Author Archives: Hervé Lebret

Google is not Stanford largest license revenue anymore

Until early this morning, I thought that the Google license (i.e. the rights Stanford University had granted the startup on the PageRank patent) was the largest generator of licensing revenue for the Californian university. I was wrong! If you read the annual reports of OTL, its Office of Technology Licensing, for example the pdf of the 2016 Annual Report, you may notice that the largest royalty revenue generator had another source: intellectual property/patents about functional monoclonal antibodies. Here are what these reports say of the largest amount of revenue in a given year from a single invention:
2016: $64M
2015: $62.77M
2014: $60.53M
2013: $55M
2012: $51M
2011: $44M
2010: $45M
2009: $38M
2008: $37M
2007: $33.5M
2006: $29M
These numbers give a total of $363M and another book mentions $125M cumulatively before 2006. But a more recent powerpoint document shows that the total cumulative revenue is … $613M!!

As a side note, in 2005, the Google patent gave proceeds of $336M following the company IPO. The 2004 and 2003 reports do not say the amount of the largest source of income whereas in 2002, it was “an unexpected $5.8M in one-time royalties” and in 2001, “for the first time in over 20 years, a physical science invention – an optical fiber amplifier – generated the most income”.

As Lita Nelsen from MIT said (see my previous post), “Even nationwide, you can show that tech transfer is, at best, a lottery if you want to make an ability to influence [a university’s financial position]. The primary winners—not 100 percent of them, but damn close—are single pharmaceuticals. Because if a pharmaceutical hits the market, it’s going to be in the multi-billon dollar [range]. The equity is seldom worth a lot, unless of course you can follow up with preferred investments. But that’s not what we’re in the business of doing. Any university that counts on its tech transfer to make a significant change in its finances is statistically going to be in trouble.” Google was a big exception with the equity proceeeds whereas the patent around monoclonal antibodies or the Cohen Boyer patent are about pharma. Have a look at the next figure from the same powerpoint document.

Interestingly enough I am reading a very interesting book (more when I am finished) which describes the early days of Silicon Valley and in particular the creation of the office of Technology Licensing by Niels Rimers.

In Troublemakers, author Leslie Berlin extensively describes the Cohen Boyer patent. In note 32 (page 450), she describes the terms of the Cohen-Boyer license. You can also find them in Lessons from the Commercialization of the Cohen-Boyer Patents: The Stanford University Licensing Program.

73 companies has signed for the initial $10k upfront payment, but “ten companies alone provided 77% (US$197 million) of the total licensing income” and 3 (Amgen, Genentech and Lily) provided close to 50% of the total. All this is well-known but I thought it would be interesting to blog about it today.

MIT’s Lita Nelsen Perspective on Academic Technology Transfer

I just read an excellent interview of Lita Nelsen who has recently retired as head of MIT’s Technology Licensing Office. You should read the full Exit Interview: Lita Nelsen on MIT Tech Transfer, Startups & Culture. I was used to say that MIT was more conservative than Stanford just like the Boston Area has been known to be more conservtaive than California, but things change. So let me just mention a few extracts.


Lita Nelsen (Formerly head of MIT Technology Licensing Office)

About patents:

Patents are needed because the whole idea is if you’re going to get somebody to invest a lot of time and a lot of money, if you succeed you don’t want the other guy, the bigger guy, saying, “Well, thank you very much. Now that you’ve shown the way, get out of the way.” We are primarily using patents as an incentive for investment.

About universities having an investment fund:

[The Technology Licensing Office helps] start about 25 or 30 companies a year. God knows how many [other companies started on campus] go out the back door. No one fund could put that amount of sweat equity into all of them. Now imagine we have MIT’s fund, and I invest in company A, but don’t have the resources to do B, or maybe not C. Then I go with C to [an outside venture capital firm] and say, “How would you like my leftovers?” There’s a negative selection bias there for what we don’t invest in. So, better to let a level playing field for anybody who wants to play.

But one thing any institution doing it has to decide is, are we primarily in it for return on investment? Or are we primarily in it for getting companies started that wouldn’t otherwise get started? You usually get a mixed message if you ask people which it is. And as everybody knows, when you get mixed missions, things get very hard to manage.

