Intl Technology Law Assn Conference, Discussion panel, June 3, Tallinn, Estonia on the subject of university startups, spin-outs, and spin-offs. Panel members: Dr. Burton Lee, Stanford; Dr. Matthias Holling, ETHZ, Zurich; Dr. Alar Kolk, Tallinn Technical University, Estonia; Dr. Erik Puura, Tartu University, Estonia; Matti Ylimutka, Aalto Entrepreneurship Society (Aaltoes), Aalto University, Helsinki, Finland

1. Panel on
University Research:
Spin-outs and Spin-offs
Dr. Burton H. Lee PhD MBA, Stanford Engineering, Moderator
International Technology Law Association
Fourth Annual Tallinn Conference
www.itechlaw.org
“Addressing the Challenges of the Technology Company
in the Expansion Phase”
Friday June 3 2011
10.55am – 12.30pm Panel Session
Tallinn, Estonia

2. University Research:
Spin-outs and Spin-offs
• Dr. Matthias Hölling, Spin-Off Program, ETH Transfer, Zurich
• Antii Ylimutka, Aalto Entrepreneurship Society/Aalto
Venture Garage, Aalto University, Helsinki
• Alar Kolk, Tallinn University of Technology, Tallinn
• Dr. Erik Puura, Director, Institute of Technology, University
of Tartu, Tartu
• Moderator:
– Dr. Burton Lee PhD MBA, European Entrepreneurship &
Innovation, Stanford University, Palo Alto

3. Panel Format
• 60 Minutes – Presentations & Short Questions
• 30 Minutes – Open Discussion and Q&A

4. Dr. Burton Lee PhD MBA
Panel Moderator
European Entrepreneurship & Innovation
Engineering School
Stanford University, Palo Alto
Burton.Lee@stanford.edu

5. Key Issues in the Nordic Region
• University TTO models and performance
• University entrepreneurship education
• University-industry cooperation
• Roles of student-led Entrepreneurship Societies
• Selection of university research focus areas by
professors
• EU FP7 research project outcomes, IP generation and
commercialization
• University reform and institutional changes

6. Update on Stanford University Initiatives
Entrepreneurship and Spin-outs
• Stanford Angels & Entrepreneurs
– Initiative of Stanford alumni
• Stanford Student Enterprises (SSE) Labs
– Aka “StartX”
– Based at AOL in Silicon Valley, CA
– Student-led initiative
• Stanford Office of Technology Licensing
– Recent 2010 Data and Results

9. Stanford OTL: Disclosure & Licensing History
1970 2010 Cumulative Active
Disclosures 28 457 ~8400 ~3000
Licenses* 3 90 ~3000 ~850
Royalty Income $50,000 $65.5 M $1.33 B
Staff 2 35
* Majority of disclosures are never licensed; many disclosures have one license; some disclosures have multiple
licenses

10. Stanford OTL: The Upside
• In FY09-10, $65.5 million in
royalties
60
Royalty ($ millions)
• From 1970 through 2010,
40
~$1.33 billion cumulative
royalties
20
• Typically, 10 to 15 years may
elapse between initial
0 invention disclosure and any
FY69-70 FY76-77 FY83-84 FY90-91 FY97-98 FY04-05 significant royalties
Fiscal Year

11. OTL: Looking Closely at Royalties
350
• In FY09-10, $65.5 million from
300 553 disclosures
– 32 out of 553 disclosures
250
generated over $100,000 each
# of Disclosures
200 – 2 out of 32 generated over
$1 million each
150
• From 1970 through 2010
100
– 66 inventions generated
50
$1 million or more
– 3 out of 8000 is BIG WINNER
0
FY05-06 FY07-08 FY09-10
• Royalties from large portfolio of
Fiscal Year
inventions
less than $10K
$10K - $100K
$100K - $1M
$1M - $10M
greater than $10 M

12. OTL: Conversion Numbers
~ 50% of disclosures are filed as patent
applications
some disclosures potentially licensable as
~8-9 disclosures copyright or biological materials
received per week 20 - 25% of disclosures,
including those patented,
are licensed

