Yale Startup License Program
Helping accelerate the launch of Yale technologies into the world where they can have the greatest impact.
Yale Ventures offers a Yale Startup License for Yale entrepreneurs developing new ventures based on Yale Intellectual Property (IP) arising from Yale research. The Yale Startup License is designed to simplify and speed up the process of developing new ventures based on Yale research and support the overall entrepreneurship and innovation ecosystem.
Developed to offer identical and favorable terms to Yale startups, the Yale Startup License has been designed in consultation with attorneys that represent startups, seasoned entrepreneurs, and investors to be a “no negotiation” license . By reducing the time and legal expense to get a license done, entrepreneurs can focus their efforts on developing their businesses. Further, by reducing all uncertainty as to the terms of the license, startups can comfortably take an option to license the technology, thus deferring the need to sign the license until such time that they feel ready to assume the responsibilities of a licensee.
If you’re interested in learning more about the program or using the Yale Startup License, contact your Yale Ventures business development lead or email us at YVBDteam@yale.edu.
Update March 2023
Yale has adopted a new approach to help startups retain more equity in its early phases by replacing the typical upfront “payment” for the license with a grant to Yale of 3% (Software) to 5% (other technologies, excluding therapeutics) of the founders shares in the startup. Note that this equity is shared with the inventors of the licensed technology.
The Yale Startup License Process
For Yale entrepreneurs demonstrating a diligent effort to start a company based on Yale technology that includes one or more inventors as founders of the company, the process of getting a Startup License is very simple. Entrepreneurs receive an option to the technology while they develop their ideas for a business. The option is a promise by Yale not to license the technology to anyone else for a period of time. The entrepreneur or team should work with Yale Ventures to develop a mutually agreed upon business plan. The business plan development and review process is intended to partially substitute for the more rigorous commercial due diligence obligations in typical license agreements. The process also provides entrepreneurs with the opportunity to access assistance through Yale Ventures or other initiatives on campus. Throughout this process, the team will receive access to resources to support the development of the new venture. Once a mutually agreed upon plan is in place, the option can be updated to include a promise to provide the license under the Startup License terms.
Once a business plan has been agreed upon, entrepreneurs may then execute the Yale Startup License immediately, or may extend their option as they seek to raise financing or other sources of cash that will allow them to make the payments required once the license is executed.
Yale Startup License Features
- No upfront fee (customary upfront fee in cash, stock, or debt is waived)
- Diligence obligations limited to reasonable commercial efforts
- No milestone payments
- Deferment of past IP expense reimbursement for 1-3 years
- License Maintenance Fee creditable towards royalties and sublicensing fees
Benefits to Yale Startups
- Reduces the time and legal expense to get a license done, freeing time and resources
- Offers predictable, consistent, and fair license terms to all startups
- Raises visibility and attractiveness of partnering with Yale entrepreneurs
Any startup that is a) based on Yale IP; and b) where at least one founder is a Yale employee or student and is also an inventor on the Yale IP. If the technology is developed in a faculty member’s lab, the faculty member must either be a founder or provide their written approval. Note that therapeutics are not eligible for the Startup License.
Startup License Term Sheet
Terms are non-negotiable
Grant: Exclusive to IP for relevant Field(s) as identified in Business Plan, worldwide, with the right to sublicense, limited by and subject to the rights and requirements of the United States Government. Yale reserves the right to practice the IP for research and teaching, for itself and other non- profit institutions. Certain types of IP (e.g. know-how) may be licensed non-exclusively.
Upfront Fee: Waived in lieu of grant of 3% (Software) or 5% (everything else, excluding therapeutics) equity in startup.
Past IP Expenses: Licensee will reimburse Yale for past IP expenses incurred prior to the Effective Date on the following schedule:
- One third due upon the 1st anniversary
- One third due upon the 2nd anniversary
- One third due upon the 3rd anniversary
Ongoing IP Expenses: Licensee will reimburse Yale for IP expenses incurred after the Effective Date within 30 days of receiving a monthly invoice for such expenses.
License Maintenance Fee: $5000 on 2nd anniversary; $10,000 on 3rd, $15,000 on 4th, $20,000 on 5th; and $20,000 on sixth anniversary and each year thereafter, fully creditable to Royalties and Sublicensing Revenue Payments due in same calendar year. (Fees are reduced for software).
Royalty: 2% of Net Sales made by Licensee or Affiliates for patented products. 1% of Net Sales for products that utilize other intellectual property (e.g. know-how, etc). No royalty is due for software.
Sublicense Income Payments: 20% of sublicensing income (no fixed “pass through” obligations imposed on sales made by sublicensees), reduced to 10% after 4 years. No Sublicense Income is due for software.