About equity in licensing:

How much equity does the Technology Licensing Office usually take when it spins out a company? Usually in the lower single digits, maybe a little higher if you have a software spinout. And it’s common shares.

If it’s research-intensive stuff—biotech, things that take multiple rounds of funding—[our stake] usually gets demoted down to [tiny] portions. You make a little money; you don’t make a lot. Except in cases when the Wall Street bubble is totally irrational. Even nationwide, you can show that tech transfer is, at best, a lottery if you want to make an ability to influence [a university’s financial position]. The primary winners—not 100 percent of them, but damn close—are single pharmaceuticals. Because if a pharmaceutical hits the market, it’s going to be in the multi-billon dollar [range]. The equity is seldom worth a lot, unless of course you can follow up with preferred investments. But that’s not what we’re in the business of doing. Any university that counts on its tech transfer to make a significant change in its finances is statistically going to be in trouble.

About accelerators:

“Does MIT have an incubator?” And my classic answer has been, “Yes, it’s called the city of Cambridge.”

The problem with accelerators is the definition has become as broad and varied as incubators, which range from science parks to little projects within universities, so you don’t know what the word means until you dig in. But some of them are putting money into product development. Some of them are venture funds expecting ROI. Some of them are [funded] through donations, as we did with Deshpande and Harvard did with their accelerator.
It’s going to be interesting to look at the mechanisms that people are trying. Because the problem is there: How do we get from the stage of which the university has done its research and maybe even gotten on the cover of Science magazine, to where somebody is going to invest in that ripening process before it actually turns into true product development, short-term product development? How do you get from the petri dish to full-scale clinical trials? You’ve got to get pretty far along before pharma’s going to do that for you. So people are looking both within universities and outside of universities as to how you fill the gap.

About teaching entrepreneurship:

now MIT, with its emphasis on innovation, is investing officially in training students in innovation and entrepreneurship, along with, not separate from, their intense technical educations. It’s not “you go and learn how to be an entrepreneur,” it’s you learn biology or chemistry or electrical engineering or computer science, but you also learn how entrepreneurship and innovation and moving technology out into the marketplace works—rather than having to learn that after you graduate.

The Tinkerings of Robert Noyce – again

I read again The Tinkerings of Robert Noyce for reasons which are not directly related to Silicon Valley or Start-ups. A few days ago, I blogged about an extremely good article from the New Yorker – Our Town by Larissa MacFarquhar. The author illustrates some universal values of humankind through a small community in Iowa. And this reminded me of Tom Wolfe article written for Esquire Magazine in 1983. I found it again online here. It begins with : “In 1948 there were seven thousand people in Grinnell, Iowa, including more than one who didn’t dare take a drink in his own house without pulling the shades down first.” Robert Noyce studied at Grinnell College then left to MIT then to what would become Silicon Valley. Grinnell College was quite advanced in electronics. Tom Wolfe claims: “But MIT had proved to be a backwater… when it came to the most advanced form of engineering, solid-state electronics. Grinnell College, with its one thousand students, had been years ahead of MIT.” And later Grinnell College would invest in Intel, making its endowment unusually successful.

I was about to blog here about Wolfe’s article and (re)discovered, shame on me, that I had blogged about it in 2012! I had mentioneed the piece about the Wagon Wheel bar. Here it is again.

Or else he would leave the plant and decide, well, maybe he would drop in at the Wagon Wheel for a drink before he went home. Every year there was some place, the Wagon Wheel, Chez Yvonne, Rickey’s, the Roundhouse, where members of this esoteric fraternity, the young men and women of the semiconductor industry, would head after work to have a drink and gossip and brag and trade war stories about phase jitters, phantom circuits, bubble memories, pulse trains, bounceless contacts, burst modes, leapfrog tests, p-n junctions, sleeping-sickness modes, slow-death episodes, RAMs, NAKs, MOSes, PCMs, PROMs, PROM blowers, PROM burners, PROM blasters, and teramagnitudes, meaning multiples of a million millions. So then he wouldn’t get home until nine, and the baby was asleep, and dinner was cold, and the wife was frosted off, and he would stand there and cup his hands as if making an imaginary snowball and try to explain to her… while his mind trailed off to other matters, LSIs, VLSIs, alpha flux, de-rezzing, forward biases, parasitic signals, and that terasexy little cookie from Signetics he had met at the Wagon Wheel, who understood such things.

