Innovation & Commercialization Primer
For those who are deeply immersed in scientific discovery, research, and engineering, a primer on the business process of commercialization can be helpful.
Commonly Used Terms
Angel Investor: An affluent individual who provides capital for a business startup, usually in exchange for convertible debt or ownership equity. An accredited Angel Investor has at least $1M net worth excluding the value of their primary residence or $200K per year for the last three years in income.
Bootstrapping: Building a company from the ground up with little or no external dilutive capital.
Business Model: The plan for how a company will generate revenue and sustain itself over time.
- Business-to-Business (B2B): Business model in which transactions occur between one business and another.
- Business-to-Consumer (B2C): Business model in which the business sells to customers. Direct-to-Consumer (DTC) is a type of B2C business model in which the business sells directly to the customer through the business' own website, instead of through a retailer.
- Software as a service (SaaS): Business model specific to an application software hosted on the cloud or over an internet connection.
Business Plan: A formal written document that outlines a business's goals and how it plans to achieve them, including financial projections and marketing strategies.
Cap Table: A capitalization table is a spreadsheet that breaks down who owns what share of a company. The Cap Table will show the impact on the owners of a fundraise (dilutive funding).
Competitive Landscape Mapping: The study of the relevant products and companies competing against your innovation now and in the near future. Competitor funding sources and levels, sales channels and volumes, product pricing and features are typically included to provide a picture of the current market landscape as well as the anticipated landscape. Markets can evolve quickly. Ongoing monitoring of your competitive landscape is advised.
Customer Acquisition: The process of gaining new customers for a product or service. Customer Acquisition Cost is a metric used to estimate the true cost of adding new customers when considering sales and marketing expenses.
De-Risking: The action steps taken to reduce the technical, operational, financial and market risks inherent in a venture. As risks are reduced, funding levels may improve.
- Financial Risks include capital needs to hit milestones, scalable recurring revenue streams.
- Market Risks include established demand, regulatory hurdles, distribution channels.
- Operational Risks include team strength and readiness, alignment, agility, strategy & execution.
- Technical Risks include phase of development, scalability without loss of efficiency or accuracy, IP protection.
Entrepreneurship: The process of starting and running a business, typically characterized by innovation and risk-taking.
Equity: Owning a percentage of a company.
Exit Strategy: A plan for how the founders and investors of a startup will cash out of the business, typically through acquisition or an initial public offering (IPO).
Funding: Money raised to start or grow a business, which may come from investors, loans, grants, or personal savings. Non-dilutive funding includes grants, small business loans and award. It does not change the ownership of the company. Dilutive funding includes venture capital, angel investors and public offerings. Dilutive funding involves issuing new capital or securities which dilutes the existing owners' share in the company.
Intellectual Property (IP): Legal rights that protect creations of the mind, such as inventions, literary and artistic works, symbols, names, and images used in commerce.
- Patent: A government license that gives the holder exclusive rights to an invention, preventing others from making, using, or selling it without permission for a period of time.
- Trademark: A recognizable sign, design, or expression that identifies products or services of a particular source from those of others.
- Copyright: Legal protection granted to the creator of original work, preventing others from reproducing, distributing, or displaying it without permission.
IP Policy at Yale
Patent Policy for Faculty & Staff
Patent Policy for Students
Licensing Agreement - An intellectual property licensing agreement typically occurs between an IP rights owner (“licensor”) and someone who is authorized to use the rights (“licensee”) in exchange for monetary value in the form of a fee or a royalty, or both.
Market Research: The process of gathering, analyzing, and interpreting information about a market, including potential customers and competitors. Customer Discovery is a specific form of qualitative market research designed to help inventors get an early understanding of the needs of their potential users and buyers in order to optimize products and business models.
Minimum Viable Product (MVP): The version of a product with the minimum features necessary to satisfy early customers and provide feedback for future development.
Product-Market Fit: The degree to which a product satisfies strong market demand.
Revenue Model : The strategy a business uses to generate income, such as selling products, subscription fees, or advertising. Subscription model, advertising model, product sales, data sales, etc., all comprise the revenue model.
Royalty: A payment made to a creator or inventor based on the usage or sale of their work.
Sales and Marketing: Activities aimed at promoting and selling products or services, including advertising, sales calls, and social media marketing.
Startup: A newly established business designed to develop and validate a scalable business model.
Stock Options: The right to buy shares in the company for a fixed cost for a fixed period.
Value Proposition: The unique benefit or solution a product or service offers to customers.
Venture Capital (VC): Funding provided by investors to startup companies with high growth potential in exchange for equity.
Commercialization FAQs
You have several paths forward. If it is determined in your disclosure to Yale Ventures that you have created Yale Intellectual Property, then you can:
- License the IP to an existing business who would like to develop, promote, package, distribute or sell your innovation. Licensing fees and royalties generated would follow Yale IP Policy.
- Launch a startup to which the IP can be licensed. Your startup can then continue to develop the IP and take your innovation to market. Licensing fees and royalties would follow Yale IP Policy. In addition, an equity stake in the startup is often included for the faculty inventors as a point of negotiation.
Yale Ventures is a Service Organization. There is no fee or percentage of revenue incurred from working with Yale Ventures.
Your disclosure will describe how the inventors contributed to the creation of innovation. External patent counsel will determine inventorship on any filed patents. Your Licensing Agreement determines the licensing fees that will be paid by the licensee to Yale. The Yale IP policy determines the flow of those fees to the inventors, their department, and their school within the University.
Assuming a leadership role conflicts with university responsibilities and time commitments and COI policy. A business operator is best positioned to lead. There are specific roles faculty could assume in a startup:
- Faculty as Advisors – this allows faculty to continue to influence the direction of their company and their product without the work of operating the company.
- Faculty Consultancy – this allows faculty to contribute their ‘know how’ to a domain. Consulting work must be consistent with Yale consulting policy for faculty.
Yale does not currently have a policy on how commercialization effort impacts tenure.
Innovation often comes from student/faculty pairings. This creates an opportunity for the student to lead the venture with the faculty in an advisory role. Yale Ventures actively works with Graduate Students and post-docs. Tsai CITY works with undergraduate inventors.
You may need a patent to protect your innovation. Yale Ventures IP experts in collaboration with external patent counsel will work with you to determine the best strategy.
Three areas of capital are required for a startup if they wish to pursue investors. Thinking through your readiness in terms of these three important requirements may be helpful.
- Technical – is your product or service ready for commercial use at scale?
- Human – do you have the right team in place to launch, build and grow your new company?
- Financial – what capital can you access for your venture? What burn rate will allow you sufficient time to establish a revenue stream given the funds available?