Welcome to Part 2 of my blog on Strategy Advice on Technology Licensing. If you’re new to this series, take a look at Part 1. The purpose of this blog series is to help entrepreneurs see things from a university’s perspective, so that you can be more successful in planning the future of your business. Through my work and experiences I have developed an understanding of what the market for university technology looks like from the perspective of a start-up company. I classify the main topics on the issue into the following categories: Getting Skin in the Game, Taking (and Disposing of) Equity, Royalties vs. Upfront Fees, Options and Contingent Licenses, Keeping the Innovators Involved, and Owning Future Inventions. Today I will discuss the concept of Getting Skin in the Game.
Getting Skin In The Game – the phrase “Skin in the Game” refers to the concept that an entrepreneur who truly believes in her idea will invest her own resources to make that idea a reality. Outside investors like to see that entrepreneurs have some of their own money invested into the venture because it shows that the entrepreneur’s incentives are aligned with the incentives of future investors. In the same way, universities often prefer to deal with entrepreneurs who have skin in the game, because financial participation by the entrepreneur is perceived to increase the chance that the venture will succeed.
The participation can take one of several forms: an entrepreneur can contribute capital to the startup, pay a fee for a license out of personal funds, offer to share equity in a venture with the university, or make a contractual promise to deliver some future value to the university. The salient feature to this commitment is that it must represent an anchoring commitment to the startup by the entrepreneur. The anchor reduces the risk that the entrepreneur will choose to foolishly spend all of the investors’ money and then abandon the failed venture without any personal cost.
Make some tangible demonstration that you have skin in the game. Cash is always king, but don’t be afraid to be creative! A university is an institution, but you should never forget you are working with real people. Any licensing negotiation with a university is ultimately about persuading those people that you are the right person for the job. Any concrete display of personal commitment you can make will only help your cause.
Steve Glista’s practice is focused on helping clients understand the risks — and rewards — that come with doing business on the internet. He’s also representing defendants and John Doe targets in the current series of online file sharing lawsuits.
Prior to law school, Steve worked in biotech, finance, and professional services for several large companies in the SF Bay area. Steve earned his JD from the University of Oregon and his bachelor’s in biology from the California Institute of Technology.