The Power of Participation Rights

Distinctive Sources of Private Equity and Participation Rights

UC Berkeley’s world class innovation ecosystem enables us to source equity and participation opportunities from high-potential startups across campus and the UC system. This strength, combined with the affinity our founders, faculty, and alumni have for sharing the economic upside Berkeley helps create for them, drives meaningful opportunities for the UC Berkeley Chancellor’s Fund.

  • UC Berkeley’s longest-standing equity ownership program, with more than 35 years of history (the first equity agreement was completed in 1991), enables the campus to receive equity ownership and participation rights (in lieu of a portion of cash payments) in return for licensing its intellectual property to companies.

  • Similar to Berkeley’s equity program for licensing its patent rights, the campus’s licensing program for software (that aren’t open-sourced) is another form of intellectual property licensing by which the campus can receive equity ownership and participation rights.

  • Under this program, the equity ownership and participation rights are sourced (in lieu of cash fees) through agreements that provide startups with access to select campus R&D facilities, services, and office space.

  • The Open Source Software Startup (OS3) agreement is a non-cash framework that facilitates the commercialization of UC Berkeley-developed software distributed under an open source license, enabling startups to officially confirm the right to commercialize the software while ensuring mission alignment with the university. Built in collaboration with our serial entrepreneurs and VC partners, the OS3 is designed to be founder and VC friendly, providing equity and participation rights while bringing clarity to the commercial use of open source software.

  • The Innovation Access Agreement (IAA) addresses a common scenario in which VCs request a “clean bill of health” memo for startups that do not use UC licensed technology but were formed within the UC Berkeley ecosystem. As a long standing routine operational document, it incorporates a small founder and VC friendly participation rights component that does not impede VC or founder activity, yet appropriately positions Berkeley to make a future investment at the same fair value as other investors.

  • Venture Capital firms can sponsor research at UC Berkeley that may result in new intellectual property. Startups emerging from this sponsored research provide predefined equity ownership and participation rights to the sponsoring VC firms and UC Berkeley.

  • Similar to VC Sponsored Research Program, the Corporate Sponsored Research Program enables companies to collaborate with Berkeley researchers on innovative projects. These partnerships provide the corporate sponsors with early access to cutting-edge research and technical expertise. Project agreements can include equity ownership or participation rights for the corporate sponsors and UC Berkeley.

  • UC Berkeley’s Entrepreneur-In-Residence (EIR) Program provides seasoned entrepreneurs with the opportunity to engage with cutting-edge Berkeley research, with the potential to become CEOs and lead the commercialization of groundbreaking innovations. The program pairs high-value opportunities with experienced entrepreneurs to transform Berkeley discoveries into startups that advance the university’s mission, while UC Berkeley retains significant equity and participation rights in the resulting companies.

  • UC Berkeley’s ability to accept gifts of private equity across the full private equity lifecycle from company formation and seed stages, to highly de-risked and pre-IPO companies allows the campus to build a diversified long-duration portfolio. Often, such gifts enable the campus, through existing company investor rights agreements, to invest alongside future rounds of financing.

  • The Participation Rights Program reflects the bonds between UC Berkeley, its faculty, and alumni. Through this program, faculty and alumni founders, driven by their affinity for Berkeley’s mission, create opportunities for the University to invest alongside other VCs at fair value. These opportunities can take many forms: designation of UC Berkeley as a major investor in investor rights agreements, side-letters with codified participation rights, granting rights of first offer on unused pro-rata shares, or encouragement to Boards and major shareholders to include UC Berkeley in their allocation decisions. In many ways, this program operates like a close-knit family.

  • UC Berkeley’s equity management capabilities extend to other UC campuses that have a formal partnership with UC Berkeley. Through its Venture Capital Services team, UC Berkeley manages the equity portfolios of partner campuses and is positioned to identify and leverage unused investment capacity in startup financing rounds, allowing UC Berkeley to participate in opportunities originating across the broader UC system.

  • True to UC Berkeley’s culture of innovation, we are continually developing new avenues to secure equity ownership and participation rights across our campus and the broader UC system. As these stealth-mode programs launch, we will add them here along with brief summaries.