity for the university to play a large role not only in research, but also in development.

The university research departments are asked to play an increasing role in product development for a number of industries.

The question emerges, "How best can the university participate in this expanding business?" Whether the university is to simply license a product to a big company or a small company or is to participate in equity with a requisite potential for enhancement in value is a question which should be addressed at an early stage of development.