How to Turn Regulatory Chaos Into Competitive Advantage | Darren Cooke (Part 3/4)

Intro - 00:00:06

Welcome to the Biotech Startups Podcast by Excedr. Join us as we speak with first-time founders, serial entrepreneurs, and experienced investors about the challenges and triumphs of running a biotecah startup from pre-seed to IPO with your host, Jon Chee.

In our last episode, Darren reflected on his path from high-stakes patent litigation at Covington to an in-house role at Bio-Rad, where working with inventors shaped his view of IP strategy and balance. He closed by sharing why he left to start his own firm. If you missed it, check out part two.

In part three, Darren talks about the nuts and bolts of university tech transfer, what founders should know about the Bayh-Dole Act, how license and letter agreements work, and why inventors often make IP rights a condition for funding. He also shares how mentoring startups led to teaching NSF I-Corps and to MBA courses at Haas, showing how the simple act of showing up can open unexpected doors.

Jon Chee - 00:01:21

During this period, I'm guessing your law firm started to get busy. You're now deep in the ecosystem, and it sounds like after starting in the basement with zero clients, fast-forward a few years, and you're now busy. What was that experience like?

Darren Cooke - 00:01:38

Yeah. As I got busier, I did pick up some clients. I did infringement analyses and invalidity reports—stuff that I had expertise in. I also started doing license agreements for startups that were coming out of mostly Berkeley. That was now my bread and butter: license agreements.

For those who don't know this, the standard—and this goes way back to the Bayh-Dole Act—is that IP invented on campus is owned by the UC Regents. That's just the deal. If you have a startup, even if you're coming from campus and you invented it, and you want to use your IP, the first thing you have to do is license it from your own university. The first step is getting the license, so I did a number of these. I was working with startups at the stage where they wanted to start their company based on research that happened at the university. First thing they have to do is get rights to it, and they've got no money. So they're looking for a guy in his basement. That's the deal. They don't want to go to Wilson Sonsini; that's gonna be $20,000.

Jon Chee - 00:02:55

Yep. Yep. Yep. Totally. For those who are looking to do that, what is the role of the tech transfer office, and what are some key considerations for founders? And in your eyes, what does a successful tech transfer look like for both the founder and the tech transfer office?

Darren Cooke - 00:03:15

Yeah. Well, doing a deal with tech transfer, there's actually not that much variability. I think for a lot of people, it's very esoteric. But at least at Berkeley and most universities, the license agreement is online.

Jon Chee - 00:03:30

Oh, I didn't even know that.

Darren Cooke - 00:03:31

There are terms that can be and are negotiated. Most of it is what we call the term sheet terms. This is boring stuff, by the way. Term sheet terms like upfront payment, running royalty, milestones, minimum royalties, that kind of thing, are all negotiated. And the way it works is that, hey, if you don't want the university to take equity in your company, maybe you can increase the upfront payment. There are all these things that sort of float up and down.

Frankly, it's actually not hard to get to fair terms. Most universities, Berkeley is one of them, are actually fairly reasonable. We want the startups to succeed. The reputation, especially in Europe, is that they're not reasonable, but at least in the US, we understand that a startup's success is our success. So you figure out the term sheet terms, and then you move on to doing the full-blown agreement. It takes time, depending on who your counsel is. Maybe they push on different things, and maybe the university pushes back on different things. But, you know, a month to three months later, you've got the agreement. Success. So that's the process. It's actually not that exotic.

Jon Chee - 00:04:48

By the way, I find it riveting, and I think the listeners will find it riveting as well. I have a lot of colleagues who are coming from the bench, and this is like a foreign language.

Darren Cooke - 00:05:00

What is this term sheet? Yeah. A licensing agreement. What is this?

Jon Chee - 00:05:00

I think it's incredibly important for anyone at the bench to go take a peek at the licensing agreement online, which I did not know is available.

Darren Cooke - 00:05:13

They're not secret. That's right. You can see the gaps. Like, there's literally a place where you can put what's the royalty rate. And you just read through the agreement. Okay, we need to figure out each of these terms, and those are what's primarily negotiated: the numbers. But then other terms, like written terms, will be negotiated too. But it's a process. Many find it to be painful because it's drawn out and sometimes it can be acrimonious, but you get through it. And then when you get to the end, you have rights to use the technology that you probably invented, and you run with it. And that's, of course, what a lot of investors are looking for.

