top of page

UK Govt Spinout Review: a breakdown for scientists

Updated: 1 day ago



Dear Scientists and Fellows,


Years of polarising debates on how Tech Transfer Offices (TTOs) behave have led to the government taking an interest in improving the way that university spinouts are produced in the UK. During this time we have been focusing on negotiating spinout terms on behalf of founders and were eventually invited by the government to join the board of advisors set up to help carry out a review of the spinout process. We are proud of the outcome of the review and over the next few days we are going to break down how this impacts you and what the future holds for us all.

Context on the Board

Context on the Report

The core of the report is made of some 11 recommendations:

Recommendation 1 TTO Policy terms

Recommendation 2 Data & Transparency

Recommendation 3 Funding of TTOs

Recommendation 4 Levelling up TTOs

Recommendation 5 Research funding

Recommendation 6 Driving impact through spinouts

Recommendation 7 Solutions for founders

Recommendation 8 Venture training for PhD students

Recommendation 9 Funds affiliated with universities

Recommendation 10 Growth capital supply

Recommendation 11 Fluid academic careers


Recommendation 1: TTO Policy terms

Accelerate towards innovation-friendly university policies that all parties, including investors, should adhere to where they are underpinned by guidance co-developed between investors, founders, and universities

Starting off with a biggie, the premise is good! This is the single biggest reason why the spinout review was called for in the first place: why are TTOs taking so much equity from their spinouts? Since the pressure started and the publishing of this report most universities have readjusted their expectations and so the trend shows TTOs are moving away from ludicrous numbers (50%) but the median is not yet reasonable standing at 25%.

All parties should agree spin-out deals on market terms, avoiding unnecessary negotiations. Equity splits identified via TenU University Spin-out Investment Terms (USIT) Guide can be used as a starting point for life sciences spin-outs (10-25% university equity) with exact terms varying depending on the wider commercial deal.

Now this is a good starting point but it feels a bit meh and wish we were able to do more:

  • TenU proposal was put together by a panel made of universities and investors (some with track-record for proposing term sheets where the founders would only receive 10%). Scientist founders were not involved in that process and unless this happens in further iterations of the proposal, I struggle to see entrepreneurial scientists trusting this proposal. To note that the report (purposely?) recommends that founders should be included in future panels.

  • The 10-25% range is too broad and it leaves TTOs too much discretion to use the upper side of the range as a starting point for the negotiation. I raised multiple times that we ought to recognise that there are founders capable of moving without support from the universities (i.e. have lined up a full-time team with complementary skills, secured LOIs with industrial partners, are already getting in front of investors) and that such founders should be driven by the policy to start from the lowest end of the range.

By reference, for all of the founders of our portfolio ventures we have secured spinout terms within 0-10% range. We are putting together a free playbook for scientists on how to best manage the negotiation process.

Universities, investors, and founders to jointly develop guidance for (i) software spin- outs, where there is typically less university support and IP can be more straightforward to work around, and (ii) hardware and engineering spin-outs, which typically sit somewhere between software and life sciences. For less IP-intensive sectors, common in software-only spin-outs, typical deal terms should be much lower, with university equity of 10% or less.

This is promising. Hopefully we can include founders in the next policy reviews.

Universities, investors and founders to jointly build on the USIT guidance to develop a template for spin-out term sheets, similar to the US University Startup Basic Outlicensing Template (US-BOLT) to help streamline the negotiations process.

A welcome experiment, may not work in the immediate future as we are still at a stage where universities have disparate TTO structures and terms but it would be an ideal landing spot for founders.

Universities should have clearly stated expectations on time to complete the stages of the spin-out process by both the university and founders. University approvals needed for a standard spin-out should be delegated to trusted individuals and not taken by committees that meet infrequently.

Our experience has been that universities with larger TTOs can move at the speed that the venture needs and in fact that if the founders of a spinout are clear before hand on what the spinout process entails (lining up all the ducks: team, investors' list, proof of concept, secured lab space), they can incentivise the TTO to proceed faster. TTOs with less experience on the value of moving at commercially viable speeds will benefit from observing those that have systems in place.

Founders should be encouraged to adopt amongst themselves proportionate equity distribution that both recognises the contributions to originating IP and continued intellectual support, but also the need to reward and incentivise those individuals who will commit considerable effort in taking the company forward.

