Virginia aims to boost university startups

A new initiative between Virginia Innovation Partnership Corp. and Virginia’s six Research 1 (R1) universities aims to double the number of startups coming from the latter annually.

The Lab-to-Launch initiative aims to help technology breakthroughs quickly enter the marketplace, according to a news release from the governor’s office this month. The initiative’s components will be launching throughout the upcoming school year.

Lab-to-Launch has two core pillars, said VIPC President and CEO Joe Benevento: The first is creating a standardized fast-track license agreement to commercialize university research. The other is expanding private sector collaboration with Virginia university commercialization.

“Over the next three years,” he said, “we think across all … six R1s, [Lab-to-Launch] could literally double the number of startups that launch out of universities.”

Virginia’s six R1 universities are George Mason University, Old Dominion University, the University of Virginia, Virginia Commonwealth University, Virginia Tech and William & Mary. The highest research activity classification in the Carnegie Classification of Institutions of Higher Education, R1 indicates high research activity as measured by the number of research/scholarship doctorates awarded and the amount spent on research and development.

“All the universities recognize this is an important initiative, a huge opportunity [that could] have transformative impact, and we are locking arms. We are locking arms to plant a flag on the map for Virginia here that is really going to differentiate [them] from every other university out there,” Benevento said.

The Virginia Fast-Track License will launch during the upcoming school year, Benevento said. It’s expected to reduce the time it takes for new products to enter the market from about six to 12 months to one to three months by standardizing financial terms in university intellectual property license agreements with founders.

“By basically standardizing the agreement and its key terms, that streamlines that whole IP licensing process to make it easier and faster, more transparent,” and likely less costly, as a faster process could reduce administrative costs, Benevento said.

Under the Virginia Fast-Track License, university tech transfer offices will have less than 3% equity in startups and a less than 3% royalty rate of future sales.

By comparison, the Carolina Express Exclusive License Agreement offered by The University of North Carolina at Chapel Hill takes 5% equity up to a startup‘s first $2 million raised and takes a 2%, 3% or 5% royalty depending on the product or service.

A 2022 database analysis including data from Columbia University, Harvard College and Stanford University from Spinout, which compiles data for university inventors, found that the included U.S. universities took an average 5.9% equity rate upon founding.

According to a 2018 analysis of eight U.S. research universities (Harvard College, MIT, Stanford University, Ohio State University, University of Arizona, Texas A&M University, University of Wisconsin and University of Kansas) from ktMINE, an IP transactions data and analytics provider, the eight universities received average royalties of between 3.5% and 4.6%.

The license’s founder-friendly standardized terms will lower the barriers for existing faculty researchers to bring research breakthroughs into the market, attract talent to Virginia universities, and facilitate early-stage capital investment, Benevento said.

“This will plant a flag for Virginia and our leading world-class research universities that Virginia is the best place to conduct research and to translate breakthrough discoveries and technologies into the marketplace, where they can then have a huge impact on society and on people’s lives,” he said.

For investors, the standardized licensing process provides speed and certainty, making the involved startups more appealing investments, Benevento said.

Startups that spin off from universities using the Virginia Fast-Track License are eligible for an up to $50,000 grant from VIPC toward upfront out-of-pocket university commercialization costs.

The program also intends to grow private sector collaboration with university commercialization, helping connect talent, capital and data from the private sector with university researchers via several means.

Regarding talent, Lab-to-Launch will start an entrepreneur-in-residence program to connect entrepreneurs and executives with business experience to university researchers and inventors with technical knowledge. Each university can have multiple entrepreneurs-in-residence.

As part of Lab-to-Launch, universities will create digital databases with online catalogs to search university IP, making data available online to potential investors and interested entrepreneurs.

The program will also evaluate potential partnership opportunities using VIPC’s Virginia Invests program, through which VIPC invests in fund managers that run early-stage venture capital funds. VIPC will explore potential public-private partnership opportunities and potential connections, particularly with out-of-state venture capital funds that could be drawn into the Virginia startup ecosystem.

University partners will also share best practices. VIPC will measure statewide university commercialization outcome metrics against historical baselines and national peers.

“Virginia is home to world-class research university institutions and with Lab-to-Launch and the Virginia Fast-Track License, we are moving at the speed of business to accelerate commercialization pathways for university technology startups,” Gov. Glenn Youngkin said in a statement. “Virginia is leading the way, and I look forward to seeing the transformative discoveries that go from ‘lab to launch‘ and enhance people’s lives, not only in Virginia but throughout the country.”