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 Low Licensing RiskHigh Licensing Risk High Reward High Value- Added (Prioritize) Cost Drivers (Make a few smart picks where risk can be reduced; close the rest.) Low Reward Low Value- Added (Maintain low risk, increase reward if possible) Non Value- Added (Waive/Release to Inventors)

Quicklook Reports Help to Manage Risk Low Licensing RiskHigh Licensing Risk High Reward Meet Technical Milestones Cost Drivers Low Reward Trade Value for Risk Reduction Waive/Release

TAMUS OTC Licensing Metrics FY $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 investment Assist 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

PHASE 1 ASSESSMENT 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 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 2 START-UP FORMATION Business 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) Board Members (OTC) Management (external) Creation of Start-Up Proposal Submission of Start-Up Proposal for Approval (must be approved by Chancellor) Drafting corporate documents Filing for Incorporation of the new company Execution of License PHASE 3 BUSINESS PLAN EXECUTION Fundraising by Management R&D as needed Completion of Milestones Achievement of objectives of exit strategy / termination of license 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 Formation Business 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

UNIVERSITIESAGENCIES HEALTH SCIENCES

Scope of System Capabilities 11 Universities and the Health Science Center Campuses in Texas and the Persian Gulf state of Qatar 7 state agencies 27,000 faculty and staff Performed $637 million in externally funded research Physical and Program presence in all of the state’s 254 counties In 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 job o Referred clients to appropriate Members/laboratories o Worked across silos o 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, Madison Office of Corporate Relations, Wisconsin Alumni Research Foundation, Research Park, WiSys Purdue University Office of Engagement, Office of Technology Commercialization, Research Park, PURE Database University of Michigan Academic 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 Success Top administrator support for commercialization Key staff are from industry and speak the language of business Commercialization becomes part of the project design Industry partners know their ultimate goal is important to the university as well Thinking 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 discover knowledge, but to apply it,” Chairman Bill Jones Board of Regents