This point is spot on for an often less addressed matter. The academic mindset has been used to believe that research is the key asset of a successful spinout, while entrepreneurs well know that execution is what makes a company thrive. Professors and PIs have historically been able to claim majority or equal shareholding when the founding team is unable to explain the use of equity incentives. TTOs have also tended to protect the interests of PIs, so before entering a negotiation with the TTO make sure that you have defined the equity split and all founders agree on the division of shares.


^ Back to Index at top


Recommendation 2: Data and Transparency

More data and transparency on spin-outs through a national register of spin-outs, and universities publishing more information about their typical deal terms. The Higher Education Statistics Authority's ongoing review of the Higher Education Business & Community Interaction (HE-BCI) dataset must present solutions to improve the reliability of data on spin-outs.

This is very welcome and potentially pivotal in making TTO policies less of a black-box when negotiating. In our role as negotiators we have often been provided by universities with opening statements of the likes "our policy is conditional" (i.e. not negotiable) which of course we went on to challenge until we secured the terms that worked for the company (will remember to share what this means for us). This was however not simple as we often had to work in the dark with little points of reference. Spinout.fyi and this government review have now helped centralise data contributed by all founders but the mindset at TTOs remains typically one of confidentiality: they don't like you knowing of better terms agreed with other founders as they don't want you to interpret those terms as precedents which take over the policy. In fact, TTOs may agreed to unique terms on the condition that these remain confidential: before the negotiation all inventors, shareholders (and potentially advisors) are typically asked to enter into a CDA/NDA with the TTO). So in rolling out this recommendation, TTOs will have to reconsider mindset and procedures to allow for the flow of data.


^ Back to Index at top


Recommendation 3: Funding of TTOs

Higher Education Innovation Funding (HEIF) should be used to reduce the need for universities to cover the costs of Technology Transfer Offices (TTOs) from spin-out income. Given that HEIF equivalents are lower in the devolved administrations, the devolved governments may want to consider the findings of this review and provide additional support for their universities.

Coming from the world of venture I was not familiar with education funding and understand that fundamentally all universities compete for funding and this is part of the reason why it has been hard for them to get together to talk about tech transfer collaboratively and holistically. I find that this review was a forcing mechanisms for different universities to be in the same room and have the conversation. When attending the launch last week I felt an unusually vibrant energy so kudos to the chairs for coordinating this: a good bye-product of the review.


^ Back to Index at top


Recommendation 4: Levelling up TTOs

Create shared Tech Transfer Offices to help build scale and critical mass in the spin-out space for smaller research universities. These could be operated through collaboration with established university TTOs and could be implemented at a regional or sector-wide level. We note that the latter may be particularly of interest to spin-outs from the social sciences, humanities, and the arts.

On the Board it was shared that most universities in the UK have limited resources for TTOs and in any event not enough spinouts per year to justify the funding of sophisticated systems.

Learning this has helped me understand why conversations may be clunky with less funded TTOs and that their unfair demands for licensing may originate from the fact that the team is small and mainly made of trained IP license managers with little venture exposure: asking spinouts for equity is a more recent phenomena compared to the traditional licensing to industry licensee in exchange for fees and royalties. Note for scientists: when negotiating with less savvy TTOs it is down to you to help them understand what shares are for and how these work.


^ Back to Index at top


Recommendation 5: Research funding

Government should increase funding for proof-of-concept funds to develop confidence in the concept prior to spinning-out. These should integrate with the timing and offering of commercialisation support and venture-building programmes. Investors should lend their expertise to assessing funding bids for proof-of-concept and translational funds.

There is a "valley of death" in spinning out, where academic funding is no longer available (or the terms are just inconvenient) and before you are able to show enough validation to raise private capital. Venture building programmes may ask for the same level of validation as investors and traditionally provide capital when ready to start commercialising.

Note for scientists: we are designing a fast-grant program in partnership with visionary donors. We could use hearing your feedback on the challenges and workings of securing POC funding while in academia. Could you add your comments here?

Note for the government: investors may not be best suited to assess funding bids as their discipline is mainly geared towards assessing based on investment thesis and trends i.e. limited mindset unless they have previously been builders or entrepreneurs. Rather I feel that experienced founders would be better placed to both assess the potential technical merit and long term vision.


^ Back to Index at top


Recommendation 6: Spinouts driving impact

In developing the 'engagement & impact' and 'people & culture' elements of Research Excellence Framework 2028, the four Higher Education Funding Bodies should ensure that the guidance and criteria strongly emphasise the importance of research commercialisation, spin-outs, and social ventures as a form of research impact. We encourage spin-outs to assist universities in drafting impact studies for REF.

