I don’t believe I’m breaking any news here, but starting any business is hard! Starting a business around a new, unproven, first of its kind, disruptive technology that either doesn’t have a market equivalent or asks customers to change their status quo is even more challenging. Doing so as a first-time entrepreneur coming out of a university, well you get the picture. But over the last ten years that I have been involved in the Technology Transfer space, universities across the country have made truly phenomenal progress in the resources and programs made available to support these fledgling startups as they prepare to leave the nest.
One of the key tenants of these early-stage startup development programs has been that of Customer Discovery. Programs like Steve Blank’s Lean LaunchPad, which became the fundamental curriculum of the NSF, and later NIH, I-Corps programs forced the reorientation away from the technology and its research and development, to instead determine “Does this have a market and is there a customer who will buy it?” Here at the University of Oklahoma we have implemented similar concepts in multiple programs we have offered over the years, first in partnership with i2e and their new venture course, our own Venture Fellows program, and today much of the Market Discovery Phase of the Growth Fund still relies on these principles. However, while seemingly revolutionary, the reality is programs such as these are in fact the application of the scientific method to the activity of starting a business, but now instead of benchtops and beakers, the answers lie outside of the building and the testing performed is talking to potential customers.
So why do we do this? Like any hard challenge, starting a business, is about, RISK. And so much of programs such as these are about de-risking the business concept and determining if there will be good product-market fit. In addition to translational research activities to mature the technology, we can determine what the market will look like, who may buy the product and even establish early-stage partnerships and distribution channels.
But, no matter how well prepared, there comes a moment when you launch into the void and must have faith that all you have learned and done will allow you to soar. I have the opportunity to simultaneously serve as adjunct faculty in the Price College of Business here at OU, and every semester I show a lecture by Guy Kawasaki regarding the top mistakes made by entrepreneurs. He talks about building the structure of an internet pet supply company, but the most critical aspect always comes down to “Will the Dog Eat the Dog Food”, because without this the rest doesn’t matter. This is the moment of a young company’s greatest test, will someone pay for what I am selling, and the last thing needed is a stone around their neck as they jump from the nest.
Unfortunately, that’s just what can happen when at launch, as a startup must execute a license to the technology from the university. There are several reasons this action of licensing is needed, securing rights for investment, elevating conflicts of interest and employment obligations, protecting parties from liability just to name a very few, but, the reality is these licenses come with a cost. There is financial consideration, performance milestones and patent obligations in these licenses that, while fair and necessary, can be a burden to a young company. To me this begged the question, why if we are going to invest in the support of the pre-launch lifecycle of the company, at this the most vulnerable moment, would we stop?
To this end, the Office of Technology Commercialization has recently launched a new Limited Use Licensing Model. First this model is not applicable to all technologies or companies. The goal of the model is to provide a mechanism by which a company can conduct the ultimate customer discovery, SALES. Therefore, a technology must be at a stage of development where it would be ready to be offered for sale and sufficiently mature that a party would want to buy and use it. In the university environment, this would be most common in things such as software, research tools, cell lines or materials that could be a component of larger products or systems. While not free of commercial terms, there is often reduced fees and the license is limited to a preset number of sales and a relatively short timeframe, typically a year or less. Once sales objectives are met a full license can be negotiated if desired. Additionally, this is not for projects that need continued development or large scale investment, but rather the demonstration of traction that can accelerate them in some way, or nudge them out of the nest if you will.
While early, I’m happy to say we have executed two licenses in the past months under this model and have learned immense amounts about the market demand, one good one bad, in that short time. Therefore, if you are interested in learning more about this model, think you might have a technology that could benefit from this type of customer discovery, or just know where we can find some hungry dogs, please feel free to reach out to OTC, because we got some new chow to try!