Venture-Capital Report Calls for Meeting of Minds on Tech Transfer

February 3, 2009

 by Josh Keller

Universities can improve their ties to venture capitalists by establishing a transparent process for working with them and by better educating faculty members about how technology-transfer deals will work, according to a report to be released today by the University of Southern California.

The report, "Venture Capital-University Interface: Best Practices to Make Maximum Impact," draws on interviews with 94 venture capitalists across the country. It offers a broad framework for universities to improve their pitches and to generate successful start-ups from their research, and focuses heavily on setting the right expectations for faculty members, administrators, and their partners in industry.

For instance, four out of five venture capitalists interviewed said university-generated business plans do a poor job of estimating issues of timing, such as how long it would take a potential company to put a product on the market. Venture capitalists typically add two or three years to a university's estimate, the report says.

More generally, university administrators should spend more time reaching out to investors and building networks of contacts to solicit ideas and advice, the report says. Too often, it says, universities approach investors with lists of patents, poorly thought-out proposals, or the wrong types of projects.

"There are VC's out there that really want to get involved in universities," said Krisztina Holly, the report's author and executive director of the university's Stevens Institute for Innovation. "But VC's go with the people that they know, and they're busy too. I think that universities can take the first steps to start developing those relationships."

'They Want to Be in Control'

Another area that needs improvement is in properly setting expectations among researchers, Ms. Holly said. Too often, she said, faculty members are afraid to give up any kind of control of their research, even if they lack the money or the management ability to carry out its application.

"Very commonly, they will expect to be the CEO. They want to be in charge, they want to be in control, and they don't want to give up any equity," Ms. Holly said.

Tech-transfer officials at other universities agreed that faculty misperceptions can be major roadblocks to working out deals that help both sides. In some cases, faculty members simply fail to understand what investors are looking for, said Charlie Lewis, vice president for venture development at Arizona Technology Enterprises, which is part of the Arizona State University Foundation.

"There's this perception that VC's live in this other world, and oftentimes they have this stigma," said Mr. Lewis, who worked for two venture firms before moving to Arizona State. "Faculty, the overwhelming majority of the time, don't know how to interface with them or what the expectations are."

Those misperceptions can often be corrected if technology-transfer representatives work with researchers ahead of time to help them understand the pace and terms of a typical deal, the report suggests. It is often helpful to have researchers meet directly with venture capitalists in an informal setting, giving faculty members a better idea of what to expect, Mr. Lewis said.

"It's much more powerful for them to hear it directly from the VC's mouth," Mr. Lewis said. "It gets them excited, and it gets them motivated about they're doing."

Read this article on the Chronicle of Higher Education website.