January 21, 2019
People are always asking that if a Technology Transfer Office (TTO) can’t help build your company and takes a chunk of “your” money, then why should they work with them and how can they avoid them? That’s really the wrong question to ask. Not only is there no legal way around them, but you would also be missing out on the tremendous value that a good TTO can bring to your venture. You just need to leverage them properly.
Protecting your invention
The most obvious benefit of a TTO is that they can help protect your invention. Unlike business development expenses, they actually have money to file patents. This is a big deal given the steep cost of patent filing ($20,000+). More importantly, these guys really understand patents and patent strategy. Developing good patents is an art form and requires a lot of practice to get right. These patents will be the foundation of your new venture and leveraging the TTO in this area is key to success. Patents developed by university TTO are almost always solid documents. Patents written by independent inventors are a bit like sticking your hand into a beehive – there is honey in there somewhere but most of the time it just hurts a lot.
In addition to patents, the TTO also sees a lot of venture deals. This puts them in a position to be a great sounding board for your new company. Remember, they have a closely aligned interest so their opinion is usually not just informative but also fairly unbiased. Venture capitalists have a similar level of deal experience but their perspective is often biased.
Honest opinion on market dynamics
Especially for first-time entrepreneurs, it can be very valuable to get help on deal structures and investment terms. Beyond the legal aspect, TTOs can also give you an idea of the current investment market dynamics, common terms and so forth. Many Venture Capitalists would throw out a number for liquidation preference and present it as “the way things are right now”. They will say this with completely believable conviction, as any good salesman should. It is very easy to come away with the firm with the impression that all these preferences are just “normal”. The TTO can help you get a better statistical perspective of the local market dynamics. They will have added tremendous value to your venture even if all they did was steer you around a few aggressive deal terms.
A lot of investment terms are really about the alignment of interest or the lack thereof. Understanding this upfront can make the difference between success and failure of a venture. You can also leverage your TTO after the launch of your venture. An example of this might be ongoing patent administration where your TTO manages the intellectual property of your startup. Especially early on this can be a lot cheaper than gearing up your own legal process.
The TTO can also indirectly help you to defend your patents. Universities generally don’t enforce their patents through litigation but they can help in other ways. Any business built around intellectual property will sooner or later reach the point where a big company considers the cost of your royalty fees versus paying the legal fee necessary to screw you in court. Depending on your industry they will be more or less direct about this, but rest assured that everybody makes the analysis. At that point, it can sometimes be a helpful posture to have the patents owned by a big public institution with much deeper pockets than your start-up. It’s a bit of a high wire act but can be very valuable if you can avoid actual litigation.
Finally, don’t be afraid of the barriers that a TTO might throw into your path. There will be some administrative issues and likely some relationship work but that’s unavoidable in any engagement with separate legal entities. Try going through investment or acquisition without due diligence and the interaction with a TTO will seem like a breeze. Also always keep in mind that you are really calling the shots. The university will usually own the patent but without your active involvement, they have practically no way to commercialize the invention. Most TTO have a problem of motivating their inventors to be proactive. They won’t stand in the way if you go out into the world to find financing or set up deals. Just keep them in the loop, leverage their skill set and think of them as an early investor/mentor.