In our previous article, we discussed the Routes to the Valley of Death — also known as pitfalls along the path to commercialization for intellectual property. These include catch and kill — in which a company snaps up intellectual property that may threaten an existing line of business for them, sit and wait — in which a licenser fails to commercialize technology and instead lets it linger on the shelf in perpetuity, and private party — in which IP creates major advantages for existing private companies rather than new entities and net new opportunities in the marketplace. If a researcher can avoid these common pitfalls on the way to market, they must then decide on the correct path to commercialization for their technology as well as their personal goals.
Paths to Commercialization
There are a few established paths to commercialization for PIs who have developed novel technology through their research at an institution.
Option 1: Direct Licensing
Direct licensing is probably the most common and well known option for technologies developed through institutions. With a direct license, a founder relinquishes control over their technology in exchange for a fast and relatively low effort avenue to financial return.
Besides the danger of catch and kill, which we covered in the last article, there is an emotional component to this path. For PIs who have spent many years developing important technologies, relinquishing all control can be difficult no matter the paycheck potential. It can be especially difficult to relinquish control if the licensing entity then fails to commercialize or applies the technology in a way that the inventor disagrees with.
Option 2: Create a Startup
Theoretically, if a researcher is not going to sell their tech to someone else, they intend to take it to market themselves. On this path, a founder establishes a new company and recruits a business lead to help them seek funding, establish market traction, and implement organizational structure.
While this sounds straightforward, the question of how to get from “zero to one” is more complicated than it may seem. Though PI’s are experts in their fields —sometimes arguably the single most informed human in a particular subject area — they’re not always experts in organizational architecture, market analysis, talent recruiting, or company legal structuring.
In a 2015 TEDMed talk, Founder and Director of Stanford University’s SPARK program Daria Mochly-Rosen describes the struggles she encountered trying to take her own novel treatment for heart attack and stroke to market. After experiencing the frustration of watching a treatment that could radically benefit patients fall by the wayside, she founded her own Pharmaceutical company. That’s when she realized how little she actually knew about the drug development process and the business requirements of taking an invention from the lab to the bedside.
“There is a huge knowledge gap between academia and industry,” she said on the TedMed stage, “and equally disturbing, there is a huge cultural disconnect.” While Mochly-Rosen’s work focuses on drug development and bringing pharmaceuticals to market, this academic/industry gap exists outside of the medical realm as well.
The hundreds of small decisions at the very beginning of business building are immense hurdles made up of non-glamourous minutiae. Navigating legal frameworks, setting up technical infrastructure, securing office space, claiming social handles and web domains — taking out the trash and running payroll. This, on top of the existing responsibilities of running a full time lab or functioning as active university faculty, is a confusing and overwhelming web for many would-be founders.
That’s where the “business lead” comes into play. But the factors of time, attention, and lack of resources that make it hard to go alone are the same ones that make it difficult to recruit the right person to this critical co-founder role. The opportunity cost of making the wrong choice is astronomical and there are very few networking or financial resources available to help a PI recruit world-class talent to business lead roles.
Option 3: Resource-Assisted Startup
While resources may be hard to come across, they do exist — usually in the form of an incubator, accelerator, or private innovation program designed to help new companies gain footing in the market. On this path, a researcher/founder establishes a new company and, once certain milestones are met, a partner organization (accelerator, incubator, industry organization) provides support on the path to commercialization.
The key here is those milestones. As covered in the last path, reaching those first few milestones is incredibly difficult and there’s still a monumental gap between the very beginning and the demonstrated market traction that most accelerators require for entry. And that’s assuming that the researcher is able to nab one of those coveted spots at all.
The problem of this path is the same as the previous path — the PI still has to run the first leg of the marathon alone.
Enter Venture Studios.
Option 4: Venture Studio
On this path, a founder partners with a studio's expert, hands-on team to establish a new company and chart the path to commercialization together.
To further the marathon analogy: Studios make founders a spaghetti dinner the night before and help them get to the starting line.
What is a Venture Studio?
As outlined in the paths to commercialization above, traditional venture capital usually requires an existing level of company maturity, organizational structure, and some kind of market traction to invest.