13. OTL: Revenue vs. Expenses
• OTL is self-supporting
$12,000 – 15% of revenue > operating expenses
$10,000
• Operating budget of ~$5.0
$8,000
million/year
($ thousands)
$6,000 • Patent expenses of ~$7.1 million/year
$4,000
• OTL has given ~$45.2 million to
$2,000 Research Incentive Fund
administered by Dean of Research
$0
FY69-70 FY76-77 FY83-84 FY90-91 FY97-98 FY04-05
• OTL has given ~$14.4 million to the
Fiscal Year Research & Graduate Fellowship Fund
15% of Revenue Operating Expense

14. OTL: Equity from Licenses
20 • Stanford’s philosophy
– Equity is one component of a
whole financial package
– Historically, most income is
# of Licenses involving Equity
15
generated from earned royalties
(~$965 M vs. ~$365 M)
10 – Equity is liquidated soon after IPO
– We can’t hold equity if licensee
conducts clinical trials here
5
• Equity from licenses
0
– ~190 companies cumulative
FY91-92 FY96-97 FY01-02 FY06-07 – ~105 companies currently
Fiscal Year – Equity liquidated to date
~$365.5 million

15. Incentivizing Research Commercialization inside the University
Distribution of Royalties inside Stanford University (1970-2010)

16. Proper Selection of Research Focus Areas for Intellectual
Content – and Commercialization Potential - is Essential

17. Research @ Stanford
$1.15Bn out of $3.8Bn Annual Budget
The “business model” of Stanford University, briefly summarized
+ an additional $189Mn in industry-sponsored research during FY2010

18. Its All About the Research …

19. Poor Selection of University Research
Focus Areas by Professors
• A major determinant of university IP production and
commercialization strength
• Professors in Europe often choose research topics based on their
own local knowledge and networks
– Small, local networks – out of date with latest development in the
West
– Do not survey research programs in US, Japan, UK, Germany, Finland
• www.nsf.gov, www.nih.gov
• Result:
– Research areas that duplicate research in US, elsewhere
– Research topics that are out-of-date and old
– Research themes with relatively little commercialization potential
• Important role for national STI agencies to establish national
research roadmaps, priorities and areas of interest as a guide to
universities

22. Key Questions I
• University TTOs:
– What are the most effective models here?
– Where do Baltic Region universities stand here in comparison to other
European universities?
• What are current models of university entrepreneurship
education?
– How effective are these programs?
– What is current thinking/practice in Estonia/Baltics here?
• Current bottlenecks in university-industry cooperation in
Estonia/Baltic Region; successful examples, future benefits
• How can Baltic Region universities replicate the successes of
the student-led Aalto Entrepreneurship Society?

23. Key Questions II
• EU FP7 research project outcomes
– How much IP is generated?
– How much of FP7 results are commercialized? Spin-outs, etc
• Selection of university research focus areas by professors as
a major determinant of Baltic university IP production:
– How is this done today, is this approach effective, what can be
improved here?
• What institutional changes are required at Baltic Region
universities?
– University reform as an unaddressed issue in Baltic Region national
innovation agendas

24. Dr. Matthias Hölling
Spin-Off Program
ETH Transfer, Zurich

25. KTT between Academia and Private Sector
– Core Relationships
Graduates
Contractually bound
Partners in the
Publications, Private Sector
Congresses,
Partnerships
Research
Exchange Programs, Education
etc.
scientific Private Sector
excellence Currently
unused research
results & resources
Research
Core of the
Technology Tansfer Academia
Activities
Adapted from: Andreas Steiner, Marina de Senarclens, UWS 2004
June 7, 2011 ETH transfer – Linking Science and Business - Matthias Hölling 25

