The University occasionally has the opportunity to acquire equity in companies on behalf of the University and with the approval of appropriate academic and business officers as consideration for a license agreement. Inclusion of equity in such agreements may be in the best interest of technology transfer. Young companies often do not have the requisite cash reserves to compete with an established company for rights to University technology. An offering of equity is a means of enabling otherwise qualified small companies to license University technology.
Risk is an issue because equity generally has no value at the time it is given.
Whether or not equity will acquire value will depend on the overall success of the company, which is a function of many factors that may not relate to the technology being licensed. Therefore, the University will require some cash as part of the consideration for the license agreement to minimize risk, except in exceptional cases approved by the Provost and the Vice Chancellor for Business Affairs. Equity has considerable potential for creating conflicts of interest for inventors and the University because equity holders are part owners of the company. Owners stand to gain considerably if the company does well, and therefore there may be incentive to take actions and make decisions that favor the interests of the company over the academic missions of the University. This Policy reduces the potential for real or perceived conflicts of interest by removing inventors, departments, colleges, and campus administrative offices from the management and sale of University equity.