Part 3: Challenges and Solutions for University Technology Commercialization – Gap Programs


Both universities and regional entities have become more active in providing critically needed support to faculty innovators with commercially relevant technologies.

This ongoing series of articles focuses on the vast and complex process of moving nascent inventions along the path towards successful products. Not only is this concept critical for addressing significant unmet needs across myriad sectors and industries, it is fundamental to establishing and maintaining a robust culture of innovation. Previously, I provided an outline of the overall process in Part 1 while Part 2 explored the nuances of licensing rights to the underlying intellectual property. In this edition, we will tackle the emerging concept of university “gap” initiatives. I recently attended the Covergence conference, where I was on a panel discussing venture creation. This annual summit for developing or collaborating with university technology and startup gap fund and accelerator programs has three primary goals:

  1. Share gap best practices and tactics
  2. Discuss gap challenges and insights
  3. Connect with other gap program leaders as well as corporate and investor resources

Research universities are increasingly taking it upon themselves to at least partially span the “Valley of Death” to get from basic research to a licensable asset and beyond. One of the primary reasons for this has been the movement of many investor and partner entities towards requiring more mature, de-risked technologies before they will take a serious look at it. The gap support they provide can be separated into two primary buckets, the first being directly to the inventor and the second to a startup that has secured the rights to the technology.

University gap fund and accelerator programs


Inventor. To set the stage, let’s use an example of a faculty innovator with a novel therapeutic technology in the oncology space which they believe has commercial potential. They’ve use RO1 and similar grants from agencies such as NIH and NSF to get their innovation to the point where they have promising results in cell models as well as limited, albeit encouraging studies in mice. The goal will be to increase the size of the in vivo work to include the appropriate controls and number of animals to be statistically significant (i.e. have a meaningful outcome). This might involve multiple doses and timepoints of administration, longer-term survival studies, an extensive analysis of a variety of samples. The inventor’s lab may have the technical expertise and physical infrastructure to conduct these experiments, or—if they do not—will need to use a contract research organization to perform them. In either situation, the costs could quickly reach six figures. Basic research funding might cover these expenses, especially in the oncology field, but other therapeutic areas may not have access to such largess. In this case study, the inventor’s university—in collaboration with state incentives—has established a Proof-of-Concept (POC) grant program, with awards of up to $250,000 over a one-year period, which can be used alone or combined with other funding sources to substantially move the needle on the technology. In addition to the monetary benefit, the inventor and their team (e.g. post-docs, grad students) participate in an educational component led by individual with expertise in the development and commercialization of innovation.

shutterstock_1884612922-editIn some cases, POC funding may not be available, but mentoring is. Increasing academician understanding of the technology translation process—something which is often foreign to them—is an important concept. Case in point: Asking the inventor and their team to validate the assumption that there is unmet need and market opportunity for the technology through the customer discovery process is one essential component. Participating in I-Corps or similar methodologies should be a required step in any curriculum. A potential risk is that the technologies chosen for funding may not always have a high likelihood of technical and/or commercial success, which can be mitigated by including the optimal mix of expertise in the selection process. An ideal balance would comprise individuals with relevant scientific, preclinical and clinical, regulatory, patent and commercialization perspectives as well as prospective investors and partners who could potentially take the baton as the technology matures. Such a panel of experts would ensure that the scope of work funded by the POC delivers value enhancing/de-risking milestones during the course of the project timeline.

Point of emphasis: Although many traditional venture capital firms have set a high bar for the technical readiness level of an asset, there is a growing number of earlier, seed-stage investors often called venture builders/creators/studios who work directly with universities to create and fund spinouts focused on a specific technology. Having this type of investor involved—if at all possible—in screening and selecting projects for gap support can provide substantial benefit, especially if they voice interest in funding a future startup should certain milestones be reached using gap and/or other resources.

Startup. University Technology Transfer Offices (TTOs) often place a heavy emphasis on spinning out new companies, sometimes without a clear understanding of the likelihood of success. This may be due to the fact that TTOs usually don’t have the expertise in-house to perform the level of due diligence needed to flesh out the technologies with the best chances of achieving meaningful progress from those with little-to-no hope. Frequently, these startups are led by the inventor themselves or someone from their lab, which—as discussed in numerous prior articles — is not typically a recipe for success. In some ways, university technologies would better-served if the bar for creating a company was higher, and the finite resources that can be applied to these startups was allocated to only those with the strongest scientific- and business-cases. Some universities require a business lead be in place and other milestones such as initial funding, developing an operating plan, regulatory guidance, etc., prior to optioning or licensing the rights to the startup.

With our hypothetical cancer therapeutic, let’s assume that the POC funding led to results validating the drug candidate in the appropriate animal model, and a newco has been established with a somewhat experienced individual at the helm. The company has been accepted into a startup accelerator with close ties to the university, and—as a result—is able to participate in programs that will help it to generate the milestones necessary to secure the option/license.

In this instance, the university has an investment fund which can provide up to $250K in seed funding, but requires an outside lead investor to commit at least 2x that amount before they can write a check. This approach is smart in that it involves objective validation by an entity not influenced by the university, and the various complications this entails. Furthermore, it limits the exposure of the university fund. As is often the case, the lead investor—following extensive due diligence—responds with several requirements for their participation in the seed round:

  1. Conduct a thorough freedom to operate assessment of the foundational intellectual property
  2. Replace the current CEO/business lead with an individual approved by the external investor
  3. Renegotiate several components of the license agreement such as milestone payments, royalty rate and change of control fee.

The point I’m making here is that there is a lot that can be done to anticipate the needs of future investors back when the company was formed, such as preventing the business lead from becoming entrenched or structuring license agreements to be more investor-friendly, just to name a few.

Funding sources for university gap programs

Picture2 copy-1As touched on earlier, universities should work with venture creation firms whenever it is feasible to move technologies beyond the "valley of death." My firm (VIC Tech) has formed and invested in numerous companies to accelerate the development of university life science innovation so many times that we have created best practices informed by past misteps. One of these is that we don’t’ invest in pre-existing companies and—as such—avoid the myriad legacy issues that frequently come with them. To this point, VIC provides the operating team for each of our startups from our own ranks: Individuals with exceptional experience growing and exiting companies working on promising therapeutic, medical device, diagnostic and other related technologies. The expectation is that the interim leadership will take the startup up to the Series A financing, and step away to take the helm of a recently formed newco. We intentionally structure the license terms to facilitate future investment rounds (see Part 2 of this series). Our overriding goal is to focus the use of both dilutive and non-dilutive funding to move the technology forward as quickly and cost-effectively as feasible. Another element of the VIC model is the establishment of regional offices across the US to establish deep connections with local sources of innovation and adjacent ecosystems.


For technologies that are not quite to move forward with as an investment opportunity, the VIC Foundry provides a mechanism using grant and/or contract funding from a variety of resources to get the innovation to a point where it is ready for newco formation. This approach creates a means of accessing the resources beyond what is typically available to university-stage assets with prospects for real-world impact.