Here is another piece about stock options, which I discussed in another recent post: Rewarding Talent – A guide to stock options for European entrepreneurs by Index Ventures.

From the beginning Noyce gave all the engineers and most of the office workers stock options. He had learned at Fairchild that in a business so dependent upon research, stock options were a more powerful incentive than profit sharing. People sharing profits naturally wanted to concentrate on products that were already profitable rather than plunge into avant-garde research that would not pay off in the short run even if it were successful. But people with stock options lived for research breakthroughs. The news would send a semiconductor company’s stock up immediately, regardless of profits.

There would be so much more to say about this marvelous piece of Silicon Valley and American history. You should read it!

Rewarding Talent – A guide to stock options for European entrepreneurs by Index Ventures

I recently read an article mentioning a new report by Index Ventures Rémunération du risque : la France s’en sort bien ! and a few days later a student of mine mentioned a new app by Index to help entrepreneurs allocate stock options: Index Ventures Option Plan beta. Thanks Javier! I had a look, tweeted about it and then thought it was worth a blog article…

I advise you to read the full (143-page) report – link here. It includes great information at the macro (national policy) and micro (startup) level. There are minor differences with my past analyses such Equity in Startups published in Sept. 2017 or my recurrent class about Equity Split in Startups which you can find here:

What is particularly interesting, I think, is their summary:

1 European employees own less of the companies they work for than US employees. For late-stage startups, they own around 10%, versus 20% in the US.

2 Ownership levels vary much more in Europe than the US. In Europe, employee ownership in late-stage startups ranges from 4% to 20%. In the US, ownership is more consistent, as stock option allocation is driven by market forces.

3 Employee ownership correlates to how deeply technical a startup is. An AI or enterprise software startup requires more technical know-how than a straightforward e-commerce startup. These employees are more likely to seek stock options.

4 Ownership policy details adopted by startups vary between the US and Europe. For example, provisions for leavers, and accelerated vesting following a change in control.

5 In Europe, stock options are executive-biased. Two-thirds of stock options are allocated to executives, and one third to employees below executive level. In the US, it’s the reverse.

6 European employees still don’t expect stock options much of the time. US employees joining a tech startup with fewer than 100 staff would typically expect stock options straight away. This is much less true in Europe, although expectations are steadily rising.

7 European option holders are often disadvantaged. In much of Europe, employees will be paying a high strike price, and they will be taxed heavily upon exercise as well as sale. Leavers often get nothing.

8 There is wide variation in national policy across Europe, with the UK most supportive of employee ownership. Regulations and tax frameworks are radically different across Europe. The UK’s EMI scheme is most favourable, better than what is available in the US, and France is also good. Other countries, including Germany, lag behind in our opinion.

The complexity of innovation policies – the example of Malaysia

I was lucky to meet last week two economists from the International Monetary Fund who are the authors of the working paper The Leap of the Tiger: How Malaysia Can Escape the Middle-Income Trap. It is not directly linked to high-tech innovation and I am not an economist; my expertise is limied to the nano-economics of start-ups. This being said, I was very impressed by the analysis of Reda Cherif and Fuad Hasanov.

In general, I read more about developed countries and high-tech entrepreneurship, Silicon Valley, obviously, but also the example of Israel, Finland, France, Chile… Lerner, Saxenian and Mazzucato have been important authors for me. Hasanov and Cherif explain how Malaysia tried to develop its economy and relatively failed compared to Taiwan and Korea. The reasons are complex and the interested person should read their paper.

They really show the complexity of things and again the recipe needs so much fine tuning, with no guarantee of success. The addition of Chile, Thailand and Norway in their analysis, makes it really rich. I understood that a combination of strong state support (incentives, funding, sometimes protection) and competition in the private sector (so many Korean automotive firms were initially created) with an emphasis on its ability to export is very striking. Why did Nokia succeeded for some time and not Alcatel maybe explained with their arguments. They also put a lot of emphasis in the ability to innovate, a must to enable exportations.