A key point: many companies in their early days will have what's loosely called a letter agreement with their university. At Berkeley, we have a letter agreement. It's literally a letter, which is an agreement that says, "Hey, we're not gonna out-license this technology. It's reserved for you for a year" or whatever the term is, and then there's a nominal fee. That's it. That's the letter agreement. It's like a standstill, just to give the startup comfort knowing that we're not just gonna license it out to Genentech or something in the meantime. It's reserved, but you also don't have the rights to it yet.

Most companies we were looking at at Skydeck or LSA would be at the stage where they have a letter agreement. Many times, if there's any sort of question about whether they're going to be able to get a license, we'll put as a condition to investing that they get the license first. They don't like that condition. But from an investor standpoint, if you pretend it's a university that's notoriously hard to deal with, you'd say, "We understand you have the letter agreement, but we would like to see you get the license first." And if so, that condition is satisfied, and we'll invest. So, that happens.

Jon Chee - 00:07:15

And that makes a lot of sense. From the perspective of the investor, you want it adequately de-risked to some degree. Because there's a bunch of risk outside of that, but that's one that you can generally control for.

Darren Cooke - 00:07:30

You should be able to control it. Yeah. It'd be a bummer for you to invest and then be like, "Uh, they couldn't get the license?"

Jon Chee - 00:07:37

Yeah. I can empathize for sure with founders who are on the other side, but also from the investor side, it's like, we need just a little bit of de-risking here because there are so many other multivariate risks that you're trying to get your arms around, especially at this early stage. And so you're doing this with your firm; you're helping these companies stand themselves up. And you ran your firm for a fairly long time.

Jon Chee - 00:08:06

When did you know that it was time to slow down your firm?

Darren Cooke - 00:08:11

Oh, yeah. The law firm stuff just sort of wound down gradually, but then I got a job at Berkeley. That ended it. Before that, because of the connection that I made through LSA and other things, I was now somewhat plugged in on the Berkeley campus. And, ironically, the same program that I mentioned in the beginning, LAUNCH, the MBA-run startup accelerator, needed someone to be a mentor. My neighbor was a mentor in the program. And so now somehow I became known in the ecosystem, so they asked me to be a mentor for teams. And so I did.

And then because I became a mentor in the program, other people, at least at Haas, who are running this program called the NSF I-Corps program—have you ever heard of this? The National Science Foundation I-Corps program?

Jon Chee - 00:09:00

Sounds familiar.

Darren Cooke - 00:09:00

Okay. This is pivotal. It's a huge program run by the federal government. It's a market needs-finding assessment program that's based on the lean startup methodology. This is what I teach at Haas, so this is the very beginning. They needed someone to be what's called an industry mentor for a team that was doing the I-Corps program. And because I was known as a mentor at LAUNCH, the folks at Haas said maybe I'd like to be a mentor for the I-Corps program. Seemed reasonable and fun. Just a volunteer job. But you're in bed with a team—this was an academic founder and her grad students—for seven weeks while they're doing this rigorous NSF-funded program.

And so I did. It was the first I'd ever heard of it. It was super fun. Apparently, I was such a good mentor that the instructors took notice and said, "Hey, maybe I'd like to teach it in a boot camp at Haas." Like, me? That's wild.

Jon Chee - 00:10:07

Yeah. Yeah. Yeah.

Darren Cooke - 00:10:08

Okay. And so I did. I started teaching the NSF I-Corps boot camp, which is a two-week program at Haas back in 2017, because I went through as a volunteer. I'd been identified as somebody who seems to understand the process, and maybe I could actually stand up and teach it myself. So then I found myself in this wild position of standing in front of a classroom full of some faculty, but also grad students and other students mostly coming from the Berkeley campus. And I'm the instructor for a market needs assessment class. Interesting. Why not?

So I started doing that and started teaching it quite a bit. That was when my connection with Haas started, because I started regularly teaching the I-Corps class. Then they wanted someone to be a national instructor. A national instructor is somebody who teaches the seven-week version, and it's actually in different places around the country; you fly to different places. It's a big program. You had to be nominated to be a national I-Corps instructor. And so I got the nomination, went through a training class—and not everyone passed, it was wild. I did all that, and then I became a national I-Corps instructor for the NSF. And so then that became a job. One thing led to another. It wasn't full-time, but it actually paid fairly well.

This is where it's like, of all things I never would have predicted, that's it. I can see, yeah, become an attorney in your basement and then mentor teams. I could do all that. But then actually being hired by the government to teach entrepreneurship to academic founders—I didn't see that coming. I've been doing that for a long time. I started teaching the national I-Corps program in 2018. That happened pretty quickly, and I did a number of the classes.

