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WTN Interview: Carl Gulbrandsen
WARF’s Investment and Portfolio Strategy

Editor’s Note: In this final installment of an interview with Carl Gulbrandsen, managing director of the Wisconsin Alumni Research Foundation (WARF), Gulbrandsen shares WARF’s investment and portfolio strategy, WARF’s perception and working relationships with VCs as well as an insightful discussion of WARF’s experience with software and information technologies.

PART 1) How WARF is Reaching Out to Businesses About Technology Developed in Wisconsin - 12/04/03

PART 2) WARF - A Unique and Successful Technology Transfer Organization

WTN: How does WARF structure deals with new versus existing companies? At what point do you take an equity position?

Gulbrandsen: We almost always take cash for the ordinary license agreements that we do on an ongoing basis with existing businesses. For start-up business we will take an equity position in lieu of cash for the technology license. Depending on the technology, that could be anywhere from $10,000 to $1 million of equity. And then there are usually some milestone payments made as well.
WTN: Does WARF invest or partner with venture capital funds?

Gulbrandsen: We have a partner relationship with Venture Investors of Wisconsin and Baird Venture Partners. That type of business arrangement is how we invest in faculty start-ups in order to help them. When we think that a company would be a viable investment for us, we want to make sure that they are successful. There are a number of reasons why we do this besides just for a return on our investment. We have criteria for investing directly in start-up companies and it usually involves partners. We don’t invest cash directly in technology companies other than buying stock.

WTN: Do you invest any dollars outside of Wisconsin?

Gulbrandsen: Not directly in companies. We invest in the public equity market and we invest in partnerships with other investors. As I mentioned, we have invested in Venture Investors and Baird Venture Partners in Wisconsin, and when other VC companies doing their fundraising rounds, they knock on our doors. We’ll do the diligence like we do with the others. Like any institutional endowment, we have a target allocation model of how much is available for private equity investments.

WTN: Some venture capitalists say that technology-transfer organizations can be difficult to work with. Is this a fair commentary?

Gulbrandsen: I do think the indictment is legitimate for universities that don’t have a lot of experience in this area. They’re scared about letting something really valuable get out the door without capturing or valuing it. The level of experience and awareness of these issues is starting to increase through professional organizations such as The Association of the University of Technology Managers. They try to educate people as to how this process works, and we have a good track record with them. I’ve also heard many times from venture capitalists outside this region who come to explore and do a deal with us say, “God, I wish it was this easy back where we come from.” We’ve got policies that we built up over the last ten years. WARF is good to work with because we understand how to value technology, and we understand how to structure deals. I think if you talk to many of the VCs around here, they are champions for the work our group performs.

WTN: Is WARF well known among west coast VCs? Do they contact you regarding information technologies (IT) that might be available from the University?

Gulbrandsen: One of the goals of having our west coast office is to raise our awareness there. WARF has a lot to learn. We could do things better. We don’t have that stellar of record in the IT area. We are not as knowledgeable about the software industry in the same way we are with life sciences. So, we’re more than happy to take our criticism on that and try to learn and get better at it.

WTN: What are the challenges you have experienced with software technologies and start-ups?

Gulbrandsen: The policies of the University in regards to the faculty and staff of who owns the intellectual property for software technologies makes it very difficult to start a software company when the technology is developed within the University environment. The reason is the presumption by the faculty that they own the Intellectual Property (IP). It is widely recognized that the software turns out to be written more by students than the faculty. The faculty may come up with algorithm, but then they have to get assignment from the students with respect to the code. This is big obstacle!

We have tried to start software companies. We took equity a couple of years ago in company called Knowledgeport Alliance Inc. It took us over a year to bundle that technology. The reason was that there were so many students that had been involved in writing the code. The process of tracking them down, and getting an agreement with them with respect to assignment of intellectual property, so we could bundle and transfer the IP to this company was a miserable experience. Every time there was a fork in the road where there was a change in the business or something, we had to go back and negotiate with 40 people.

Related Articles:

PART 1) How WARF is Reaching Out to Businesses About Technology Developed in Wisconsin - 12/04/03

PART 2) WARF - A Unique and Successful Technology Transfer Organization

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