UK universities and investors have joined forces to boost the number of software spin-outs from academic innovations by recommending a more efficient deal-making processes designed for rapid scaling.

TenU – which represents world-leading universities including Imperial, Cambridge, Oxford, UCL, Manchester and Edinburgh – has joined forces with a group of top investors and professional services firms to launch a new expert guide for the speedy and efficient formation of spin-outs from cutting-edge university research.

The USIT for Software Guide was launched on 20 May at an event at Mansion House attended by Andrew Griffith, Minister of State at the Department for Science, Innovation and Technology.

Many of the UK’s leading tech companies, such as Solexa, Oxford Nanopore (an IP Group investment), and Synathesia, originated as university spinouts.

A government study revealed that investments in UK university spinouts grew dramatically, from £1.06 billion in 2014 to £5.3 billion in 2021 – a five-fold increase.

To streamline negotiations, especially for less experienced parties, the new USIT Software Guide offers a standardized approach across the sector.

This guide suggests that university technology transfer offices (TTOs) should acquire 5-10% equity in software spinouts.

Recognizing the unique nature of software spinouts compared to life sciences and deep tech ventures, the guide accounts for their faster development cycles, lower initial capital needs, and the necessity for swift growth in a dynamic, competitive market.

The guide proposes a framework where founders retain 90-95% equity, with university royalties set between 0-2%, based on intellectual property and resource expenses.

A new fast track equity model in Cambridge

Earlier this month the University of Cambridge launched a new opt-in fast track equity model that sits alongside Cambridge’s unique and pro-entrepreneurship intellectual property (IP) policy, to simplify and speed up the legal process to spin-out creation.

The offer allows for an immediate agreement on the equity portion of an IP licence to enable a spin-out and is structured to reflect the different circumstances of different businesses. This opt-in model will rapidly accelerate the time take to create a spin-out and provide greater support, enable greater impact from University research and improve the experience of our academic founders. 

About TenU

TenU is an international collaboration formed to capture effective practices in research commercialisation and share these with governments and higher education communities. Its members work together to increase the societal impact of research.

Its members are the technology transfer offices of the University of Cambridge, Columbia University, University of Edinburgh, Imperial College London, KU Leuven, University of Manchester, MIT, University of Oxford, Stanford University, and University College London. TenU members work together to increase the societal impact of research. TenU is funded by Research England and hosted by Cambridge Enterprise.

Parkwalk & Cambridge Enterprise have co-invested in multiple investments over a ten year period, and run the University of Cambridge Enterprise Funds. For more information please see here.

This article was originally posted on Cambridge Enterprise’s website, read the full article here.