UConn takes equity stake in Canadian startup

In recent years, UConn has doubled down on efforts to build up its tech transfer program — which identifies promising technology and research that could translate into new business ventures or products.

But the process isn't easy.

Most university licensing deals with private industry don't bear fruit and commercializing lab findings is time consuming, complex and capital intensive.

Most university startups or business ventures fail.

One company trying to beat those odds is located more than 500 miles northwest of UConn's flagship Storrs campus. Headquartered in downtown Toronto, with leased lab space at UConn, Poet Technologies is trying to change the future of electronics with a method for manufacturing a next-generation microprocessor chip, which acts as the brain of modern computer systems.

If the company accomplishes what it aims to — upending the multi-billion dollar global microprocessor market — UConn could reap a big pay day.

The school recently restructured its technology license agreement with Poet, taking a 1.4 percent equity stake in the company, worth about $2.7 million as of press time. The deal represents the first time UConn owns a piece of a publicly traded company, which is the route many big tech transfer universities take to earn sizable investment returns.

"This is new at UConn, but is not unique for major research universities," said Andrew Zehner, UConn's director of corporate and business relations. "We hope all of our startups will eventually provide a return to UConn, and ultimately generate positive economic activity for the state."

Peter Copetti, Poet's chairman and CEO, said he thinks the school's stake will increase multiple times in value in the next two years.

"[Poet] believes that its integrated electro-optical chip is the next great leap forward in technology and will have the ability to power everything from wearable technology, everyday appliances, to phone, tablets, computers and military applications alike," Copetti said in an email.

Next-generation Microprocessor

Poet is developing a way for manufacturers to build a faster, more energy efficient microprocessor.

What differentiates Poet's technology, according to its chief science officer — UConn professor Geoffrey Taylor — is that it builds a single chip that uses lasers and other optical components, as well as electricity, to process data.

"By bringing [optical and electronic components] together, you open up a whole new dimension of capabilities," Taylor said.

That combination of light and electricity is something that no company has yet been able to bring to market, Taylor said.

But it's the type of speed-enabling technological leap the industry has been talking about for years. The problem for manufacturers is that squeezing faster speeds out of today's silicon-chip technology is getting more difficult and expensive.

Taylor said microprocessors made with Poet's platform could be eight times faster than their current counterparts.

But to convince a chip manufacturer to prototype the technology on a larger scale — which would be expensive — Poet has some more work to do.

Taylor and Poet's five Connecticut employees have been testing the technology in a UConn clean room, but the company will need to prove its manufacturing method works on larger "wafers" — the round discs of raw material, like silicon, out of which manufacturers punch hundreds of tiny high-tech chips.

Manufacturers prefer bigger wafers because it brings down the per-unit cost of the chips. Leveraging those savings will be particularly important for Poet, whose technology also uses the compound gallium arsenide, which Taylor says is vital to integrating light and electricity, instead of less expensive silicon.

Taylor and his team have been working with defense giant BAE Systems to test their technology, but Poet is also looking for other development partners to push its product toward the commercial market.

UConn's Unique Deal

As part of its restructured deal, Poet reduced its sublicensing royalties to UConn from 30 percent to 3 percent, which will make it easier for the company raise more equity financing, said Taylor and Donna Cyr, UConn's licensing director for physical sciences.

In fact, just days after announcing its new UConn agreement, Poet closed on a $5 million equity raise, which will provide working capital through the rest of this year.

The UConn contract also adjusts to Poet's new business model. Originally Poet envisioned selling their own chips, but now they'd like to sublicense the technology.

As a result, sublicensing revenue could be much higher than previously expected — if Poet is successful — making a 30 percent cut for UConn a steep price to pay.

"Their business strategy had changed from selling chips to sublicensing the technology and working with partners," Cyr said.

UConn could also earn as much as $1 million a year if Poet hits certain revenue benchmarks.

UConn has approximately 100 active license agreements with companies. But Cyr said she wasn't aware of any others in which UConn owns shares in a publicly-traded company.

Poet is also one of the few firms in UConn's portfolio that isn't headquartered in the United States.

Poet trades on the Toronto Stock Exchange, the third-largest exchange in North America, as well as the OTC Marketplace and OTCQX International. Last week, the company's share price reached its highest point since 2011, hovering between $1.16 and $1.38. Under its agreement, UConn can't sell its stock until May 2016.

If Poet's technology platform catches on, the majority of UConn's proceeds would fuel further R&D at the school, Cyr said.

"We're certainly very excited about Poet … and their success so far," Cyr said.

Clarification: The original version of this story failed to mention that Poet's stock also trades on the OTC.

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