Bar-Ilan University Ventures to Forego Startup Equity for Future Success Share
Bar-Ilan University's commercialization company, BIRAD, has announced a groundbreaking initiative to waive its equity stakes in startups founded on university research. Instead, BIRAD will receive a predetermined share of future success, such as exit events or royalties. This move aims to streamline the technology commercialization process, reduce potential conflicts between investors, researchers, and the university, and encourage the faster establishment of more companies.
BIRAD CEO Zohar Yinon explained that the traditional model often leads to disputes over equity distribution early in a startup's life, potentially deterring researchers and investors. "Our interest is to establish as many companies as possible. Eventually, something will succeed," Yinon stated. The new, simplified, and transparent agreement means BIRAD has no stake in the company until it achieves success, allowing for quicker launches.
This approach marks a return to older models where universities often licensed inventions to large corporations, receiving upfront payments, milestone payments, and royalties. The traditional split for Israeli universities was 40% to the university, 40% to the researcher, and 20% to the commercialization company. In recent years, universities began accepting equity in early-stage startups, leading to the management of diverse portfolios and complex negotiations during subsequent funding rounds.
Under the new model, BIRAD will take a 2% to 4% share of future profits or royalties, depending on the company's field. This also includes an option to convert royalties into a one-time payment, accommodating sectors like pharmaceuticals that prefer royalty-free products. BIRAD's management expressed fatigue with the tensions arising from early-stage equity negotiations. The pilot program has been approved by the university's management, led by President Prof. Arie Zaban, for a three-year period, after which its success will be evaluated. BIRAD has previously seen success with companies like Anbound, sold for $300 million, and Syneron, which went public at a valuation of 1 billion shekels.
