Senior Licensing Associate, Office of Technology Licensing, Stanford University
Sable's David Kitley met with Kirsten Leute from Stanford's Office of Technology Licensing to discover more about Stanford, the Technology Licensing process and to enquire about entrepreneurial characteristics at the university.
Dave (D): What is your position, and briefly describe the role and that of the Office of Technology Licensing at Stanford?
Kirsten (K): Senior Licensing Associate, where I act as a liaison that works with inventors or researchers who produce inventor disclosures where they feel they have identified commercially realizable ideas and opportunities, largely in the physical and life science industries. We receive around 500 invention disclosures per calendar year, and each licensing team handles approximately 250-400 active inventions at different stages of technology licensing and realizing economic value. The group is structured to focus on specialist areas on a case-by-case or team basis. I work on biotechnology mainly, but also electronics/engineering and software. The office sits under the Dean of Research at the university. Essentially we are linked but not micro-managed or hands-on. This helps with our functioning, we are given guidance when we need it but this generally only comes when we ask of it or are having issues.
D: How do you enable technology licensing?
K: We see ourselves, and we hope that others see our function, as 'facilitators.' We help the technologies get out of Stanford into industry to have them develop into products that will help people. So we are not policing the university and enforcing policy, rather we expect people to come to us to tell us what they think is technically and commercially applicable. Work with us on licensing, patenting and marketing, to help get it out to industry. We don't police for multiple reasons: the Stanford IP policy states that if there are no sponsored research or other encumbrances and the researchers believe it would be in the best interest of the technology, they can place the technology in the public domain. But if ownership of IP is pursued through a disclosure then it will belong to Stanford if it falls under ownership policy. We get over 500 disclosures a year, so at this stage there are plenty of opportunities in the pipeline that we are dealing with already. At the same time, we are also activating and in-activating disclosures and patents from prior years.
D: How does the running differ now in comparison to when you originally started out?
K: We originally started in the 1970s, Tech Transfer was very nascent. The director at the time went and spoke with the researchers informing them of the new office and its intent to patent new thinking to discover if researchers would be interested. Sponsored research was different back then as federal sponsored research was subsequently owned by the government. We petitioned the government so that we could license ourselves, and this act is what would eventually lead to the current policies in place, the Bayh-Dole Act, that came in place in 1980. The system and process now is well established and students and researchers know to come to us for assistance. This is not limited to Stanford, a lot of the Universities in this country and internationally also have developed Tech Transfer offices, know that registering IP rights is critical in order to get an idea beyond the lab.
D: The Stanford Office has license revenue from Google, how does this work based on the aspect that it is not life or physical sciences?
K: A part of the original Google algorithm and associated software were developed while they were students at the University as part of research with their mentor. This falls under the University policy for general responsibility of students and where one uses more than incidental use of university resources. There is a lot of entrepreneurship going on at the university that doesn't touch us whatsoever. This is one of the main reasons why people come to Stanford or choose to because they want to be in this environment.
D: A stat being thrown around, as an example, is that greater than 75% of student in the Stanford Business School Class are either involved in or starting up entrepreneurial-type business. Compared to RSA, a lot of Graduate Students are absorbed by corporates. When was there an inflection point for Stanford?
K: It changed in the late 70's or 80's. Going the corporate track, especially on the U.S. coasts, is not very popular anymore. However, I think in other parts of America and the world, there is still a large corporate push and pull. The model in Stanford is not a mirror of where people join corporations and work their way up. It is almost disruptive in its drive to form new businesses. At the same time, perhaps ironically, the people in our office have been there for a long time, mainly because we like what we do. We get the academic and the entrepreneurial involvement.
D: Based on your receipt of ~500 Investment Disclosures a year, what is the success rate of registering and licensing these?
K: Roughly between 20-25% of these are licensed. There are a number of ways to evaluate this as this may or may not be a success depending on how you view it. Even fewer licensed disclosures make it into products, and also few that may bring in meaningful income to the university, which is $100,000 or more.
D: How do spinout companies differ? Does it make a difference to the success if a spinout is created?
K: We treat spinout companies the same. We don't create the spinout companies, but if the researchers form a company around their invention disclosure they subsequently may become the licensee. How the licensing may work differently is that the University will take equity in the new company in exchange for lower licensing fees early on in the company's life. The university will subsequently sell its equity stake once there is a liquidity event, as this is policy, which also reduces conflicts of interest. In my opinion it does make a difference if a spinout is created as this may assist in creating a market or demand for it in a developed state. We are lucky that so many researchers or students wish to create spinouts, fully aware that not all universities have this luxury. They have the focus, the drive, knowledge of the particular technology and they have the heart to take it forward.