26. Tasks in the Tech Transfer Business
Business Development
Acquisition of new projects Licensing
Sale of products and services Negotiation
Coordination with researchers License contracts
Spin-off Support
Consulting for researchers License controlling and admin.
Management of Spin-off
Process ... to Spin-offs ... without research project
Renting of rooms
Know-How, ... with research project
Inventions,
Licenses
Protection of IP Copyrights Funding,
Consulting for Project Contracts
researchers
Evaluation of inventions Services
Patenting Consulting for researchers
Admin. support / controlling
Internal Project
Management & Support Negotiating & drafting contracts
Personnel, Commun., Legal, etc.
Industry Project
June 7, 2011 ETH transfer – Linking Science and Business - Matthias Hölling 26

27. The “Endowment” from As basis for a
a University (ETH Zurich) successful company
 Faculty (ETH 415 Professors)
 Staff (6’300 FTE)
 Students (16’342)
 Excellence in research (21 Nobel Prizes) Good Ideas
 Publications (over 5’000 referred publications)
 Collaborations with industrial partners (>550 in 2010) Good People
 International collaborations
Market Insights
 Budget for research and IP protection
 Functional technology transfer
 Clear IP assignments
 IP protection, invention disclosures
 Licensing
 Track record from existing spin-offs (215)
June 7, 2011 ETH transfer – Linking Science and Business - Matthias Hölling 27

28. Spin-Off Definition
 Conditions for ETH Spin-Off:
 ETH technology, Know-how or SW
 Founders are ETH students, employees,
or alumni
 … and
 The business idea and plan are sound
and sustainable
 The team demonstrates entrepreneurial
skills
A private company of ETH employees or graduates
that commercializes products or services based on
technologies developed at ETH Zurich.
June 7, 2011 ETH transfer – Linking Science and Business - Matthias Hölling 28

29. ETH Zurich Spinoff Support
 Review of business idea / plan and help with incorporation
 Pioneer’s Grant
 “proof of concept” funding for prospective founders
 Licensing of intellectual property (IP): patents, software, know-how, etc.
 Preferred licensee
 Renting of rooms and infrastructure
 under preferred conditions
 up to 2 (+1) years (if available)
 Consulting & Coaching
 Business Plan, Business Management, Sales, Negotiation, etc.
 Link to seed money, BA’s and VC’s
 Venture Incubator, others
 Contacts to training, coaching, media, PR, etc.
 Label „Spin-off Unternehmen der ETH Zürich“
June 7, 2011 ETH transfer – Linking Science and Business - Matthias Hölling 29

30. The Spinoff Innovation Value Chain
And Support Structures Available to our Spin-offs
PoC,
Research Pilot, Prototyp Product
Development
Preparation Foundation Growth Maturity
Internal
*ETH Zurich directly involved
Support
Stimulation /
Training /
Coaching /
Collaboration
Kommission für Technologie
und Innovation KTI
Infrastructure
Financing
SlElClA
Swiss Private Equity
& Corporate Finance
June 7, 2011 ETH transfer – Linking Science and Business - Matthias Hölling 30

31. Antii Ylimutka
Aalto Entrepreneurship Society/Aalto Venture Garage
Aalto University, Helsinki

32. www.aaltoes.com facebook.com/aaltoes twitter.com/aaltoes

33. How it all began?
Fall 2008
• MIT
• Bengt Holmström
• Less talk, more action
Rolemodels:
• Silicon Valley
• Stanford
• BASES

34. The Community
A community of over 5000
students, researchers, alumni &
entrepreneurs
AES team of 40 entrepreneurs,
Students & researchers
6 Board
Members
Startups
http://www.aaltoes.com http://facebook.aaltoes.com

35. Culture
Starting up
Founders

36. Aalto Venture Garage
An old
industrial hall
conquered
and renovated
into a co-
working
space by
students

37. Suomi hyvinvoinnin jälkeen
The biggest panel discussion so far about rebooting the Finnish economy focusing on
entrepreneurship.
Jorma Ollila/Nokia, Shell Petteri Koponen/Jaiku, Lifeline Vtures
Risto Siilasmaa/F-Secure Wili Miettinen/Hybrid, Microtask
Björn Wahlroos/Sampo & Nordea Tina Aspiala/Eat.fi

