Technology Transfer and New Venture Creation at Stanford University

Stanford University Hoover tower

Photo credit: yuyang226

I was fortunate to attend a facinating talk by Katherine Ku, Director of Stanford University’s Office of Technology Licensing (OTL), on her role to commercialise the inventions coming out of an institution at the very heart of Silicon Valley.

Despite the central role that Stanford has played in building Silicon Valley, and alumni who have formed companies such as HP, Sun Microsystems, Yahoo!, Paypal and Google, I was surprised to learn that cumulative earnings from technology developed at the University are just $1.3 billion since 1970, when the technology licensing office was established. I say “just” because Stanford’s total annual budget is $3.7 billion. Donations alone last year were $640 million, ten times the earnings from licensing out inventions in the same period.

But when looking at the total earnings figure you have to be aware that the University does not “own” all inventions, only those in which staff or students have used University resources to produce the invention. (In these cases royalties are split equally three ways between inventor, department and school.)

Pareto in action

65% of licensing earnings came from just 3 of the 8000 inventions which have passed through the doors of the OTL:

  • Google’s improved hypertext searching: $337 million
  • DNA cloning: $255 million
  • Functional antibodies: $229 million

Sadly for the University they struggled to put a value on Larry and Sergey’s invention and opted for 2% of equity, and immediately cashed out post-IPO. For other more obviously monetisable inventions they tend to go for a annual maintainence fee and revenue share instead.

Other notable inventions which have generated decent revenues for Stanford included FM sound synthesis and digital subscriber line technology (DSL).

Highs and lows:

The schools of engineering, physics and medicine are the top contributors to Stanford’s licensed technology; the business and law schools are joint bottom. It seems there’s an opportunity for both schools to get more involved in the commercialisation of the inventions their colleagues are producing.

Warning: here is a business opportunity!

The OTL has a bank of 3000 inventions packaged and ready for you to use! They’ve even put them on their website that can be searched searched using their Techfinder tool.

There’s no geographic bias, whether you are in Cupertino or Canberra you can take a license, and there’s no preference to startups or multinational corporations. In fact, most technologies end up being licensed by small startups. While they don’t have a preference, they do have criteria, and want to do whatever is best for the technology or invention, making it a commercial success.

When licensing to startups the usual criteria applies:

  • Quality management team
  • The investment to commercialise the opportunity
  • Realistic business development plan (just a few pages!)
  • Passion and enthusiasm

Is the Stanford approach the right one?

Stanford’s approach is interesting and successful but is just one way of getting inventions out there. Other Universities take a much more selective approach and pick a few things they consider to be winners and spin out commercial enterprises themselves, (Stanford’s view: “research and education comes first”, and want to avoid any potential conflicts of interest), others choose to put everything out into the public domain. As for Katherine Ku’s own view of what is best, it all depends on the institution; there is no right or wrong approach. She hopes that maybe one day some of the inventions can be passed “down the line” to smaller universities or colleges who are more practically focused and can take something – often still obscure and needing more work done – and make progress on the road to commercialisation.

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Katherine Ku appeared as part of the Silicon Valley speaker series organised by Michael Clouser of the University of Edinburgh Business School and was co-sponsored by The Edinburgh Entrepreneurship Club, the School of Informatics and Informatics Ventures.

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One Response to Technology Transfer and New Venture Creation at Stanford University

  1. Scott,
    This is an interesting post. I like how you dug into this and showed something of an insiders perspective.

    I recently read “The Google Story” by David A Vise and found the bits about Stanford really interesting.

    Essentially Google used a lot of Stanford resources in the beginning and Stanford led them to an early investors but really got a minor share of Google stock when it was all said and done.

    The story seemed to show that Stanford wants their students to be a success more than they want to ‘get rich’ and take ownership of their inventions. Now, I don’t know if that’s true, but that was my interpretation of how they dealt with Google.

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