Issues to Consider before Licensing Technology to a Start-up

Abstract

If done correctly, licensing technology to a start-up company provides a great opportunity for a university to commercialize its technology and generate good will. If done incorrectly, however, the venture may jeopardize the technology's value and adversely affect the university's reputation within the business and academic communities. Before licensing technology to a start-up, a university is well-advised to consider the issues that are most critical to the company's success; that is, those issues that will directly affect the university's ability to benefit from commercialization of its technology. This article surveys the issues a university should evaluate before licensing technology to a start-up venture. While presuming that the university's technology transfer office has overcome, or at least is aware of, any university-imposed policies relative to taking an equity ownership in a start-up, this article presents a workable framework for identifying the key questions that need to be asked and answered: (1) Why participate in a start-up? (2) Who are the right people for the job? (3) What incentives will motivate the start-up company's employees to perform? (4) What assets will the start-up need to be successful? (5) How will the venture be managed? (6) What is the university's exit strategy?