Education

What policies govern faculty members involved with startup ventures?

Several Faculty and University policies govern the role that faculty (and staff) may take with startup business ventures. For more information on this topic, consult the Startup Ventures section.

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Does OTD write or help write business plans?

Generally no, but we work with faculty interested in becoming involved with a startup venture and with those in the venture capital community so that a well constructed business plan can be crafted. It is important to us that when Harvard technology will be licensed to a startup company, a well-thought-out business plan is in place and adequate resources (in particular, sufficient financing and capable management) are available to enable the Harvard technology to be developed effectively. We are also available to provide information and assistance so that faculty is aware of, and appropriately addresses any conflict of interest issues that may arise as part of a startup venture.

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Can OTD help me find venture capitalists (VCs) to fund and/or manage a startup?

Yes. OTD maintains active and ongoing relationships with a wide range of leading venture capital groups, and regularly hold meetings and markets Harvard startup opportunities to the venture capital community. The VCs, working in conjunction with OTD, will often identify and recruit a management team to run the company prior to or in conjunction with negotiating an agreement with OTD and undertaking to finance a startup.

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What is OTD’s role in dealing with a startup company?

OTD has the responsibility to determine whether the startup company has the potential to obtain sufficient financial and management resources to be truly capable of vigorous and effective development of the technology to be licensed. Once the company has sufficient financial backing and a business plan and management team in place, OTD’s role is to negotiate an appropriate agreement with the startup company. The agreement will take into account the capital resources of the company, but will also obtain fair value for the technology to be licensed. When a company founder (who has or will have equity in the company) is also a Harvard faculty member and inventor of technology to be exclusively licensed to the start-up, OTD must perform due diligence to avoid conflict of interest issues that may result from the inventor’s financial relationship with the company.

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Will Harvard take equity in lieu of cash as part of a licensing agreement with a startup company?

Sometimes. Since startups are often cash-poor, equity is seen as a reasonable means for Harvard to accept payment for its technology. At the time the license agreement is executed, OTD will specify an event that will trigger the sale of Harvard’s stock (e.g., the earliest date after the IPO that the stock agreement allows; when a product has reached a specified stage in regulatory approval, etc.). Any proceeds will then be distributed according to Harvard’s Royalty Sharing Policy.

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Am I able to receive equity?

Yes. Holding stock (or the promise of stock) in the startup company is allowed, but is likely to make it impossible for the company to sponsor research in the faculty member’s laboratory. When an inventor holds stock in a company it is likely that he/she will be deemed to have a close financial interest in that company. Harvard recognizes those faculties often have such an interest in emerging companies and that the resulting potential for conflicts of interest requires oversight and resolution. The appropriate resolution will be tailored to each individual case. For more information on financial interests, see the University’s Conflict of Interest Policy as well as any school-specific policy that may apply to you.

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How does equity get distributed?

There are two sources of equity-based income that an investigator may receive as a part of his/her involvement in a startup venture:

  • The investigator may receive stock as partial compensation for his/her role on the board of the company and/or as a founder of that company. The distribution of such equity will be determined by the investigator’s agreement with the startup itself.
  • Any cash proceeds resulting from equity held by Harvard on account of a technology license agreement will be shared with the inventor in accordance with the formulas specified in the IP Policy for the distribution of Net Royalties. 

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Am I required to report my equity holdings to Harvard?

Yes. Faculty members and other Harvard personnel who will hold stock in the startup must report the details of their relationship with the company to their Faculty conflict of interest committee so that committee may develop an appropriate conflict management plan if that is required.

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Can I hold a line management position in the company?

No. This extent of activity is very likely to seriously divert attention from University duties, or create other conflicts of loyalty. Individuals should consult the Faculty committee that deals with conflict of interest issues before accepting any outside management position. In FAS, this is addressed by the Committee on Professional Conduct. In some Faculties, the Dean or the Dean’s representative may be designated rather than a Committee.

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Can I sit on the Board of Directors or Scientific Advisory Board of the company?

Yes. This is usually permissible without consultation with the conflict of interest committee. It is understood that as a member of a corporate board, the faculty member does not serve as a representative of Harvard University. Some federal agencies mandate disclosure of interests in for-profit organizations that exceed a specified threshold. For example, the NSF and NIH require disclosure of interests (including stock) valued in excess of $10,000 and/or equity that exceeds 5 percent of company stock. The FAS and HSPH Conflict of Interest Policies outline disclosure policies to help faculty comply with agencies’ regulations.

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Can I consult for a company?

Yes. This is also usually permissible without consultation with the conflict of interest committee. Again, some federal agencies mandate disclosure of consultancies for which compensation exceeds a specified threshold. Further, it should be noted that no more than 20 percent of one’s total professional effort may be directed to outside work during the academic year.

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How may my students be involved in company work?

Involving students and/or post-docs in Harvard work designed to benefit the company is considered a major conflict, and is generally not allowed. Involving students and/or post-docs more directly in the company (as employees or consultants) also raises conflict of interest issues. Consultation with the dean and/or the chair of Faculty conflict of interest committee is generally required in order to ensure that the student’s/post-doc’s educational experience is not compromised.

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