Again, coming from venture I was not familiar with REF though I understand that this is to make the flow of public funding towards spinouts easier.


^ Back to Index at top


Recommendation 7: Solutions for founders

Founders need access to support from individuals and organisations with experience of operating successful high-tech start-ups, regardless of the region founders are based in or sector they operate in. The existing landscape of support services needs both consolidation and targeted expansion to ensure that founders have access to:

NOW! This is where we recognise our work and the message we have been sharing with the government and board: to see more spinouts we need a novel infrastructure designed to up-skill entrepreneurial scientists and with them generate healthy spinouts. This is based on the belief that there is a new generation of scientists that holds the trait of founders and that wants to see their research translated in the real world.

3 years ago pre-pandemic and climate change becoming a priority for all, we set up Wilbe.com when we recognised that:

  • the solutions that we need for this century are all based on science and that

  • scientists will be the industrialists of this century

  • traditional incubators developed for regular tech will not work for science translation

We needed a new playbook and we recognised that we needed to analyse the hurdles that entrepreneurial scientists face and develop bespoke solutions to free you.

Note for scientists: the below may feel a bit of a "plug" but hopefully also of good reference to all stakeholders out there. Look out for links to resources that may help you.

Advice, support, or representation in negotiations with universities and investors.

Securing licensing terms that are healthy for the spinout is important because you need the equity to incentivise the founding team, future hires, advisors and allow for dilution from the shares that you will be giving to investors. Doing this is also beneficial because it's great practice on managing commercial interests and stakeholders.

Though TTOs are now making more efforts in providing transparency on the spinout process, their work still remains quite mysterious and the inherent academic mindset often means that scientists are often treated with deference and superiority when negotiating spinout terms. Here are the challenges for a scientist:

  • negotiations need to be carried out without emotions or fear for repercussions for promoting your interests and that of your future career / company: TTOs generally benefit from making you feel like you are still an employee and a "mere" inventor at the time of the negotiation, they don't want to recognise that you are a founder-in-the-making as they want you to feel "subject" to the hierarchical rules and systems of academia.

  • some forward looking TTOs promote that you seek "independent" advice (e.g. Cambridge, Imperial) though good advice is very tough to secure when you are getting started:

  • advisors / consultants / mentors: there are pools of these individuals hanging around or at times promoted by TTOs. They tend to be retired executives from industry, hence not with an entrepreneurial / venture mindset, with the time to carry out negotiations but in exchange may ask equity stakes in the company that are too high for the long term value that they bring

  • investors: if they have a strong interest in your company, they may try to help. Not trained to carry out negotiations, more used to telling people what to do, end up coming into the room and shouting

  • lawyers: as a former corporate solicitor myself this is a very complex relationship. Lawyers are great at managing the details, but not trained to tell you on what should be your ambition and fighting on your behalf for a number of reasons:

  • it takes time: they charge by the hour and even if they decide to help you on a pro-bono basis, negotiations take time and require

  • incentive: driven by fees, not the value increase of the shares

  • ability to walk away: in a negotiation you need to be able to do that if you need to flip the table and that is something lawyers are not ready to do

  • conflict: very few firms have experience with negotiating with TTOs and those that do will not be able to go to the end of the world for you as they don't want to sacrifice

So what: if you prepare for it, you can be the best negotiator out there. Here is what you can do:

  1. read through your university policy (this should be publicly available on the university's website)

  2. speak with other spinout founders on their experience (good founders care for each other)

  3. apply for a free strategy session with us at SPIN: if you are just getting started we can share what to expect from the process and test your plan.

  4. have a business proposition: TTOs need conviction that there is a viable commercial plan to license you a patent (even though you are the inventor). See below for how we have been training researchers on building this proposition.

Training on entrepreneurship and commercialisation.

There has been a disconnect between the world of science and venture and while IP and ideas are important to start a company, execution is really what makes the biggest different in business. Trainings will help make informed career decisions and avoiding expensive mistakes when starting a company.

The first solution we launched at Wilbe (while on lockdown from a farm on the Isle of Wight) was Become a Science Founder (BSF) a practical business training we designed and delivered with a cracking set of exited founders, operators and investors from the US. Now counting some 200+ Fellows across 22 institutes and 15 countries, we cover all the pivotal pieces needed to organise your ideas and understand the different operational pieces you need to consider once you get started.


