UT takes equity
in tech firm
Deal marks first time school accepts only
stock
05/19/2000
By Alan Goldstein / The Dallas Morning
News
The University of Texas at Austin will accept equity in a Florida
start-up, rather than royalty payments, in exchange for access to
technology developed by the school's researchers.
At a time when investors are increasingly interested in
biotechnology companies, equity ownership in Labnetics Inc. offers
the university potentially greater rewards than royalty payments.
Although other universities have made equity deals, the agreement
marks the first time that UT has agreed to be compensated solely
through stock for its technology, said Renee Mallett, associate
director of technology licensing for the school.
Sebastian, Fla.-based Labnetics declined to reveal specific terms
of the deal, but the company said the agreement stipulates that the
university's ownership can't be diluted to less than 5 percent by
additional investors.
Taking stakes in start-ups can be risky. "Equity can be fantasy
money," said Katharine Ku, director of the Office of Technology
Licensing at Stanford University in Palo Alto, Calif. "You can't run
an office on it. We couldn't live on just equity deals."
Stanford, in the heart of Silicon Valley, held equity in 53
companies as of December, according to the university's licensing
report. The school took in $40.1 million in royalty revenue in its
last fiscal year from 339 different technologies.
Labnetics seeks to develop medical diagnostic technology based on
small, disposable computer chips. According to the company, the chip
can test for as many as 100 different conditions with a single
sample of blood.
The technology can be used for animals and humans. Labnetics
intends to release its technology first to the veterinary market,
where regulatory hurdles are lower, said Michael Otworth, interim
chief executive at the company.
UT-Austin was interested in the equity position in part because
it has been building a strong relationship with the company, Ms.
Mallett said.
Labnetics has said it intends to keep the lion's share of its
business in the Austin area, offering a potential boost to the
region's nascent biotechnology industry, she said.
"They like our inventors, and we like them liking our inventors,"
Ms. Mallett said. "And they like to keep us involved."
Indeed, the university will have a formal oversight role at the
company. As part of the arrangement, the university will take a
board seat at Labnetics, Mr. Otworth said.
Labnetics is being formed at XL Vision Inc., a business incubator
in Florida whose shareholders include Safeguard Scientifics Inc., a
technology investment company, and TL Ventures, a venture-capital
firm.
As part of the agreement, XL Vision has committed $1.3 million in
a sponsored research agreement with UT-Austin.
UT's Office of Technology Licensing and Intellectual Property
seeks to protect, market and license rights to the work of the
faculty and staff of the school. License agreements may be based
solely on royalties, equity or some combination of the two.
The licensing deals are intended to sponsor continued research at
the university, and to serve as an incentive to inventors who share
in the income. A special committee reviews potential conflicts of
interest for the university researchers. |