Spin-off+Companies

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==Guidelines for creating spin-off companies from higher education institutions, public and private research institutes, and enterprises ==

Questions - please add comments

 * 1) Making the decision on whether to license IP or to create a business around the IP is a critical decision. What are the main factors in considering this choice?
 * 2) For a potential investor, the initial spin-off company management team is perhaps the most important factor. How can universities and research institutes form management teams which will attract investment?

//[The terms "Spin-off" and "Spin-out" are taken to mean the same]//

**Typical Agreement Terms and Conditions when licensing IP to start-ups or large corporations to commercialize a technology**:

The company pays a royalty to the university or research institute based on sales revenue (not profits) attributable to IP. Royalty rates vary, but are typically in the range 3% to 6% of sales. An upfront payment may also be part of the agreement. Payments may be based on agreed milestones being achieved.


 * Alternative option – build a new company (Spin-off Company) to commercialize the technology and license the IP to this spin-off company. **

[Glossary: a spin-off, also called a spin-out, company is one created from another existing organization such as a university, research institute, or a company. A start-up company is any new business.]

Members of the research team may become shareholders in the spin-off company as well as the university (a separate organization owned by the university may hold the shares to avoid legal issues with the university’s non-profit status). Some universities and research institutes may allow members of the research team to work both for the company and at the university or research institute; many academics do not want to leave a university. Usually the inventor or key researcher is not the best person to become CEO of the spin-off. It is better to bring in someone with start-up company management experience, and keep the research scientist doing what he or she does best – research.

<span style="font-family: Arial,Helvetica,sans-serif; font-size: 10pt;">Creating spin-off companies from higher education institutions, public and private research institutes, and enterprises. may be a very profitable way to commercialize research and create wealth. Such new small businesses receive incentives and support in many countries. They can be effective job creators and attract investment with a return on initial investment from a future trade sale, future rounds of investment, or an initial public offering. However, many more decision factors are involved in creating new business rather than licensing a technology. There is a need for education in all aspects of spin-off company creation and management.

<span style="font-family: Arial,Helvetica,sans-serif;">**University Spin-off Company Term sheet** <span style="font-family: Arial,Helvetica,sans-serif;">**Case example: Guidelines for Spin-off Company and Equity Management in University Technology Transfer**

<span style="font-family: Arial,Helvetica,sans-serif;">Research collaboration between the spin-off company and the Institute/University laboratory may be carried out under a grant, license (including exclusive license), or other collaborative agreement. Any use of Institute facilities by the spin-off company will be governed by specific agreements with the Institute/University which will include the payment schedule for the use of those facilities.

<span style="font-family: Arial,Helvetica,sans-serif;"> Policies should be developed for:
 * <span style="font-family: Arial,Helvetica,sans-serif;">Employment of Institute/University employees by the spin-off company
 * <span style="font-family: Arial,Helvetica,sans-serif;">Location of the spin-off company on Institute/University property
 * <span style="font-family: Arial,Helvetica,sans-serif;">Establishment of an Oversight Committee to review the research activities of the spin-off company and the Institute/University laboratory, in order to make sure that no policies are violated
 * <span style="font-family: Arial,Helvetica,sans-serif;">Record keeping

<span style="font-family: Arial,Helvetica,sans-serif;">The Institute/University may hold an equity position in the spin-off company in accordance with Institute/University policy. In addition, royalty payments, milestone payments, or other financial arrangements may be agreed between the spin-off company and the Institute/University.

<span style="font-family: Arial,Helvetica,sans-serif;"> Both the inventor and the Institute may be granted separate shares or royalties and/or equity. The Institute/University will not have rights to a portion of the inventor's share.

<span style="font-family: Arial,Helvetica,sans-serif;"> Conflict of Interest policies should be extended to cover ethical, legal, and financial conflicts of interest between the Institute/University and the spin-off company. Use of the Institute/University’s name in connection with spin-off company activities should be regulated.

