In the UK, one of the main ways to commercialise academic innovation (often built on years of research) is through the creation of a “university spin-out”, i.e., a newly incorporated company whose core product comes from university owned intellectual property (“IP”). The founders of the spin-out company will need to consider if they will continue their research roles at the university or join the spin-out full time and this will impact the portion of the equity which they will hold. The university will also be a shareholder in recognition of its role in creating the research environment and, in some cases, providing the initial funding to bring the idea to proof-of-concept. The extent to which the IP involved is university-derived will be a key consideration impacting the balance between equity held by founders and by the university. Negotiation of the licencing arrangements for the IP behind the spin-out will be a key issue when creating the spin-out.
Founders will also have to consider share option arrangements, board appointments, leaver provisions and be mindful of any regulatory considerations, in particular whether the technology concerned is within one of the 17 “high-risk” areas under the UK National Security and Investment Act 2021.
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