What is a startup and why choose to create one?
A startup is a new business entity formed to commercialize one or more related intellectual properties (IP). Forming a startup business is an alternative to licensing the IP to an established business. A few key factors when considering a startup company are:
- development risk (often large companies in established industries are unwilling to take the risk for unproven technology)
- development costs versus investment return (can the investors in the startup obtain their needed rates of return?)
- potential for multiple products or services from the same technology (few companies survive on one product alone)
- sufficiently large competitive advantage and target market
- potential revenues sufficient to sustain and grow a company
Who decides whether to form a startup?
The choice to establish a new company for commercializing intellectual property is a joint decision made by the TLO and the inventors. If a new business startup is chosen as the preferred commercialization path, the Technology Licensing Officer can assist you and the other founders in meeting investors, consultants, and entrepreneurs and accessing other resources for advice at MIT to help you in founding the company. The TLO will negotiate with a representative of the company (who, to avoid conflict of interest, should not be an employee of MIT), to grant a license to the new company. Also, it is wise for inventors to have agreements regarding their roles with the startup reviewed by their own attorney to ensure that all personal ramifications—including taxation and liabilities—are clearly understood.
How long does it take?
The time it takes to complete the steps in the startup process varies greatly among inventors and often depends on many aspects of the business coming together simultaneously, such as the participants’ ability to engage in the business, the ripening of the technology and the momentum that may be achieved from entering a business plan competition or forging a strategic connection. Typically a patent application takes a few weeks to prepare and file, including the time it takes inventors to review and revise a preliminary draft of the application. Negotiation of a license agreement with the TLO can take anywhere from weeks to months. Many inventors spend months, and sometimes years, tapping into the MIT Entrepreneurial Ecosystem while taking care of the other steps in the startup process—and pursuing their academic research and education responsibilities. Time spent immersed in this ecosystem may shorten the time it takes to attract funding, by streamlining connections and focusing your efforts. But a fair estimate for the time it takes to attract and close a first round of funding would be several months at a minimum.