2020 STEX25 Accelerator Startups Day 2 - Startup Corporate Collaboration Panel Discussion, Session 2

MARCUS DAHLLOF: And is around startup and corporate collaboration. And I'm going to ask the four startups that just presented to join us here. And my first question is around exploration versus focus problems.

And I would almost call this conventional wisdom or conventional advice. Typically, we like to ask corporates to start with a business problem. What's the use case? What's the business problem? And then start addressing that. And then we can figure out, OK, which are the startups that might help you?

But then at the same time, we know that serendipity plays a role in corporate innovation. And exploration is really important. In fact, there have been a number of cases when I've seen a startup have a corporate meeting and then pivot into a new use case and then go on to be acquired. So that's an important component, as well.

How do you guys think about this? And in fact, are you willing to take small deals upfront to explore new use cases? Or do you feel like the relationship has to be strategic, has to be a top-identified corporate priority before you move ahead? Michael, please go ahead. But you need to unmute first.

MICHAEL SCHRADER: Great, thanks. No, I think it's an interesting question. And I'd say, from our perspective, the early stage exploration collaborations for us that have worked out well have always been very thoughtful in terms of both involving high-level decision makers within our partner's organization-- so we get some buy-in that if this goes well, there's going to be some support from above to move this forward, one, and two, I think, some very clear success criteria. So what does the outcome of this study have to look like in order for our partner to believe that this is worth taking to the next step?

And then the collaborations we've struggled with have been kind of small dollar amount collaborations with maybe an external innovation group or an early stage R&D group that's doing some-- I'll call it kind of tinkering. But they don't necessarily have buy-in from those above or a clear image or understanding of what they want to get out of it.

MARCUS DAHLLOF: Jack, do you have a comment you want to add?

JACK BARON: Sure. I think that Michael is exactly right on. Our best collaborations have been with companies that are prioritizing, Marcus, to your point, and companies that realized that there's real value here if they can, in our case, lower the cost of their products while improving some performance attributes. So they fast track it, and they apply resources. Where we've had challenges, I think, are areas where it's something they've just tinkering with and something that they know is a year or two away or three years away before they're really going to get serious about it.

MARCUS DAHLLOF: Got it.

PAULO GARCIA: Maybe just to add--

MARCUS DAHLLOF: Yeah, Paulo. Please.

PAULO GARCIA: To add to that, we have had both types of collaborations. And the earlier ones, we were trying to validate our platform. But they were on an unpaid manner. And so this, we're really with R&D folks on the counterpart. And we learned about our platform. We got some exciting results.

But really, the ones that are moving the needle are the ones that are committing a little bit of funds in order to do that exploration, because it aligns with whoever is a decision maker on their side. So exploration is OK if there's a little bit of a commitment from the partner.

MARCUS DAHLLOF: All right. Next question here-- how do you think about exclusivity? So this is the point where you've maybe proven some value, and you're at the negotiation stage. At what point is it reasonable to grant exclusivity in your mind? Never?

JACK BARON: I'll go. It's challenging. We granted exclusivity for a certain geographic region in the Baltics where our first large partner is completing a commercial-scale plant with us right now. And they've licensed the technology, and they'll be paying us royalties down the road.

But so the Baltic states are off limits for other partners that we join. But that was for, frankly, many millions of dollars that they were willing to put into the equation. And so it comes down to that weighing of the value that they're bringing to you versus what you're giving up.

ADAM BEHRENS: And Marcus, I'm happy to chime in there, as well.

MARCUS DAHLLOF: Yeah, please.

ADAM BEHRENS: We deal in exclusivity pretty often. I think it's really reflective of our business model more than anything. Since we do have diversity in application, we can focus very specifically on commercializing with one major partner in a vertical. And that gives us a lot of the ability to navigate long-term relationships because of that umbrella. But it is a-- we price in the opportunity cost when thinking about that.

MARCUS DAHLLOF: Right.

MICHAEL SCHRADER: And also, at least from our perspective, Marcus, we actually look at exclusivity, I think, a little bit differently. So we have a delivery platform that has, I think, a range of different applications. And we have our two internal programs that we're driving and is really our focus.

If a partner comes to us and says they want exclusivity in a field or they want to work with us in a certain field, we actually insist on them paying for that exclusivity upfront to show that there is kind of a longer term commitment here. So we rarely do early-stage tinkering without a partner who's willing to come put some money on the table at least for an exclusive option to license in the long run.

So for us, it's kind of part of that showing sincerity from the partner again that they're coming to the table and understanding what they're looking for. And they at least have a vision of moving this beyond just early-stage feasibility.

MARCUS DAHLLOF: By the way, is exclusivity a common request?

JACK BARON: Oh, yes.

MARCUS DAHLLOF: Is it an issue to deal with?

PAULO GARCIA: Yeah. I'll chime in here. I've seen it a couple of times now. I'm actually in conversations on this very same topic. And it really depends on the stage of the company, so earlier stage versus later stage, and what the partner-- how advanced they are in the particular field. If they are a dominant player, you might want to associate with them, because that can propel your company and set up for success in the long term. So it depends who's asking for the exclusivity, as well.