So that's where one thing led to another. At the same time, I started volunteer-teaching an MBA course at Haas with a colleague of mine. And this is important because this is the magic of showing up. I just thought it was a neat course. So I taught it with him just for fun, and with another colleague, Rhonda Schrader. It was Errol Arkilic, Rhonda Schrader, and I teaching this lean transfer class. Frankly, I was just a volunteer. I just thought it was fun. Later, when Errol Arkilic, the guy I was teaching with, got a different job at Irvine, suddenly, they're looking around like, "Who's gonna teach the class?" And everyone looks at me. I was the guy who was the volunteer. I got an MBA course out of it just by showing up.

That's the thing. If you just consistently show up in the right place—it took years. It didn't happen right away. It wasn't like I just showed up as a volunteer and they were like, "You're hired." No. It took a while. But most people who teach—so I'm professional faculty at Haas, which means that I'm employed by the business school to teach classes. It's distinct from being ladder faculty who are professors. Most of the classes are actually taught by professional faculty. People don't know that. A lot of people ask me, "How did I get the job?" or "How do they get the same job?" because they want to teach a class at the business school. It seems pretty consistently most people get the job just by being a guest lecturer, hanging around, being involved. And then when the regular instructor retires, quits, wants to do something else, or moves, they look around like, "Who else can teach this class?" That was my situation.

Jon Chee - 00:13:55

I love that. And the throughline I see is that going to those events cascaded into this. The NSF opportunity and your mentorship via the investing circles just opened that door. That's the thing: showing up opens doors in so many ways that you can't predict.

Darren Cooke - 00:14:16

That's the main advice I give people, but perhaps it's a theme of the podcast: it's the magic of showing up. It really is. That's the way it works.

Jon Chee - 00:14:25

I love that too. And I think also, volunteering is just a win-win. People oftentimes are like, "How do I get into wet lab research?" Oftentimes, it's just knocking on a PI's door and saying, "Do you need any help? I'm interested in what you do. I will do dishwashing. I will wash the beakers, whatever you need." And that willingness to just go volunteer and be helpful in a field that you're interested in—it really is as straightforward as that. And even here, it's just like, who would have thought? You're like, "Yeah, I'll do some mentorship," and now you're a professional educator.

Darren Cooke - 00:15:10

One thing on the volunteering is that many times, actually becoming a volunteer is hard, meaning you can't just be like, "Hey, I wanna volunteer," and they take you. I see this a lot with undergrads. You know? You can't just say, "Hey, I wanna work in the Doudna lab. I'll do it for free." That's not gonna work.

Jon Chee - 00:15:30

Yeah. Yeah. Yeah.

Darren Cooke - 00:15:32

Although, I had a student in my I-Corps class. She took my I-Corps boot camp when she was an undergrad just to stand out. She came back later—I ultimately started an undergraduate class called Berkeley Changemaker: Human Health, which I'm happy to tell you about. But she came in as a guest speaker in my undergraduate class. If you look at the guest speakers in this class, they're big time for the most part. And then this recently graduated undergrad, who was working at Genentech, came back. The students loved her, but she told the story about how when she was an undergrad on campus, she got a volunteer position, an internship in the Doudna lab, because that's hard to crack. She's like, "Yeah. Don't just send endless emails and say, 'Attached is my resume, and I'd appreciate meeting.'" She's like, "You know what I did? I just went there." Just went there and found Jennifer Doudna. And people are just like, "What?"

Jon Chee - 00:16:47

But it's exactly that. Right? It's a form of showing up. Just bombarding someone with emails is low effort. And with low-effort attempts, they're easily distorted. Your email might not get opened. So when we talk about the early days of having zero clients, sometimes it really is just going in person and showing up and finding the person that you wanna speak to. Obviously, do it with—you know, be as articulate and professional as you can be. Exactly. But sometimes it is that: physically showing up. It's not just firing off a DM or something, because that's low effort.

Darren Cooke - 00:17:42

So this is what I teach in the I-Corps class. The I-Corps class is an intensive, what we call "customer discovery" class, where you go and interview people who are experts to test your hypotheses. Anyway, there's a framework to it. I had a team before the pandemic at Haas in the boot camp who said they really wanted to talk to somebody at Genentech, but they kept sending emails and no one was responding. I'm like, "You guys are in luck because Genentech is right here. It's right there. It's across the bay." And there are multiple buildings. I've been there. There are a bunch of buildings and parking lots between them, and people walk between the buildings. You can just go there and talk to people as they walk by. They're like, "That's crazy. We're probably gonna get arrested or something." And so I remember saying, "How badly arrested could you be?" They're just gonna kick you out. It's not like they'll throw you in jail.

