Friday, May 13, 2016

Crossing the Valuation Chasm: Importance of Technology Valuation in Licensing

By Dipanjan "DJ" Nag

Chief Executive Officer and President


Not many would argue the fact that Universities are the key innovation driver of our economy. With more than $65 billion a year spent on research and with an efficiency better than most industry partners in creating fundamental and disruptive innovations, universities still face a challenge in getting these technologies to market. We are performing research to understand what some of those challenges are that hold us back from getting these technologies to the hands of users. The pathway to market for these technologies is either through an industry partner or through a startup.

 In this article we will focus on how industry and universities differ in their approach to licensing. This comparison might not be a fair one, because universities inherently have a different mission than industry does, i.e. industry’s sole motivation is profit and the university’s sole mission is dissemination of knowledge (and technology). In the recent times, post 1980 after enactment of Bayh-Dole act, technology transfer has become one of the top missions for universities and economic development and job creation are now metrics that a university must closely attend.

How are universities dealing with technology transfer (or commercialization or development) in a way that is so fundamentally different from industry? For one, consider the approach to valuation. If you look at the approach taken by universities, it starts with creating one page summaries of technology called non-confidential summaries (NCS). The NCS is a great way to communicate that a certain technology is available but it surely does not communicate the value of that technology. In fact after benchmarking more than 50 technology transfer practices it is apparent that most of them do not use valuation methods at all.

Speaking with numerous industry licensing leaders, including the ones at IP100 conference this year in Phoenix, AZ, most feel that there is a disconnect with universities (rightly or wrongly) on these key areas (in no particular order):
  • Valuation of the technology
  • Maturity of technology
  • Structure of relationship including IP terms
  • Time taken to close a deal
For its part, industry does not begin to understand the notion of value expected by the university for a certain technology. The apprehension is that a university will overvalue the technology. By the same token universities often believe that industry undervalues the technology. The value proposition of a technology to industry and most importantly the VALUE of the technology itself needs to be clearly defined.

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