2 minute watch | November.26.2025
Featured as part of the UK Founder Series, this Conversation Series offers guidance to startup founders navigating the challenges of building and growing their business. View the full series here.
Orrick’s James Badge highlights the crucial legal steps founders and university researchers must navigate when forming a spin-out – from securing intellectual property rights and negotiating licensing terms to structuring the new company and aligning with university policies.
Note: This video requires functional cookies to load.
James Badge: The key legal commercial considerations that founders and spinouts need to consider when spinning out from university are first of all, IP. What does the IP landscape look like? So, running that IP order initially to understand what data, research, tech can be rolled out from the uni and what you're going to commercialize are kind of the key things. You're going to need to negotiate with the university and the tech transfer office. That's going to be a long, arduous process, and you want to make sure that you are picking out and highlighting the right kind of IP that needs to be carried across.
Now, typically the universities take quite a large equity stake in companies. It varies from jurisdiction to jurisdiction. We find that in the UK, it's typically between 10 and 50%. Typically, when you've got a larger equity stake from universities taking up quite a large chunk of the cap table, that obviously has the impact of diluting the founding team over time as you go through the life cycle raising more and more capital. But also, it can be a bit of a red flag for any investors who are coming on board. Effectively, you want to set up your cap table for the future. And if you've got a large stake on the cap table, that's going to be prohibitive to your future financing rounds.
So, the role of the university when it comes to IP and things that founders need to be aware of are down to firstly what it should look like, whether it's assignment or whether it's licensing. So, the preferred position we find for founders is that assignment is always best because founders will have complete ownership over the IP going forwards. However, the reality is that universities typically look for a license. It's then going to get tricky in how you negotiate the terms. It's quite a long, arduous process, and we find that it can take six to twelve months to negotiate the terms of a licensing agreement. We typically get involved with companies at all stages of the life cycle, but we would always encourage founders to get in touch with us when you are negotiating the terms with your university in respect of the licensing and IP side, but also in respect of terms sheets with the investors. And we can guide you through that process to make sure that you have the right tools and the right setup so that long term you are setting the right precedent for future success.