So Mazzucato is right, the state has an entrepreneurial role, but individual initiatives seem to be also important, something I had not necessarily understood in the cased of Taiwan and Korea. The diaspora of engineers who studied and work abroad (in the USA mostly) was instrumental to the economic development and innovation once they came back (sometimes many years later) in their home country…

Where the Small-Town American Dream Lives On

“As America’s rural communities stagnate, what can we learn from one that hasn’t?” is the subtitle of Our Town by Larissa MacQuhar in the Nov 13, 2017 paper edition of the New Yorker. The online title is Where the Small-Town American Dream Lives On. It is a strange and fascinating analysis of America. (By the way in the same edition, you can also read The Patriot a critic of the collected nonfiction of Philip Roth, another enlightening explanation of what American-ness is.


The Chamber of Commerce in orange City, Iowa. Photograph by Brian Finke.

Towards the end of this 10-page article, the author writes: In his 1970 book, “Exit, Voice, and Loyalty,” the economist Albert O. Hirschman described different ways of expressing discontent. Your can exit – stop buying a product, leave town. Or you can use voice – complain to the manufacturer, stay and try to change the place you live in. The easier it is to exit, the less likely it is that a problem will be fixed. That’s why the centripetal pull of Orange City was not just a conservative force; it could be a powerfully dynamic one as well. After all, it wasn’t those who fled the town who could push it onward, politically or economically -it was the ones who loved it enough to stay, or to come back.
Americans, Hirschman wrote, have always preferred “the neatness of exit over the messiness and heartbreak of voice.” Discontented Europeans staged revolutions; Americans moved on. “the curious conformism of Americans, noted by observers ever since Tocqueville, may also be explained in this fashion,” he continued. “Why raise your voice in contradiction and get yourself into trouble as long as you can always remove yourself entirely from any given environment should it become too unpleasant?”

There are many other interesting descriptions of people leaving and those staying; and of their ambitions, their motivations. I am not sure how this relates to innovation and entrepreneurship, but I remember Robert Noyce, one of Silicon Valley’s fathers with born in a small town in Iowa… and moved first to MIT for his PhD and then West.

How Do You Teach High-Tech Entrepreneurship according to Randy Komisar

It’s the 4th time in a few days that I show the video below to people. It is rather old (dated 2004) and it is just great. A sentence I remember from the first day I watched it is the following: “I think there’s stuff you can’t possibly learn in school and I’m not even sure you can learn that on the job. There’s an entrepreneurial character. Some people have it and some people don’t. Some people may not think they have it, and they may have it. A lot of people they think they have it, and many don’t.” Here is the video and then the full transcript…

I think what can be taught, by and large, is a set of very basic skills about the various domains required for startup to succeed: finance, organizations, transactions, strategy, business models. You can get an exposure to that which can raise your entrepreneur IQ a hundred points. Because starting without that context, it could be awfully hard to understand what’s happening around you as you work in these environments let alone try to do it. I also think you can get exposure to the personality and character of entrepreneurship through the case study method in particular. You can begin to see the tortured lives that many entrepreneurs have to live in order to pursue their dreams. And you can get a sense of how that relates to your abilities to cope and to make tradeoffs in your life.

I think there’s stuff you can’t possibly learn in school and I’m not even sure you can learn that on the job. There’s an entrepreneurial character. Some people have it and some people don’t. Some people may not think they have it, and they may have it. A lot of people they think they have it, and many don’t. The entrepreneurial character is very, very comfortable with uncertainty and ambiguity. That entrepreneur character is very capable of understanding and targeting opportunities that others don’t see and is tenacious about their pursuit. At the same time, they remain permeable to know ideas and to course corrections from feedback from the market and from people who might have more experience or more insights than they’ve got. There’s a personality that works in this environment. And there’s a personality that I think is uncomfortable. And I try to explain this in particular in the classes that I teach. There is a badge of courage in being an entrepreneur. I mean, we sort of, you know, if you read the press and you read the local technology rags you know there is a real sense that entrepreneurs are a special super breed. They’re different. They create a lot of value. I love working with them.

But if you’re not an entrepreneur that’s OK too. There’s lots of other value to be created. There’s lots of other things to be “attacked” in the market place that maybe more appropriate. So I think you can learn a lot. And I think you can accelerate your ability to learn more by building a context. But I think ultimately you got to ask yourself a hard question. Am I suited for the uncertainties and ambiguities, the ups and downs, and the risks of being an entrepreneur, or am I not?

