Los Angeles Business Journal

Brewin’ R&D

New rules let UCLA put money into startups By Howard Fine Monday, July 14, 2014
On Campus: Brendan Rauw and Neelam Sullivan at California NanoSystems Institute.

On Campus: Brendan Rauw and Neelam Sullivan at California NanoSystems Institute. Photo by Ringo Chiu.

It’s a been a major frustration for fledgling ventures trying to commercialize technologies and research from UCLA: For 25 years, University of California campuses have been barred from making direct investments in companies spun off from campus research. The ban cut off a vital source of capital for startups.

But late last month, the University of California rescinded its ban on direct investment and allowed its campuses to take equity stakes in fledgling spinoffs instead of charging them fees.

At UCLA, these changes could benefit startup ventures in three programs: the California NanoSystems Institute; an accelerator at the David Geffen School of Medicine; and Startup UCLA, a 10-week accelerator program for students looking to commercialize research.

“This both benefits startups that need to preserve capital and encourages the expansion of programs to commercialize research,” said Brendan Rauw, executive director of the UCLA Office of Intellectual Property and Industry Sponsored Research.

New UC President Janet Napolitano rescinded the ban on direct investment in order to boost technology transfer efforts at UCLA and the nine other UC campuses. Under the relaxed rules, the UC system or the individual campuses can invest in university-affiliated startups. She also allowed UC campuses to take equity stakes in spinoffs in lieu of charging fees for use of campus facilities. In addition, Napolitano announced the formation of a UC Innovation Council to craft a strategy to boost technology commercialization.

The most immediate impact for campus startups will likely be the option to give up a small equity stake instead of paying $500 a month or more in fees for the use of lab space, equipment and staff.

While $500 a month might be a steep discount from the going market rate for lab space, it is sometimes too much for debt-laden students and faculty researchers who face other expenses while trying to commercialize their technology, such as pursuing patents or hiring expert staff.

“These fees can add up very quickly,” said Wei Yu, chief executive of Lyxia Corp., a Culver City company that spun off two years ago from UCLA to commercialize its technology that turns microalgae into crude oil. “The charges were too much for some people I know; they were discouraged from forming companies.”

The eight companies at the California NanoSystems Institute on the UCLA campus pay about $500 a month in fees to the university, said Neelam Sullivan, the institute’s technology development manager. As a result of the policy change, when the companies’ annual leases come up for renewal, the institute will consider whether to continue charging the fees or give companies the option of offering an equity stake in lieu of payment.

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