38. Next up…

39. Antti Ylimutka
+358 (0) 40 7268383
antti.ylimutka@aaltoes.com
Twitter: @andynosebone
Skype: andynosebone

40. Alar Kolk
Tallinn University of Technology
Tallinn, Estonia

41. Innovation 1918 - 2018
Entrepreneural University For Science
Alar Kolk
Open Business Model &
Internationalisation!

42. Why
universities
need to found
spin-offs?

43. The most prominent spin-offs and inventors?
...academy dropouts!!!

44. We teach our students that
start-up is not cool!
Students’ future career aspirations , GUESS 2008

45. Students value the innovation services
but our universities do not deliver!
The use of the university services , GUESS 2008

46. iTUT
iTUT – innovative and international
Tallinn University of Technology 2011 - 2015
international + innovation

47. iTUT key topics:
How to recruit our professors?
How to recruit our students?
How to make money?
If you can’t explain it simply, you don’t understand it well enough.
– Albert Einstein

48. Integration & Balance!
Science
Teaching
Innovation

49. MeKTor
y!
Modern Estonian Knowledge
Transfer Organisation for You!
 Interdisciplinary platform
 Attracting international students
 Integration of study and practice

50. Research Problem Applications
Oriented Research Oriented Research
Science Quality Innovation $

51. iTUT value chain...
Ideas Develop
Technology MeKTory Test iTUTech Growth
NorTic ProtoFond Tehnopolis
TUT International Mobile Media
…creates value for professors,
students and companies –
enhances our ecosystem!

52. Spin-off
Ecosystem

53. Spin-off
Ecosystem
A spin-off ecosystem is a self-organising
platform aimed at creating a entrepreneural
environment for networked organisations that
supports the cooperation, the knowledge
sharing, the development of open and
adaptive technologies and evolutionary
business models.

55. Spin-off
Ecosystem
People Investors Legal
Branding Coaching
Shareholder Customers Business plan
Requierements Personal network
Patents
Exclusive license
Institute
IP
Know-how
Publications Software
Network Valuation
Professors
Growth Professors
Management Universities
Capital How much? Pre-money
Investors For what? For what?
Deliver innovation services and develop tools in
collaboration with you partners!!!

56. vs

57. Dr. Erik Puura
Institute of Technology
University of Tartu
Tartu, Estonia

58. Some aspects of university – industry
collaboration
Erik Puura
Director of the Institute of Technology
Head of industrial relations and innovation

59. We are participating in the informal network of
the university knowledge transfer managers called
UPPSALA ROUND TABLE
• University of Uppsala
• University of Gröningen
• University of Helsinki
• University of Linköping
• University of Tartu
University-industry collaboration methods and outcomes are
often discussed

60. We have structured university-industry relations into
4 activities:
• PUSH: we offer what the university has already produced
or is capable to provide (IP, knowhow, services, competence)
• PULL: we visit the companies without knowing exactly what
they need; the outcome can be very surprising
• STRATEGIC PARTNERSHIP: many activities, incl informal
meetings
• OPEN KNOWLEDGE TRANSFER: using media channels

61. OPEN KNOWLEDGE TRANSFER: using media channels
including
our own
channel

62. PULL: we visit the companies without knowing exactly what
they need; the outcome can be very surprising
• the experts have outstanding communication/selling
capabilities, not necessarily science/technology background
• the first contract may be small and irrelevant for the university,
even some help with project development (for SME-s)
• the offer includes project preparation for external funding

63. PUSH: we offer what the university has already produced
or is capable to provide (IP, knowhow, services, competence)
• the experts have science/technology background
• the offer includes project development and external
funding application preparation (if necessary)
• new method: open doors day for entrepreneurs every year

