Jonathan Shapira contributed to the preparation of this advisory
The U.S. Department of Energy (DOE) announced on November 19, 2008 a competitive solicitation for five venture capital firms to participate in the expansion of DOE's Entrepreneur in Residence (EIR) program. The EIR program aims to accelerate deployment and commercialization of advanced clean energy technologies from DOE's National Laboratories. Chosen firms earn a "slot" of one year of increased access to the researchers and technologies at a national lab.
This latest phase of the EIR program will place five more venture capital entrepreneurs in DOE's National Laboratories:
- Argonne National Laboratory in Argonne, IL
- Brookhaven National Laboratory in Upton, NY
- Lawrence Berkeley National Laboratory in Berkeley, CA
- Lawrence Livermore National Laboratory in Livermore, CA
- Pacific Northwest National Laboratory in Richland, WA
On February 27, 2008, in the first phase of the EIR program, Kleiner Perkins Caufield & Byers, ARCH Venture Partners and Foundation Capital were chosen to work with the National Renewable Energy Laboratory, Sandia National Laboratory and Oak Ridge National Laboratory, respectively.
The Program
Each selected EIR will work directly with the management and staff of a national lab to conduct technology assessments, identify commercially promising technologies and formulate a business plan to finance a start-up company based on clean energy technology developed at the lab. The entrepreneurs and their venture capital sponsors can then negotiate a license to use the laboratory-developed technology. Entrepreneurs will also have an opportunity to recommend policy and business practice modifications to DOE and the national laboratories to improve the process for transferring technology into the commercial sector.
Selection Process And Eligibility
Venture capital firms will be selected for participation in the EIR program in a competitive solicitation using the following predefined decision criteria:
- Energy efficiency and renewable energy experience
- Venture capital track record
- Entrepreneur in Residence experience
- Program proposal
The program is restricted to established venture capital firms: domestic entities that must certify they have at least $5 million in funds available for energy efficiency and renewable energy technology investment, an overall current fund size of at least $50 million and a proven track record of launching successful start-up businesses. The firms must also demonstrate previous entrepreneurial support experience. Unlike in the first phase of the program, venture capital firms are now allowed to bid as consortia. EIR candidates will be limited to U.S. citizens and resident aliens only.
Legal Issues
The EIR, not the sponsoring venture capital firm, signs a non-disclosure agreement that facilitates full access to lab personnel, data and lab-developed technologies. DOE itself will not have a formal relationship with companies based on spin-off technologies from the program. The national laboratory that holds the patent for the IP that forms the basis of the newly founded company, however, will own a portion of the company's equity and/or receive royalty payments, in exchange for issuing a license. Most terms of the license have been pre-negotiated with venture capital general counsels, national lab general counsels and DOE general counsel, leaving the percent equity share as the only point of negotiation.
More information about the Entrepreneur in Residence program is available here on the DOE's website. Applications for the EIR program, which are due January 6, 2009, are available here.
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