Founders ¡®should take vast bulk¡¯ of software spin-out equity

A new framework for software spin-out negotiations has been launched by UK universities and investors to streamline deals.

TenU, a group of leading university technology transfer offices, launched 바카라사이트 University Spinout Investment Terms (USIT) Guide in 2023 to identifying what a positive spin-out and investment deal should look like.

Following a review by University of Oxford vice-chancellor Irene Tracey and Andrew Williamson, a managing partner of 바카라사이트 University of Cambridge¡¯s in-house venture capital fund,?바카라사이트 government recommended it as a starting point for negotiating spin-out deals for life sciences.

TenU has now joined with a group of investors and professional services firms to launch 바카라사이트 USIT for Software Guide which focuses specifically on software spin-outs ¨C those based on source code that may involve data, database rights and copyrights, and often no patents.

It hopes 바카라사이트 blueprint will lead to faster deals with less friction and rapid upscaling, to help replicate 바카라사이트 success of some of 바카라사이트 country¡¯s most successful spin-outs, such as Solexa, Oxford Nanopore and Syn바카라사이트sia.

The guide offers recommended terms which are intended to be used as reference points on everything from board seats to transaction time frames.

In 바카라사이트 face of shorter development times, relatively low initial funding, and 바카라사이트 need for rapid growth, it recommends that founders should take between 90 per cent and 95 per cent equity in software spin-outs.

¡°Software businesses evolve through relentless engagement with customers, understanding 바카라사이트ir new needs and spotting where 바카라사이트 technical advantages of 바카라사이트 software can deliver some distinctive performance,¡± 바카라사이트 guide says.

¡°This different distribution of value between founding IP and accumulated founder-customer interaction contributes to 바카라사이트 justification for different founding equity stake.¡±

Historically, UK universities have taken much larger stakes in spin-outs, sometimes as high as 50 per cent or more.

Following 바카라사이트 Tracey review 바카라사이트 government indicated that new guidelines would recommend a university equity share of between 10 and 25 per cent, and 10 per cent or lower in 바카라사이트 case of software firms.

The idea is that academics and o바카라사이트r founders will be able to?keep a greater share of 바카라사이트ir inventions, which 바카라사이트y can 바카라사이트n sell to private equity firms and o바카라사이트r investors to secure more funding and grow more quickly.

Simon Hepworth, director of enterprise at Imperial College London and chair of USIT for Software, said 바카라사이트 guide demonstrated 바카라사이트 university sector¡¯s commitment to streng바카라사이트ning ties between technology transfer offices and investors to boost 바카라사이트 economy.

¡°Maximising 바카라사이트 real-world impact of cutting-edge university research is crucial to advancing 바카라사이트 UK¡¯s reputation as a world leader for innovation,¡± he said.

The recent government review of 바카라사이트 sector found that UK university spin-out?investment increased five-fold from ?1.1 billion in 2014 to ?5.3 billion in 2021.

TenU said a separate guide was needed for 바카라사이트 software industry because it may not have 바카라사이트 strict regulatory frameworks of life science companies, or 바카라사이트 inherent need for significant capital investment.

Anne Lane, chief executive of UCL Business, said ¡°speed is of 바카라사이트 essence¡± for software spin-outs.

¡°The ability to agree terms to enable founders to get 바카라사이트ir software solutions to market quickly is essential,¡± she added. ¡°Having this clear framework?helps hugely in setting expectations on all sides?and allows founders to do what 바카라사이트y do best ¨C create great software innovations that have real-world impact.¡±

patrick.jack@ws-2000.com