D: How do you see the role of TTOs, Business Incubators, and Accelerators in enabling Entrepreneurship?
K: These are all great mechanisms to aid in facilitating entrepreneurship, but there needs to be a clear differentiation between entrepreneurial activity and pure entrepreneurship. Essentially these all assist the former, but what is critical is to have the latter that is formed through the identification and the creation of ideas.
D: Is entrepreneurial education and behavior limited to the graduates?
K: No. A program called SPARK was created as an innovative way of educating those researchers who never previously thought they would become entrepreneurs with the critical business training required to commercialize their ideas. The program offers mentorship and guidance across the faculty, including grants to facilitate the research process.
D: Can you describe Entrepreneurship at Stanford?
K: Entrepreneurship at Stanford exists within the students, faculty and the staff. People have to be self-motivators and you can't wait for people to come to you necessarily. You need to put yourself out there to join something or start something. I am a prime example of the ecosystem here how it generates this mentality as I arrived here not wanting to put myself out there, but now I do it all the time. You become immersed in this culture. You start thinking I can do that, and it takes on new attributes. Also everyone here is so positive and excited, willing to try anything.
D: Are researchers and staff contracted in a specific way to help drive innovation?
K: There is no formal contracting. There are researchers that are more prolific than others. It is not part of their tenure decisions. Some universities are starting to consider having investment disclosures as a part of contracts but not at Stanford. Our primary focus is on research and education, and out of this innovation is created. But the system and process is there if they wish.
D: Is the Stanford Tech Transfer Office profitable?
K: Yes. We have been profitable since the early 80's. We generally distinguish between the money that Stanford receives for research, and then the process of technology licensing. We isolate the licensing process and this is how we measure profitability. We receive well over $1Bn for research, so are not profitable if you incorporate everything, but before we started tech licensing we were receiving grants, so we have isolated based on this opportunity cost of not licensing. So essentially our expenses for tech licensing (salaries, rent, patenting, etc.) is offset by the licensing revenue, the 15% we take off from the revenue for administration expenses.
D: Can you break down the revenue received in comparison with when you licensed the technologies?
K: Our licensed revenue largely comes from a few products, with the largest patent expiring in 2 years. This may affect our profitability going forward. We have been fortunate to have 3 phenomenal technologies, amongst other successful technologies, which have brought in over $50m each in total. It is historic patents bringing in the most revenue, emphasizing it is a long-term process to bring in revenue. It took Stanford 10 years initially to have a profitable year, and 15 years to get completely out of the red. However, we only did because we were lucky with one patent that was doing extremely well. So now we are looking for that next one, but that being said it may come from something we have already licensed out and it requires time for technologies and the market to develop. It takes a long time, and you have to be lucky in some ways, you also need lots of investment disclosures, which can increase your chances somewhat.
D: What are the current obstacles at Stanford, if any?
K: There are lots. Mainly funding for the start-ups. It is a tough environment. Others include finding the right space, getting to the next stage of development, the right people for your team, but all this has its root with finding initial funding to support it. In previous years there was more funding from VC's, but has got tougher in the last few years. We see this in the decreasing success rate of those spinouts that take license options and are unable to convert them due being unable to unlock funding.
D: Finally in comparing South Africa to America, America has been extremely successful with innovation, why is this so?
K: Americans aren't afraid to fail. They're ok with that. They get up and start again. It's funny, we don't have the social system to assist failures as easily as other countries. People here are more willing to try things and go out on a limb more than in other cultures. A big factor contributing to this is that there is risk with starting a business in comparison to being in a large corporation. An example would be the mindset of earning an 'ok' salary for the safety of a salary, in comparison to risking leaving the safety of a salary for something riskier. Americans are more of the opinion that doing ok isn't great, and I want to do something more exciting. Furthermore, it's not up to the government to provide this, it has to start from the ground up and with you. The government can help in certain ways, but it needs to be taken from individual perspective to understand how 'you' can change things. It's a different way of thinking.
D: What are the key characteristics of entrepreneurs that you have observed in your time at Stanford?
K: Enthusiasm, drive, willing to go out on a limb and talk to anybody, not willing to take 'no' for an answer, and really believing in something.
About Kirsten Leute
Kirsten has sixteen years of experience in university technology transfer. Most of her experience has been with Stanford University, but she also spent one year at the German Cancer Research Center in Heidelberg, Germany. Specialties include: Licensing between universities and industry.
For more information see: http://otl.stanford.edu/
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