Deal Flow Is Everything

1
Deal Flow Is Everything!

• Projecting Deal Flow and Revenue for an
  Individual Technology Transfer Office Using AUTM
  Survey Data

March 6, 2004
2
Abstract

• Strategic planning is critical for a growing
  technology transfer office, and such planning
  requires a prediction of deal flow and future
  revenues. Because of the nature of our
  businesswith licensing revenue dependent on the
  successful commercialization of early-stage
  technologies that must face many developmental
  and regulatory hurdlespredicting future revenue
  can be difficult and the results may seem
  unreliable.
• We approached this problem by combining our
  offices deal-based model for staffing with
  estimates of expected licensing revenue per deal
  based upon data from the AUTM Survey. Because
  royalties on individual deals vary greatly,
  relying on deal revenue figures alone can only
  suggest general revenue trends. These trends
  become more relevant to long-term strategic
  planning in light of our predictions on the
  number of mature deals expected over time.

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The Business Model
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The Common Patent-Based Model
The UVAPF Deal-Based Model
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Characteristics of the Deal-based model

• disclosure rate drives licensing staff levels
• extra duties for licensing staff (e.g.,
  monitoring patent prosecution, agreement
  compliance) influence work load
• the relative disclosure rate is a measure of
  faculty satisfaction, and the research budget of
  the institution is a confirmation of expected
  disclosure rate AUTM average 3.9/10M
  research spending, UVAPF 5.3/10M AUTM
  Licensing Survey, 2002, UVAPF 5.7/10M in 2003
• patent unlicensed technology? only if (1) in
  the budget, (2) some companies expressed interest
  if more data were available, (3) inventors have
  the funding to gather that data and are expected
  to have the data in a reasonable time

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Do you fit the model?

• Annual output AUTM average UVAPF
  model
• new disclosures/licensing associate 22
  31 25
• deals/licensing associate 7.5
  10.5 10
• Data taken from AUTM Licensing Survey FY 2000

7
UVAPF, past 5 years
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UVAPF, past 5 years

• UVAPF licensing associates produce 10 deals per
  person each year staff experience may be a
  threshold influence average licensing
  experience of 0.9 years in 1999 increased to 1.75
  years in 2000 and has been increasing each year
  since.
• be aware of licensing lag times when analyzing
  relationships between disclosures and deal flow
  at UVAPF, 43 of disclosures that get licensed
  are licensed in the year of disclosure, and 35
  are licensed the next year

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Planning for the Future Using the Model
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Assumptions

• disclosure rate will increase over time as a
  reflection of the universitys increase in
  research funding UVA averages a 9 annual
  increase
• only mature deals yield significant revenue
  based on our experience and our technology
  portfolio, deals yield revenue from year 7 to
  year 15
• we cannot identify those deals that will yield
  significant revenue, so we rely on the average
  amount for revenue-generating deals we used the
  AUTM average of 146,646 AUTM Licensing Survey,
  2000
• only a certain percentage of deals will yield
  significant revenue 20 of our current deals
  yield revenue, so we view a range of 10 to 30

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Comparison of the Number of Mature
Deals(constant v. increasing staff)
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Projected Revenue -constant staffing levels
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Projected Revenue - increasing staff levels(1
new licensing FTE every 3 years)
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Conclusions

• UVAPF has plans to expand the licensing staff as
  required by the model, thus providing the best
  opportunity for growing revenue
• even if an office does not follow the UVAPF
  model, plotting mature deals over time provides
  an image of future revenue and may help justify
  adding more staff
• the major challenge of tech transfer office
  budgets we budget on an annual basis, but the
  income cycle is measured in decades