So what: we are receiving applications for Class 11 starting Feb 2024. You don't have to start a business or share your ideas, you just have to be curious about entrepreneurship and joining a community of ambitious scientists. At this stage we can only offer 1 place for every 5 applicants so make sure to share why BSF would be valuable for you at this stage of your life. Oh and the fellowship fee is covered if you are a postdoc at one of our partner universities.

Support for business building activities: provide support to identify the commercial proposition of spin-outs, build a business a case, access customers, help connect investors with spin-outs, and help identify experienced and diverse people to join as early employees, advisors, and board members.

Traditionally in the UK scientists have not been seen as capable of starting and managing a business and the expectation by TTOs and legacy investors is that scientific talent should be paired with an industry executive or an MBA candidate. Scientist founders within these companies loose control of the vision and typically results in the company being "flipped" for a moderate exit and I am sure that this playbook works for many.

However I raised with the board that there is a novel generation of entrepreneurial scientists that has the ambition, foresight and execution capacity to build industrial scale ventures and needs a novel playbook. I welcome this recommendation as existing "operators" are not quite the answer:

  • Universities: provide free access to resources and connections but as a non-commercial entity they do not hold the mindset and the content to match the ambitions of scientists in high drive

  • Portfolio advisors from industry: they are solo freelance consultants that hang around the startup scene and universities though have typically a limited understanding / instinct for scrappiness and bootstrapping. They may be the first business stakeholders that you meet but not necessarily the best ones: they will ask for equity which they generally try to sell in the short-medium term.

  • Incubators: created to serve traditional tech but not quite fit for science-based companies:

  • large cohorts, onboarding dozen companies at a time

  • front ended by fresh operators as those with expertise are busy managing the incubator

  • offering typically $100-400K investment capital which is rarely sufficient to unlock inflection points in science and

  • potentially with a conflict of interests if founded / funded by the university

There is no turn-key solution when building a healthy science-based company and believe that, like with spinout negotiations, the answer is within you: the more prepared you are the more specialist support you can attract. As operators, we focus on supporting our founders during the spinout process, the most delicate stage in the lifetime of a science company, and this way BUILD some of the most coveted science ventures in Europe by:

  1. validating strategy

  2. avoiding expensive mistakes when securing spinout terms, confirming founding team and role of the PI, seeking commercial partnerships and securing the right lab space

  3. the opportunity is then de-risked to the extent that you are in control of the fund-raising timeline and narrative

So what: plans can evolve, delivery , speed and quality of execution is key.

Access to part-time or on-call professional support in law, finance, or operations in early stages before permanent hires are needed.

This is a problem but not a huge one and in implementing this recommendation the government may have to reconsider how it can better incentivise freelance advisors to step in and how IR-35 (a recent tax regulation for self-employed) impacts career choices. Nonetheless there is an increasing number of freelance advisors that are familiar with the dynamics of an early stage venture (though not many with direct experience advising science-based companies) and can provide the relevant degree of support at the right fee level. Surprisingly some of the larger firms can be the most entrepreneurial ones, investing pro-bono time and resources before you have funding provided that they have the confidence that your spinout is going to perform (if you needed another reason to get your thoughts in order, see above).

To note: our founders have access to a collective of tested advisors in legal, finance and branding at the ENGINE and a platform for TALENT matching, which we may open up to all scientist founders as we expand our operational capacity. Hit me up if you were "in-house" professional at a science company and you now wish to work closer with inspiring founders.

Access to shared equipment and facilities for rent.

This is an urgent problem. When we started, all our founders with capital in the bank and a team ready to go could not secure an appropriate lab space to move into. Even if not needed, securing a non-academic lab space can be of benefit:

  • performance: commercial lab spaces are more functional and effective

  • privacy: no shared benches and storage

  • culture: shape the space to cater for your company's identity

At LAB we are addressing this problem by sourcing, fitting-out and managing lab spaces for our founders and all scientist founders who wish to offer a beautiful home to their teams. We developed a playbook where we can retrofit existing commercial office and retail spaces effectively and working alongside partner advisors in complaisance with all health and safety regulations.


^ Back to Index at top


This is a living document, every day we release commentary for each recommendation, circle back tomorrow for the below!


Recommendation 8: Venture training for PhD students

Recommendation 9: Funds affiliated with universities

Recommendation 10: Growth capital supply

Recommendation 11: Fluid academic careers




bottom of page