Startups

Starting a company is very exciting and rewarding. In some cases, it can be quite lucrative. In all cases, it is a lot of work. These new entities provide great value to the community, the University, and the inventor. The University of Texas at Austin appreciates this contribution and will assist the UT entrepreneur throughout the process.

Invention disclosure

The first step of any activity involving a technology invented at the University is for the inventor to submit an invention disclosure form to OTC. The word invention is used broadly in this context to describe any discoveries or assets with commercial value—particularly intellectual property that could be patented, copyrighted, or otherwise protected.

Once you have filed your disclosure, a Licensing Associate will be assigned to your case and will lead and coordinate the patenting, marketing, and licensing efforts. Read more about this process in the Commercialization for Inventors section of this website.

During the patent or copyright process, your assistance will be required by the legal counsel in order to prepare the various materials.

Making the decision and getting started

Once the University has asserted rights to the technology (see Regents' Rules for details) and the appropriate intellectual property protection is provided, a licensee is sought. If you are interested in forming a company, you will want to be sure the OTC is aware of those intentions.

Generally, the first step is to decide if you really want to create a startup. An executive summary is a useful document in this initial stage, as it helps you formulate your ideas and your business model while providing a vehicle for discussion and advice. There are many factors that should be considered in making the decision. It is recommended that less experienced entrepreneurs seek advice from peers, mentors, and other UT and industry professionals who possess startup and business experience. Your Licensing Associate will be able to direct you to various resources, including the Austin Technology Incubator (ATI). The ATI, a program of UT Austin's IC2 Institute, provides its companies with strategic business advice and assists in locating funding sources. The ATI is also a great source for getting a company's basic infrastructure in place.

At this point, one usually has a decent sense of what lies ahead. If you decide that you are not interested in the activity of starting a company but that a startup is still the best vehicle for the commercialization of the technology, OTC may present the opportunity to potential investors and entrepreneurs. If you decide that you would like to start a company, the next steps include developing a more complete business model, drafting a business plan, assembling a management team, and approaching investors. Some inventors hand off almost the entire process and stay on in a minimal advisory capacity. Others assume the role of CEO and manage the entire affair.

Conflict of interest

You must contact the appropriate Associate Vice President for Research, who will manage the conflict of interest. Your Licensing Associate is able to provide you with the contact information. More information about developing and submitting a plan to avoid conflict of interest may be found at the website of the UT System's Office of General Counsel (OGC). Sample letters and plans are also available at the OGC website.

Obtaining rights to the technology

If you choose to create a company, you will want to obtain the rights to the intellectual property from the University. This is done through OTC. You should not negotiate the license agreement to your own invention. Appropriate individuals to do this negotiation include other officers of the company, investors, or retained counsel.

The terms of different license agreements differ as much as the technologies involved. Most of the compensation to the University can be collectively identified as a fraction of the success. Agreements for new ventures are designed to avoid an undue financial burden on fledgling entities.

Generally, each license agreement with a startup company will include a reimbursement of all patent prosecution fees and related expenses. The agreement also often includes some portion of equity in the new venture. Milestone requirements and associated payments, as well as revenue royalties, are also a part of the license agreement. The factors that determine the equity and royalty percentages include industry practices and the particulars of the technology.

Investors

UT does not have an investment fund but does have an incubator for startups. The Austin Technology Incubator (ATI), as mentioned above, can provide assistance in securing funding. Your licensing associate will facilitate the introductions to people in the ATI when appropriate.

For companies that don't engage in the ATI, there is no formal mechanism for assisting with the fundraising process. However, OTC has relationships with several investors. On a case-by-case basis, if there is a match, OTC will provide introductions to investors or investment groups.