General University Reference Utility
Guideline IPG03 WHAT TO EXPECT WHEN LICENSING A PENN STATE TECHNOLOGY
INTO A START-UP COMPANY (Formerly RAG14)
Policy Steward: Office of the Vice President for Research
Forming a company is a demanding and challenging undertaking requiring a
significant commitment of both time and money. While forming a company can be a
positive and rewarding experience, it is not for everyone. If you are
considering becoming involved in a start-up company, please review these
guidelines carefully and then schedule a meeting with the Office of Technology Management to discuss the process.
- The Penn State Office of Technology Management (OTM) negotiates license
and option agreements on behalf of The Penn State Research Foundation (PSRF),
which is responsible for administering the financial and business aspects of
technology transfer for Penn State University.
- Faculty are required to be highly cognizant of, and address any
conflict of interest issues that arise due to their involvement in companies,
and to be particularly sensitive to issues surrounding human effects
inventions. Strict compliance with the conflict of interest policies delineated
in the following is essential:
AD83 - Institutional Financial Conflict of Interest
IP06 - Technology
Transfer and Entrepreneurial Activity (Faculty Research)
RA20 - Individual Conflict of Interest
HR91 - Conflict
- Universities are obligated by federal law to find the best possible
route to commercialization for their technologies. Therefore, the OTM must
consider and evaluate all reasonable licensees. Companies sponsoring research
will be considered as likely successful commercial outlets because of their
demonstrated resources and interest in the work.
- Negotiations will be conducted impartially and objectively. Faculty
companies cannot receive any preferential treatment on licensing terms.
Agreements with companies in which faculty are involved will receive the same
level of review and scrutiny as would any other agreement. It is highly
recommended that faculty not directly participate in negotiations with
- The OTM, in conjunction with the Office of General Counsel, is responsible for protecting the interests of the University
and University inventors who are not participating in the company to whom the
technology is being licensed.
- There are extensive resources available in the Technology Transfer
Office in addition to the OTM to support and assist companies formed from
University technology. It is the responsibility of the companies to avail
themselves of those resources.
- University inventors who are principals, founders, or participants in
the company being licensed must realize that their business interests may not
completely align with the University's and as such, are responsible for all
aspects of their own interests including financial and legal implications of
stock ownership. Separate legal counsel and financial advice is recommended.
Founders are responsible for the legal expenses associated with forming a
company. It is advisable to obtain estimates of these expenses in advance.
- Professional operating management of the company at the level of
CEO/COO. Faculty should not attempt to manage start-up companies. Although
positions such as Chief Technical Officer may be appropriate, most venture
capital firms will not invest in start-ups that have faculty members as
operating management. Faculty need to be cognizant of the highly competitive
and complex nature of the business world and the level of effort and commitment
which will be required for a company to be successful.
- A thorough and comprehensive business plan. Typical business plans
address the following:
- Mission statement and strategy
- Service/Product description
- Market analysis
- Competitive analysis
- Key management
- Financial projections
- Capitalization schedule
- Projected profit and loss
- Exit strategies
- A reasonable level of capitalization to support the initial
operations of the company and a plan for approaches to subsequent
- Ability and commitment to reimburse all current and future patent
expenses. It is not unusual for patenting costs for domestic and international
filings to quickly exceed $100,000. The IPO maintains records of current patent
expenses and will estimate future patent expenses based on defined patent
protection strategies upon request.
For questions, additional detail, or to request changes to this policy, please contact the Office of the Vice President for Research.
Effective Date: January 7, 2013
Date Approved: September 14, 2012
Published: January 7, 2013 (Editorial changes- November 19, 2015)
Most Recent Changes:
- November 19, 2015 - Editorial changes. Title changes FROM "Vice President for Research and Dean of the Graduate School" TO "Vice President for Research."
Revision History (and effective dates):
- October 25, 2013 - Editorial changes. Addition of policy steward information, in the event that there are questions or requests for changes to the policy.
- September 10, 2013 - Editorial change in GUIDELINES section; replaced reference to Policy RA21 - Institutional Financial Conflict of Interest Involving Sponsored Projects, Dedicated Gifts, Research, Scholarship, and Technology Transfer (obsoleted) with Policy AD83- Institutional Financial Conflict of Interest.
- July 25, 2013 - Editorial change; references to the Intellectual Property Office have been changed to the Office of Technology Management (OTM), as the Industrial Research Office (IRO) and the Intellectual Property Office (IPO) have merged to form the new Office of Technology Management.
- January 7, 2013- Policy moved from the Research Administration section, formerly named RAG14 - What to Expect When Licensing a Penn State Technology into a Start-Up Company. Moved to new Intellectual Property section and renamed Policy IPG03 - What to Expect When Licensing a Penn State Technology into a Start-Up Company. (Moved; no changes.)
- July 13, 2010 - Editorial changes in GUIDELINES section: (1) Cross-reference to RA05 deleted in 2nd bullet, and (2) In 5th bullet, reference added for "the Office of General Counsel," making the appropriate reference to this newly-created office and its role in working with IPO to protect the interest of the University and University inventors.
- April 16, 2003 - New Policy Guideline.