The Evolution of the OTC

1. The Evolution of the OTC A comprehensive approach to technology commercialization The Texas A&M University System

2. 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

3. Overview at Texas A&M System • OTC Facts • Evolving Demands • The Three Paths to Commercialization • Direct Licensing • R&D Alliances • Start-Up Formation • Partnership

4. 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

5. 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

6. 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

7. 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

8. 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

9. 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

10. Scope of OTC Services • Direct Licensing • Research and Development Alliances • Industry • State/Federal • Start-Up Formation

11. 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

12. Technology Evaluation Matrix

13. Quicklook Reports Help to Manage Risk

14. TAMUS OTC Licensing Metrics • FY 2009 - $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

15. 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

16. 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

17. 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

18. 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

19. 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

20. Start-up Development

21. 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

22. 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

23. 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)

24. 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

25. Phase III – Business Plan Execution • Fundraising by management • Assistance from OTC • Short time line with specific goals • $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

26. 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

27. 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

28. UNIVERSITIES AGENCIES HEALTH SCIENCES

29. 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 • 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

30. 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 • Referred clients to appropriate Members/laboratories • Worked across silos • Recognized synergies between industrial clients and multiple Members • Initially organized under Business Development in OTC

31. 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

32. 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

33. 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

34. 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

35. Operational Model

36. 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

37. 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

38. 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

39. 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

40. “Our goal is not only to discoverknowledge, but to apply it,” Chairman Bill Jones Board of Regents