Valuing a technology—knowing how much to ask for it—is one of the most important skills a TTP needs to develop. Selling (i.e., usually licensing) technology is not like selling a car or a house—the full price is very rarely paid upfront. Early-stage academic technologies are extraordinarily high risk initially, so their value at the time of licensing is very low. That value will hopefully increase as the technology gets closer and closer to the marketplace and risk is progressively reduced, so academic licenses are characterized by relatively low upfront payments followed by milestone payments that get larger as the technology meets successive technical milestones that demonstrate its potential ultimate value, plus running royalties on the licensee’s sales of the finished product.
This author (Stevens) completely messed up his first negotiation for an important technology in 1991. Luckily, this technology had not two but three companies interested in it, and he was able to license it to one of the other two, thereby saving a promising Tech Transfer career that could have been cut short prematurely (the innovation’s inventor was very highly regarded within the institution).
As a result of this experience, he set out to research valuation techniques and to teach what he learned to the AUTM community. The result became the AUTM Valuation Course, still offered by AUTM to this day.
For more information, see these slides summarizing the AUTM Valuation Course.
This course has since been converted into a training manual. See the WIPO Intellectual Property Valuation Manual for Academic Institutions.
Valuation is a substantial, complex topic—TTPs should allow themselves time to review the topic and these reference materials.
Here’s a presentation (Mike Martin’s view of valuation) that provides a shorter introduction to the key concepts.