<span style="font-family: Arial,Helvetica,sans-serif; font-size: 10pt;">Modules

 * 1) <span style="color: windowtext; font-family: Arial,Helvetica,sans-serif; font-size: 10pt;">Making the license versus new company creation decision.
 * 2) <span style="color: windowtext; font-family: Arial,Helvetica,sans-serif; font-size: 10pt;">Managing and financing spin-off companies.
 * 3) <span style="font-family: Arial,Helvetica,sans-serif; font-size: 10pt;">Market pull or technology push.
 * 4) <span style="font-family: Arial,Helvetica,sans-serif; font-size: 10pt;">Roles of scientists and managers in start-up companies. <span class="wiki_link">.
 * 5) <span style="font-family: Arial,Helvetica,sans-serif; font-size: 10pt;">Finding and dealing with strategic partners.
 * 6) <span style="font-family: Arial,Helvetica,sans-serif; font-size: 10pt;">Maximizing investor and shareholder value.
 * 7) <span style="font-family: Arial,Helvetica,sans-serif; font-size: 10pt;">Valuing the company.
 * 8) <span style="color: black; font-family: Arial,Helvetica,sans-serif; font-size: 10pt;">Understanding the terms and conditions of the deal, deciding the fairness of a proposed deal.
 * 9) <span style="color: black; font-family: Arial,Helvetica,sans-serif; font-size: 10pt;">Annotated sample deal terms and investment contracts
 * 10) <span style="color: black; font-family: Arial,Helvetica,sans-serif; font-size: 10pt;">Investment exits.
 * 11) <span style="color: black; font-family: Arial,Helvetica,sans-serif; font-size: 10pt;">Writing successful business plan.

<span style="font-family: Arial,Helvetica,sans-serif; font-size: 10pt;">These Modules are a guide only to the planned content of this Handbook Section. Please add new content to this page, or use the discussion Tab. As the wiki grows we will move things around.

<span style="font-family: Arial,Helvetica,sans-serif; font-size: 10pt;">Additional External links
<span style="font-family: Arial,Helvetica,sans-serif;">[]
 * <span style="font-family: Arial,Helvetica,sans-serif;">Creating and Developing Spinouts: Experiences from Yale University and Beyond **

[]
 * Spinouts: From Research to Market**

Spinouts UK is a listing of all spinouts from UK universities since 2000, with information about their origins, their activity, their growth, and their current status. The objective is to provide for the first time a continuous time series of data which will be updated regularly to give the most comprehensive and reliable source of information about this important sector.

<span style="font-family: Arial,Helvetica,sans-serif;">**In the Public Interest: Nine Points to Consider in Licensing University Technology** <span style="font-family: Arial,Helvetica,sans-serif;">[]

<span style="font-family: Arial,Helvetica,sans-serif;">The Association of University Technology Managers (AUTM) 2006

<span style="font-family: Arial,Helvetica,sans-serif;">Point 1 <span style="font-family: Arial,Helvetica,sans-serif;">Universities should reserve the right to practice licensed inventions and to allow other non-profit and governmental organizations to do so

<span style="font-family: Arial,Helvetica,sans-serif;">Point 2 <span style="font-family: Arial,Helvetica,sans-serif;">Exclusive licenses should be structured in a manner that encourages technology development and use

<span style="font-family: Arial,Helvetica,sans-serif;">Point 3 <span style="font-family: Arial,Helvetica,sans-serif;">Strive to minimize the licensing of “future improvements”

<span style="font-family: Arial,Helvetica,sans-serif;">Point 4 <span style="font-family: Arial,Helvetica,sans-serif;">Universities should anticipate and help to manage technology transfer related conflicts of interest

<span style="font-family: Arial,Helvetica,sans-serif;">Point 5 <span style="font-family: Arial,Helvetica,sans-serif;">Ensure broad access to research tools

<span style="font-family: Arial,Helvetica,sans-serif;">Point 6 <span style="font-family: Arial,Helvetica,sans-serif;">Enforcement action should be carefully considered

<span style="font-family: Arial,Helvetica,sans-serif;">Point 7 <span style="font-family: Arial,Helvetica,sans-serif;">Be mindful of export regulations

<span style="font-family: Arial,Helvetica,sans-serif;">Point 8 <span style="font-family: Arial,Helvetica,sans-serif;">Be mindful of the implications of working with patent aggregators

<span style="font-family: Arial,Helvetica,sans-serif;">Point 9 <span style="font-family: Arial,Helvetica,sans-serif;">Consider including provisions that address unmet needs, such as those of neglected patient populations or geographic areas, giving particular attention to improved <span style="font-family: Arial,Helvetica,sans-serif;">therapeutics, diagnostics and agricultural technologies for the developing world

<span style="font-family: Arial,Helvetica,sans-serif;">For details see the above link.