Making+the+license+versus+new+company+creation+decision

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Spin-off Companies
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Module 1 Making the license versus new company creation decision
development, possible regulatory or other hurdles || Manageable risk. Development path well understood. || Founders have social ties to venture capitalists.
 * **Questions to ask** || **Consider licensing the technology** || **Consider building a Spin-off**
 * company** ||
 * What is the estimated market size? || Too small to sustain a spin-off company || Large markets ||
 * What is the competition? || Competition with established companies with strong market shares || Market niche with few competitors ||
 * What are the development risks? || Large risk or unknown risk. Long path to
 * What are the development risks? || Large risk or unknown risk. Long path to
 * How much investment capital is needed? || Unsure if it can be obtained || Investment committed or high probability of its being available

//Government or seed investment may be critical to create a spin-off company, but will additional larger amounts of investment be available for growing the company?// || growing a business || Experienced team in place || customers contacted about your product or service? || Technology supports incremental changes to existing technologies || Substantial number of commitments to buy || (IP)? || Narrow technology, could be part of a larger system || Radical technology broad platform, multiple uses
 * Is there an experienced management team and CEO? || Little or no experience with building and
 * Has market intelligence been conducted or potential
 * What are future income projections? || Royalty payments are reliable and can be estimated || Potential of future profits from holding equity in the spin-off company are estimated to be greater than expected royalty payments from a license ||
 * Are experienced external advisers and mentors available? || Few mentors or advisers || Experienced external advisers and mentors ||
 * What is the scope of technology and intellectual property
 * Are experienced external advisers and mentors available? || Few mentors or advisers || Experienced external advisers and mentors ||
 * What is the scope of technology and intellectual property

//<span style="color: black; font-family: Arial,Helvetica,sans-serif; font-size: 10pt;">University spin-offs tend to exploit general-purpose technologies, or basic inventions with broad // //<span style="color: black; font-family: Arial,Helvetica,sans-serif; font-size: 10pt;">applications // || university/research institute and the spin-off company during its early development, after a potential sale to another company, after further rounds of investment, or if the spin-off ceases doing business or files for bankruptcy? || Non-existent or uncertain relationship || Good relationships Agreements in place ||
 * What marketing will be needed? || Extensive marketing infrastructure needed which only an existing company can provide ||  ||
 * What is the relationship between the parent
 * What is the experience of the parent organization's technology transfer or commercialization office? || The office has little practical experience. The office is more used to protecting IP ans licensing or selling patents. ||  ||


 * Spin-off companies may create value more quickly and in greater amounts than licenses if the shares in the spin-off increase in value sufficiently.
 * License royalties may produce a more reliable and consistent return on investment.
 * Creating spin-off companies require much more work than licensing but may have a larger financial "upside" in the long term.