Unlike traditional venture capital, venture studios build companies from the very earliest stages. In the case of intellectual property, this means doing the hard work alongside researchers/founders to prepare that IP for market viability, determine the right go-to-market strategy, business model, and initial team required for success. Studios help founders successfully arrive at the point where traditional methods, like accelerators or VC firms would be ready to pay attention.
The 1870 Ventures Studio Model
At 1870 Ventures, we have a proprietary process designed to wrap business architecture around promising intellectual property. Through this process, we ideate, validate, build, and scale new businesses alongside founders, maximizing the potential of each opportunity.
In practice, this means that 1870 Studios is constantly identifying market gaps and opportunities in our areas of focus and we can then scout promising intellectual property that would create a competitive moat in those areas. We’re then able to build the entire entity — legal, financial, technical, and brand — to bring that company to life. In this way, we operate in the very earliest founding stages, truly from zero to one, as co-founders to the Principal Investigators.
A Bridge Over the Valley of Death
For IP that can survive through the pitfalls and challenges of licensing to make it onto one of the the paths to commercialization — the hard work has just begun. There are many reasons that intellectual property falls into the aforementioned Valley of Death and many reasons that PIs struggle to create their own companies around IP. At 1870, we focus on these three primary hurdles facing would-be founders:
Lack of Clear Commercial Pathway
We’ve established elsewhere in this article that the path from zero to one is a steep one and it’s hard to chart a path if you’re not sure where you’re even heading. Because the venture world centers around sectors, themes, and theses — a constantly growing knowledge of markets and the existing gaps in those markets, studios are able to help researcher/founders place their pin on the map. Charting a clear path to commercialization and identifying places where intellectual property could provide a clear market advantage.
Lack of Experienced Leadership
Talent scouting is difficult for even the most sophisticated companies — and the cost of a bad hire has both financial and morale-depleting implications. For a first time founder though, identifying that ideal first “business lead” is absolutely critical. And the cost of getting it wrong is catastrophic.
Besides the industry/academia gap that Moshley-Rosen identified, it’s simply not feasible for many researchers to dedicate the necessary time to leading a company (even if they happened to be the right fit, which they usually aren’t). Researchers often have full, demanding schedules and are unable to drop their responsibilities to spearhead the creation of a new company with the proper amount of attention. Or even to recruit that diamond in the rough candidate who will help their fledgling idea succeed. At 1870 Ventures, we place a huge emphasis on sourcing and installing world-class leadership because we understand the importance of these early decisions.
Lack of Earliest Stage Funding
The path from zero to one is expensive, sometimes even more expensive for deep tech companies. We challenge you to find someone who thinks of fundraising as easy and enjoyable (please send them our way, if you do!). The connections, manpower, and hours required to raise earliest stage funding are often prohibitive to even proven founders. At 1870 Ventures, we're prepared to spend a great deal of time and money on great ideas and that starts from the moment we initiate due diligence. Access to the very first funds needed to take an idea from the lab to the proverbial starting line are a massive benefit to researchers/founders.
By solving these core issues alongside founders, we dramatically increase the likelihood of success for promising IP-driven startups. In these ways we’re working to create a stronger path to market for intellectual property that may otherwise fall prey to catch and kill, sit and wait, or the dreaded Valley of Death.
As part of a thriving ecosystem, venture studios provide a compelling path to commercialization for researchers who would otherwise be excluded logistically or financially from creating a company around their technology.
The Question for Researchers: Whether to Go it Alone?
In the now famous story of Ford vs Ferrari, Ford Motor Co tasked Carrol Shelby with creating a car that could beat Ferrari in the world’s toughest race. After several years of tinkering, the GT40 was born. No one other than its creator saw more potential, believed harder, better understood its inner workings and eccentricities, or put more on the line to create it. But, the car wasn’t the goal. The goal was to win at LeMans. So Shelby had to ask himself a tough question: was he the right person to drive it?
As you probably know, the answer was no. Shelby put Ken Miles in the cockpit, hired an ace pit crew, and let Lee Iacoca tell the whole world — the rest is automotive and cinematic history.
In Shelby’s case it was a race car, but the same question applies to Researchers: Should you go it alone? Or should you hire an existing team of experts to help you take your wonderful invention to the finish line?