Facts, Truth, Courage…

The word Start-up is controversial. Money, business are often the synonymous and at the time of the Paradise Papers, they do not have good press, with reason! I sometimes had to “defend” and I would still defend a world that is important … And more widely, I believe, we must fight to defend the importance of facts and a “dirty word”, truth, with courage. In a world where communication is confused with information (already at the beginning of the 20th century, Schumpeter explained that capitalism could not exist without marketing and advertising) it is important that the voices defending the facts, truth with courage be heard. For this reason, I have sometimes come out of the strict framework of technology, innovation and high-tech entrepreneurship to mention intellectuals who seem important to me. Harari, Piketty, Fleury, Stieger, Picq.

A long introduction to mention a beautiful interview of Pascal Picq on France Inter this morning: “We must deconstruct male domination in Hollywood as elsewhere.” The link to the site in French is here. A brief excerpt: “Note: the bonobos, who are close to us, have not evolved like us. Homo sapiens is one of the most violent species towards its females, so women. The degrees of this violence vary according to time and culture. The dominant status is exercised with regard to Nature on the one hand, and women on the other hand. The behaviors of male dominance that are rooted in our human societies are the result of a behavioral evolution, and not of a natural and genetic determinism. In the bonobos, the female is dominant, the violence of the relations is mastered by the hedonic relations, and the bonobos live according to a model of gynocracy. The bonobos and the men did not have the same behavioral evolution. And I say that we can not blame our nature, as some do, in the principles of male dominance that have been imposed on humans. It is a behavioral evolution that has become embedded in agricultural societies and industrial societies. Historically, where foods or things are produced, men tend to take control of production and reproduction.”

I should have added that this interview is related to the Oscar granted last night to Agnès Varda for her career and coincidence or not, my previous article in French only – If you do not love me, I can tell you that I do not love you either – dealt with Sandrine Bonnaire, the actress of Agnes Varda in the magnificent Vagabond.

In all disciplines, scientific or not, complexity makes it difficult sometimes, not to say often, to assert truths. They seem sometime to be moving. But there are facts that one must always analyze as honestly as possible with courage and then we can come out with truths. Thanks to these intellectuals who work without dogma and help us understand the world.

And to finish on a “lighter” touch, here are two works by Obey whose artistic fight is magnificent!

Do Ex-Startup Founders Make The Best Venture Capitalists? (Part 2)

Yesterday, in Do Ex-Startup Founders Make The Best Venture Capitalists? I mentioned CB Insights analysis about the background of the top VCs, and expressed my doubts about comparing founders vs. non founders. So I used the Top100 list and had a different look: what about the background in high-tech or not? Here are some charts. Quick and dirty so do not take it as a scientific analysis. Still…

First a point of caution. This list is a little strange and the authors know better than me, but I am sure this list is not highly subjective… Now it seems founders were never a majority and VCs with no high-tech experience always a majority. Now what is puzzling is that these VCs are rather young and that a high majority of them having been in the business for less the 20 years… interesting. What would have been the results of the VCs active in the 70s and 80s? Not sure…

Also the change in the last 15 years is not the ratio with a tech background, but the ones who are founders has increased and the ones with no tech background has decreased…

Do Ex-Startup Founders Make The Best Venture Capitalists?

Interesting question as I have often claimed that there was a difference between US and European venture capitalist (VC), which had been also illustrated in the past by Tim Cruttenden (see below).

CB Insights, a leading firm analyzing data about start-ups, looked at the experience of VCs: Do Ex-Startup Founders Make The Best Venture Capitalists? The next figure illustrates their results and they additionally claim: “Of the 100 VCs, 38 founded or co-founded a company before becoming venture investors, while 62 did not. Six of CB Insights’ top 10 investors haven’t founded a company. That includes the top two: Benchmark’s Bill Gurley and the recently retired Chris Sacca.”

However interesting, I would have preferred a different analysis: how many had a direct experience in technology firms, whether in product / technology development or on the business sides such as sales or marketing compared to teh ones who were “only” consultants or bankers. This would be highly important as the value you bring t the board level may be entirely different. Look at what Tim Cruttenden explained in 2006.

Indeed Cruttenden says “entrepreneurs” too, but if we remember that Kleiner Perkins and Sequoia had a lot of managers more than entrepreneurs then, we might have obtained another measure of what makes a good VC…