Jon Chee - 00:18:41

Yeah. And that is critically important, I think. With that kind of mindset, you're your own worst enemy in that sense. I understand that it can be very uncomfortable, but you will be surprised that people are actually willing to talk.

Darren Cooke - 00:19:00

It's true. So this team went to Genentech. They came back the next class, super excited. They were like, "We did it. It seemed crazy, but we went there." And they're like, "You're right. There are a lot of buildings." And we started talking to people in between the buildings. They said at some point, they had to move to a different parking lot because someone was calling security or something.

Jon Chee - 00:19:24

Most of them were blowing you off.

Darren Cooke - 00:19:26

But, you know, they're smart Berkeley students. They're not threatening.

Jon Chee - 00:19:30

No. You're not accosting anyone.

Darren Cooke - 00:19:32

So then one person stopped and said, "I'm not the person you wanna talk to. She's in this building. I could take you in and introduce you." Like, what?

Jon Chee - 00:19:44

That is it. I love that because that's how you get the snowball going. I mean, just learning about your journey, that's how you start that first revolution of the flywheel. That first push is really hard. But then when you get a couple turns of it, it starts to really go. But it's uncomfortable. I get it. My first experience was doing cold calls. I was doing door-to-door sales to try and get this first equipment lease ready to go. And I think I've told this story previously, but I would literally do door-to-door sales for equipment leasing and just cold calling. And you gotta kiss a lot of frogs before you get to the prince. And it's always uncomfortable, but you get used to it. And when you finally make that connection, it makes it all worth it. Like, "Go talk to this person. Let me just walk you to this person that you need to speak to." And you could have just been like, "Uh, it's too uncomfortable. I'm not gonna do it." But it is unglamorous stuff like that. I think a lot of entrepreneurship really boils down to that unglamorous stuff.

Darren Cooke - 00:21:04

Yeah. We had a team that was trying to get into a bottling plant, and they couldn't get an appointment, so they just went there. The guy went there, and he told the story. He still couldn't get in, but then he saw some employees off to the side smoking. He's like, "I don't even smoke." But he just went up and bummed a smoke or something. Whatever the conversation was, he actually got a tour of the plant based on just talking to the smokers. I freaking love that.

Jon Chee - 00:21:35

I love that. It makes you really wonder. Again, you're creating your own prison, but really, it's much more porous. Obviously, you must be professional about it. You gotta be professional and with great intention. But things are way more porous than you might think. And honestly, this is just a personal story, but what always made it hard for me is that I look like I'm 16. And so people didn't take me seriously. It's like, "What's a 16-year-old trying to do? Trying to sell an equipment lease?" So at first, I was just picking up the phones more because I sound older than my age, but I don't look my age. But even at that, just getting through that, you also build tough skin. Because at the end of the day, there's a certain level of salesmanship that happens at every aspect of the business, whether it's securing your first client or selling an investor. How do you get investors? Like, people are like, "Oh, man. These investors are so hard to get ahold of." For those who aren't aware, now you can DM VCs and whatever. Before, you would just have to go to Sand Hill Road and physically do the rounds. That was the only thing. But again, it's being present and showing up that is so critically important.

Outro - 00:23:01

That's all for this episode of the Biotech Startups Podcast featuring Darren Cooke. Join us next time for part four of our four-part series where Darren takes on new initiatives at UC Berkeley, launching the Life Sciences Entrepreneurship Center, designing programs like the Fellows Initiative and Speed Teaming, and helping spin-out startups with venture grants. He'll also share how Berkeley's culture shifted from skepticism about commercialization to becoming a hub for biotech entrepreneurship and what it means to now serve as the university's Chief Innovation and Entrepreneurship Officer. If you're enjoying the podcast, be sure to subscribe, leave a review, and share it with a friend. Thanks for listening.

The Biotech Startups Podcast is produced by Excedr. Excedr provides research labs with equipment leases on founder-friendly terms to support paths to exceptional outcomes. To learn more, visit our website, www.excedr.com. On behalf of the team here at Excedr, thanks for listening. The Biotech Startups Podcast provides general insights into the life science sector through the experiences of its guests. The use of information on this podcast or materials linked from the podcast is at the user's own risk. The views expressed by the participants are their own and are not the views of Excedr or sponsors. No reference to any product, service, or company in the podcast is an endorsement by Excedr or its guests.