Only a few companies can afford to spend millions of dollars onresearching and developing new technologies for their product lines, butthat doesn’t necessarily exclude smaller businesses from getting theirhands on cutting-edge innovation.
Each year, thousands of discoveries aremade at universities, and many of them are left on the shelf because they can’tfind a suitor to take them to market.
That problem has been turned intoan opportunity by a Plant City, Fla., specialty financing company called”Utek.” The eight-year-old enterprise has cleared many of theobstacles to marrying academic tech with growing businesses through acreative model that allows companies to swap equity for the innovationsthey need.
Recently, the E-Commerce Times spoke with the CFO of Utek,Carole Wright, about that model and how it’s enabling small to mid-sizedbusinesses to turn the world’s universities into their own R&D departments.
E-Commerce Times: How does Utek turn universities into R&D departmentsfor growing companies?
: We start with the customer. Once we have a customer, we find outwhat area of technology they’re looking for.
Then we go searching. We have a search database that’s been put togetherover the last year that has about 40,000 technologies that we’ve foundin universities and labs in the U.S. and abroad. We have a scientificteam that reviews those technologies, and if they find one that’s aleading technology and a fit for our customer, we let the customer lookat it.
If everything goes well, we will set up a company to purchase thelicense for the technology. We may also put in money to help with themarketization and pay consulting fees to the inventor. Then we willtransfer the technology to the customer company in exchange for stock.
E-Commerce Times: So you always start with a company looking fortechnology first?
: Yes. We never purchase technology without a customer in place.That’s how we’re different from our competitors. A lot of them own thetechnology before they have customers for them.
E-Commerce Times: How does your model level the R&D playing field forsmall and mid-sized companies?
: It levels the playing field because it allows companies to payfor technology with stock rather than cash. A lot of these companies arelow on cash. Also, having a new technology within their company givesthem a little better edge for getting financing. If you have a newtechnology and it’s really promising, you usually have a better abilityto get financing from outside sources.
They’re able to get new technology into their company without spendingmillions of dollars that they don’t have for research because theuniversity has already spent those millions on the technology.
E-Commerce Times: How do universities benefit from your U2B model?
: What we offer them is 100 percent of their royalties. Some ofour competitors take part of the royalty stream later on as the thetechnology starts to produce revenue. We don’t take any part of theroyalty stream.
The university is very happy about that because they use royalties tonot only pay themselves, but they usually pay the inventor from thoseroyalties.
E-Commerce Times: Is another issue here that businesspeople andacademics are often like oil and water — they don’t mix well together?
: That’s right. One of the things our founder, Cliff Gross, brought tothis company was his experience as an inventor who worked in theuniversity system. We also have several scientists who have workedthere. So we have people with a background in how that system works.
We can usually get universities to move faster on deals than they wouldordinarily move. We usually can close a deal with a university inbetween six weeks to three months. Normally, a university negotiatingone of these deals on its own will take one to two years to do it.
E-Commerce Times: Many universities have in-house technology transferdepartments. Do you ever get into turf wars with them?
: Usually not. They just find us as another source to get theirtechnologies out to the world. When they find out we don’t want any partof their royalty stream, they don’t view us as a competitor. We’re notreally taking anything from them. We get no fees from the university.The only person that pays us is the company that’s our customer.
E-Commerce Times: Financing developing technologies with your own moneysounds like a risky business. How do you manage that risk?
: It is risky, and the fact is that a lot of these companies thatwe’re investing in may not make it, but we have a five times markup ontechnology costs that helps us make our money back.
E-Commerce Times: How does that work?
: Five times is an average. It may be three or eight times. Whatwe look at is the amount of cash we’re outlaying and ask for five timesthat amount in equity. So if we give a company $100,000, for example, wewould review $500,000 in stock.
E-Commerce Times: What technology areas do you see as hot for investmentin the next 12 months?
: Anything in the green space — fuel economy, anythingecological — and healthcare industry technology.