While technology transfer offices (TTO) may wish they could remain engaged with their startups through the IPO phase and beyond to achieve a greater financial gain than selling off the equity at the first opportunity, they may not be able to do so.

The TTO typically is not set up to become a stockholder after exit, and in many cases university policy prescribes differently.

“Universities generally dispose of equity stakes at the earliest possible opportunity,” said Louis R. Dienes, an attorney in Ballard Spahr’s San Diego and Los Angeles offices. “They are not in the business of speculating on stocks, and technology licensing offices generally do not have the staffing to evaluate the risks and rewards of selling immediately versus holding an investment to see if there will be further appreciation.”

The most common way—other than public offerings—for universities to monetize their equity is through a merger or acquisition of the startup, he added.

“Different institutions have different policies; for example, some insitutions limit the amout of equity the institution can take, but the more common approach is how long the institution can keep said equity,” said Scott D. Marty, an attorney in Ballard Spahr’s Atlanta office. “I don’t think there is a one-size-fits-all approach. I’d like to think that an institution would always find a way to maximize the value of its equity stake, but sometimes it is about maximizing shots on goal. In other words, equitizing one opportunity may allow for an investment in two others.”

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