Participation in Future Private Equity Offerings: During the term of the license, if licensee proposes to sell any equity securities, including preferred stock, in a financing round of greater than $3 million led by a U.S. or European-based venture capital firm or corporate investor, then Yale and/or its Assignee will have the right to purchase up to 10% of the securities issued in the first such financing round. In each subsequent round of venture capital, Yale and/or its Assignee will have the right to purchase a percentage that is equal to 50% of Yale’s percentage from the immediately preceding round of financing. The rights herein are not additive to rights secured by Yale and/or its Assignee upon purchase of securities.
If the technology being licensed by the startup has been supported by the Blavatnik Fund for Innovation at Yale, then Access Industries also reserves a right to co-invest in the startup.
Startup License FAQ
Any Yale technology that is not a drug or therapeutic is eligible for the Startup License.
To ensure that Yale discoveries for new medicines get to patients in need, Yale requires that licensees to therapeutic technologies commit to significant financial and non-financial milestones that are highly tailored to the drug discovery and clinical development programs required. These typically require the commitment of tens or even hundreds of millions of dollars to very high-risk ventures, and our licenses are tailored to meet both the investors and Yale’s needs.
If you are a Yale employee or student, a founder of a Startup based on (solely owned) Yale intellectual property (Yale IP), and an inventor on the Yale IP. If the technology comes from a faculty lab, that faculty member must also be a founder, or approve of the license in writing. The entrepreneur or team is required to work with Yale Ventures to develop a reasonable business plan.
No, you will not qualify.
Maybe; it will depend on discussions with the other university.
No; at least one inventor also needs to be a co-founder of the startup.
No, you will not be able to re-negotiate the terms of the previous license.
If you already work with a Yale Ventures business development executive, you can contact them directly. Otherwise, please email us at YVBDteam@yale.edu and you will be connected to the appropriate business development executive.
No, the terms of the Startup License are non-negotiable. If for some reason the startup deems these terms unacceptable, a more detailed (and probably more costly) license agreement may be negotiated. Note, however, that Yale will only negotiate a license with an executive or manager of the startup who is not an employee or related to an employee of Yale. Because of their conflicting roles and relationships, Yale employees cannot be involved in negotiating licenses on behalf of companies they are helping found. Standard licenses typically take 3-6 months to negotiate at any university, and it is common for startups to incur legal fees with their outside counsel of $10-20,000 or more on a license negotiation, depending upon the extent of the language changes requested by the startup.
This agreement has been extensively vetted to be acceptable to any startup, and is being offered “as is” without any redlining whatsoever – it’s non-negotiable. If a startup is unwilling to accept the license as is, it may choose to negotiate a full license agreement. However, in such cases startups should expect to negotiate licensing terms that are not as competitive as those being offered in the Startup License – a cash upfront fee, diligence obligations, milestones, and other financial and non-financial obligations should be expected.
No, you will not qualify for the Startup License if you do not have a business plan. However, if you are serious about starting a business and developing a business plan, Yale Ventures will help you to develop a business plan and can provide you with a 6-month Exclusive Option, which is Yale’s promise not to license the technology to anyone else.
If the startup has made significant progress towards developing the business during the 6- month option period, the option may be extended for an additional 6 month period. Assuming all other eligibility requirements have been met (see above), completion of the business plan allows the startup to “lock in” an offer to execute the Startup License.
In order to expedite and simplify the contract process and lessen the burden on startup companies, the Startup License template has a simple deal structure: a modest grant of equity to Yale, no upfront fees, simple and competitive financial terms that have been benchmarked against those from other universities, and no diligence milestones that startups must achieve by certain dates. However, the licensee will be responsible for all ongoing and future IP costs upon execution of the Startup License. Yale will be in control of IP, but with patent attorneys that are reasonably acceptable to the licensee. Licensees are often concerned about choice of patent counsel as it relates to cost and quality. Yale uses many different law firms for patent prosecution and may be willing to change law firms in response to a licensee’s concerns. In IP prosecution, the licensee will be copied on all relevant correspondence and have opportunity to comment.
Yale has entered into a relationship with Osage University Partners to offer the opportunity for Osage to invest in Yale startups. Osage is a venture capital fund that invests exclusively in startups that are commercializing university research. Osage has partnered with over 70 of the most entrepreneurial universities and research centers to invest in their startups, and shares part of their profits with their member institutions to further promote the university entrepreneurial ecosystem. Osage invests across all sectors of technology commercialization, including information technology, energy, materials, and life sciences, and across all stages of company development, seed through growth equity, with $5-10 million per investment. Osage has a strong preference to syndicate with top-tier venture capital funds, but will lead in select circumstances.
Yes, and the royalty rate for a license to unpatented intellectual property will be half that of patented technology. No royalties are charged for licenses to software only.