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Guidelines for credible university software spinouts

Guidelines for credible university software spinouts

Business news |
By Nick Flaherty



A global collaboration has published guidelines to boost the number of software spinouts from universities.

The TenU collaboration has teamed with investors and professional services firms to launch an expert guide for the speedy and efficient formation of software spinouts from cutting-edge university research. The level of royalties on patents and equity demanded by universities is often cited as a barrier to scalable startups.

The USIT for Software Guide recommends that university technology transfer offices (TTOs) take between 5-10% equity in software spinouts and royalty levels ranging between 0-2%, depending on IP and resource cost.

The Guide provides a common approach to negotiations across the sector to make the process much more efficient, especially for less experienced parties.

TenU represents the technology transfer offices of the top five global universities – MIT, Stanford in the US and Imperial College London, Oxford and Cambridge in the UK as well as Columbia University, University of Edinburgh, KU Leuven, University of Manchester, and University College London.

The guide reflects the unique characteristics of software spinouts such as design tools if compared with those in deep tech such as semiconductors, including shorter development times, relatively low initial funding, and the need for rapid growth in a highly competitive, rapidly evolving market.

Software businesses evolve through engagement with customers, understanding needs and spotting where the technical advantages of the software can deliver some distinctive performance. This different distribution of value between founding IP and accumulated founder-customer interaction contributes to the justification for different founding equity stake.

The ease of the spin-out process matters greatly and the USIT for Software guide offers a framework for enhancing transparency and aims to enable more effective collaboration between the university, VCs, and founders.

“Maximising the real-world impact of cutting-edge university research is crucial to advancing the UK’s reputation as a world leader for innovation. The new USIT for Software Guide demonstrates the sector’s continued commitment to building stronger relationships between TTO offices of leading universities, investors and founders, for the benefit of spin-outs, the economy and society,” said Ana Avaliani at the Royal academy of Engineering.

With software spin-outs – more than many other spin-outs that we help set up – speed is of the essence. The ability to agree terms to enable founders to get their software solutions to market quickly is essential. Having this clear framework helps hugely in setting expectations on all sides and allows founders to do what they do best – create great software innovations that have real world impact,” said Simon Hepworth, director of enterprise at Impoerical College and chair of USIT for Software.

The guide is at https://ten-u.org/news/usit-for-software

 

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