64. ON THE ROLE OF SCIENCE PARKS IN ESTONIA
The classical scheme
RESEARCHERS MAKE AN INVENTION
TTO HELPS TO DEVELOP A COMPANY
SCIENCE PARK HELPS WITH INCUBATION
is realised not so often
Science Park in the university town uses human capital,
wide knowledge, competences, creative atmosphere

65. TIME USE, ACTIVITIES AND RESULTS OF A RESEARCHER
STUDENTS TOP SPECIALIST IN COMPANIES, GOVERNMENT ETC
TEACHING
15 AUTHOR’S 10
GRADUATES RIGHTS FUNDAMENTAL
RESEARCH
WRITING TEACHING
MATERIALS WRITING NEW 5 PhD STUDENTS
25 PROJECT PROPOSALS PUBLICATIONS
TEACHING APPLIED RESEARCH
MATERIALS PROJECTS
RESEARCHER 15
2 AN IDEA WITH
COMMERCIALISATION
POTENTIAL
ADMINISTRATION AND 13
DEVELOPMENT CONSULTATIONS ANALYSIS
MANAGEMENT 6
? ?
4 PATENT
COMMISSIONS SPIN-OFF
COUNCILS
DEVELOPMENT LICENCE
PROJECTS 5
Time use - 100 alltogether © Erik Puura

66. SOME FINAL REMARKS
The discussion, if TTO is needed or not, is nonsense;
but TTO has to be flexible and provide customer-orientated
services
The discussion, if researchers need to do basic or appiled
science, is nonsense – if ever possible, one should do both
Protecting IP is just like brushing teeth. You do not do it
only because you want to get rich.
But also you do not brush your teeth 6 hours per day.
Knowledge is the only resource, use of which increases its
reserves
THANK YOU

67. University Research:
Spin-outs and Spin-offs
• Dr. Matthias Hölling, Spin-Off Program, ETH Transfer, Zurich
• Antii Ylimutka, Aalto Entrepreneurship Society/Aalto
Venture Garage, Aalto University, Helsinki
• Alar Kolk, Tallinn University of Technology, Tallinn
• Dr. Erik Puura, Director, Institute of Technology, University
of Tartu, Tartu
• Moderator:
– Dr. Burton Lee PhD MBA, European Entrepreneurship &
Innovation, Stanford University, Palo Alto

68. Working in Silicon Valley, Europe, Latin America and Washington DC
• Senior financial, technical and strategy advisory services for global technology innovation organizations
• Professional Services
– Technology startup and growth companies
• Interim CXO and Advisory Board roles
• Expert guidance & decision-making at the interface between market/customers, technology and finance
• Business development – industrial and government
• Business plan preparation/research/review; Government Grant proposal preparation/review
• Coaching and mentoring of CEOs and other CXO-level managers
• Assistance with government regulatory and policy agencies
– Angel, venture capital and private equity Investors
• Fund strategy, team selection and market positioning
• Due diligence: technical, financial, strategy and business models
– Public and non-profit R&D laboratories
• Technology transfer & partnerships; venturing and spin-out of companies; strategy and business development; grant applications
– Research universities
• Innovation-related models, policies and practices
• Technology transfer and licensing; industry partnerships and relations; development and strategy; grant applications
– National and regional government agencies
• Innovation policy formulation, analysis and review; cluster development strategy; economic impact studies
• Science & technology policy formulation, analysis & review: space, aviation, nanotechnology, software/AI/robotics, manufacturing
• Selected recent clients
– US/European technology startup companies – alternative energy, robotics/AI, software, Internet, nanotech
– Venture and private equity funds – aerospace, nanotechnology, ICT, computing, advanced materials, clean tech
– Office of the Prime Minister, Ireland; European Commission; National Science Foundation; NASA, National Academies
• Dr. Burton Lee PhD MBA, Managing Director
– Contact: Burton.Lee@innovarium.net Based in Palo Alto, CA near Stanford University
– Bio/References: LinkedIn Profile
– Lecturer, European Entrepreneurship & Innovation, Stanford School of Engineering
Copyright 2011 Burton H. Lee and
June 4 2011 68
Innovarium Ventures