MARCUS DAHLLOF: Yep. And so moving forward here, let's talk a little bit about IP and when it makes sense to co-develop and share in IP. And I know there are startups that I've talked to from this great community where co-developing and sharing IP just-- they would never think about it. They've sort of gone down that path, learned the hard way that it doesn't work, at least for them. And I'm just curious if, within this group, it's something that you think about and what your thoughts are and it doesn't make sense, and how does it make sense. Michael?

MICHAEL SCHRADER: I'll go quickly on this one. So we've actually got a structure that we love that we stole from Moderna, which is to say our collaborations typically have very clear language saying that the rising IP is either jointly owned or owned by the inventing party with the caveat on the back end that no IP can be filed without express, written permission from both parties.

So essentially, what it does is allows us to get a deal over the hump early without really negotiating who gets rising IP, how do you split background versus foreground IP, allows us to get into the collaboration quickly. And then if valuable IP is generated over the course of that, obviously, it forces you both back to the table to negotiate a follow-on license or follow-on agreement. So it's a really nice way for us to move quickly with a partner and kind of kick those discussions down the road rather than getting stuck on those and letting those bog down partnerships.

MARCUS DAHLLOF: Mm-hmm. Jack?

JACK BARON: Ours is a little different, because Michael's-- he's actually developing a final product that relies on ongoing focus with his company. In our case, we're producing a final product that becomes an ingredient. So the IP for the brand-new product-- let's say the coating, the paint, the packaging-- really is 100% the large partner's. We own the IP on just our stuff. And so we sign agreements along those lines-- NDAs, typically-- upfront. And then the collaboration, we're helping a large company develop the final product that is theirs proprietary.

MARCUS DAHLLOF: Makes sense. So we're going to wrap up very soon here. And I just want to remind the audience that if you haven't made your selections in the poll, then please go ahead and do so now. Because once we close, then you can't answer this one.

As a final question here, I'd like you to share perhaps what you view as your best partnership. You don't have to name names. But talk a little bit about the process of how that started, what went well, and what were the defining parameters of that relationship that made it a productive relationship. And anyone can weigh in. Yeah, Paulo.

PAULO GARCIA: Yeah. I can jump in, since we're actively in one that is going really well. I've [INAUDIBLE] key lessons learned from others. So the first thing was that in order to entertain one of these engagements, we did bring some data that the partner saw as compelling. And it wasn't necessarily in the cell type that they are interested in. But it was close enough that they saw some hints.

And when we went into the meeting, one of the key things for our success was the fact that there were individuals from discovery, from process development, and from the business side as VP-level individuals that were decision makers. And so in one presentation, we were able to get buy-in from the entire organization in order to really craft a plan that made sense for them and for us.

And really, I think one of the things that has been very useful-- before we conducted any experiments, we had a kickoff meeting in which we all got together in a room. We went through the logistics of how this relationship will go. There was clear success criteria, as Michael alluded to.

And we have constant check-ins, monthly meetings in which we share results. We can address any things that have come up that might require tweaking. And we are excited about the progress so far. So that has been a really successful engagement for us.

MARCUS DAHLLOF: All right. Anyone else? Jack, please.

JACK BARON: I'll be very brief, Marcus. So communication has been the key-- really high level of communication, frequent communication, developing close relationships so that you really have champions inside these companies to look out for you and communicate everything that's going on. We've had really good luck with folks who-- one partner in particular, they had a large existing business where we were able to help shore that up. But what they were most excited about was moving into new areas where they can compete more effectively using a brand-new product set that they could develop with us.

MARCUS DAHLLOF: Mm-hmm. Michael, your turn.

MICHAEL SCHRADER: I'll just chime in with one final one, which is, for us, speed and our partner's ability to move at the same pace that we're moving has been the key differentiator for us. So we have one Korean partner, Green Cross Pharma, who's been fantastic for us. I think they go by GC Pharma now, so I don't want to offend them. But they've been wonderful.

Basically, if we sent an email request during the day, kind of US time, they'll send us a request back basically during the day their time. So it's literally one-day iteration on these question cycles. The collaboration is just flying much, much, much more quickly because of that. So that speed, to us, is something that's really been a key differentiator.

MARCUS DAHLLOF: Great. Thank you, Michael. Adam, do you want the last word here?

ADAM BEHRENS: I think doubling down on communication. And all of this is about relationship strength and relying on each other in that relationship. And so I think we all talk about technical milestones and otherwise, but making sure the people side is equally well addressed in both directions is probably the real unlock for every successful relationship that we've been able to enter.

MARCUS DAHLLOF: Great. Thanks so much. So this concludes the STEX25 showcase. It's been a real honor to be able to organize this for all the attendees across the world. I mentioned it on day one. We had over 750, I think now 850, people registered from across over 150 different companies from 36 different countries, so really amazing. I feel fortunate to be able to put this together for you.

Again, if you answered the poll for request for introduction, we're going to be reaching out over the next week and facilitating those introductions. If you have any questions or you want to follow up with me, again, my email's MarcusD@mit.edu. Thank you very much.