Start-Up vs. Spin-Off Companies
If a technology is a platform on which could be built multiple commercial products, it could form the basis for a new company. The MCW Office of Technology Development (OTD) actively seeks platform level technologies and will consider licensing requests from faculty inventors who desire to start new companies using the technology that they have created. Start-ups create institutional value and help grow the local economy in Southeastern Wisconsin. Since 1984, OTD has been involved in the creation of eleven affiliated companies. Click here for the descriptions of the companies formed around MCW technology.
Although under no obligation, OTD is often willing to license technology to a start-up company, provided that the scientific founders, management and inventor(s) demonstrate a clear commitment and ability to develop the licensed technology. OTD will, under a Standstill Agreement, refrain from licensing the technology for a prescribed period of time, while the groundwork for launching the company is completed. This includes the development of a business plan, assembly of a qualified management team, identification of sources for initial seed financing, and the setting of significant operational and financial milestones. Upon request, OTD can provide a list of professional contacts in areas such as business plan development, venture capital, and business law to assist the faculty, inventor(s) and the other principals launch the company.
Once the necessary steps are completed, OTD will negotiate a license to the technology with appropriate representatives of the start-up company. The terms for the license typically include a license fee, payment of past and ongoing patent costs, minimum annual royalties, equity, and other considerations.
For years, biomedical technologies have been a fertile area for new companies. Many of today's leading medical companies began as start-ups founded by industry professionals who took a risk. Valuation of these companies rose to millions as the firms grew over the years. On the upside, a new business allows a researcher to be personally involved in the translation of their discoveries into products and services that affect people's lives, and see a direct correlation between hard work and financial rewards. Earnings and growth potential make an "academic entrepreneurship" exciting and provides variety, challenges and opportunities to learn.
The down-side of entrepreneurship is risk. Three out of four start-ups will fail during the first three years for lack of commitment, information, planning and capital. Most entrepreneurs invest some of their own money. All must invest time and energy. The staff at OTD is available to help explore all options and allow the inventor to make an informed decision.
Licensing to an established company is less risky than licensing to a new company. Typically, established companies have the financial resources in hand to continue the development of a commercial product. Moreover, they may sponsor some research in the inventors' laboratories. Established companies will pay an upfront license fee as well as milestone and royalty payments. Thus, revenue from an invention may begin soon after licensing.