Academic spin-outs: process, challenges and outcomes
Debbie Wake, NIA Fellow, CEO and Co-Founder of MyWay Digital Health, offers food for thought for innovators and academics looking to form a ‘spin-out’ company, describing the advantages and challenges she’s experienced on her innovation journey.
The UK is said to be excellent at developing IP-intensive technologies but not as good at commercialising them. The UK’s universities should be great breeding grounds for IP generation but there appears to be a lack of ambition when it comes to commercialising and scaling. Having been through the process of spinning out a company from an academic institution, our experience is that the road can be long, frustrating and challenging, but potentially give competitive advantages in the longer term.Spinning a company out of a university is really just a process of establishing and defining the Intellectual Property (IP), formalising the ownership and the permissions to transfer IP to the company. The University will generally take an equity stake in the company, will establish royalty payments for the IP creators, and may want a place on the board of directors. The % of equity/ royalties will be dependent on the academic institution. They all have their ball park amounts (and this can vary a lot!), and as a company founder it is important to seek independent legal advice to help negotiate the best deal. Some Universities spin out a lot of companies (including many in the ‘golden triangle’) and have a smooth slick process. Others can take many months, even years to negotiate various layers of permissions and bureaucracy.
My Way Digital Health is a spin out company from the University of Dundee. Being a ‘spin out’ company has given us certain advantages. We benefitted greatly from a free one year start up training and mentorship programme specifically designed for University spin outs in Scotland (Converge Challenge), and received, and continue to receive excellent support from the Universities entrepreneurship team.Our university also continues to provide accommodation for a number of our staff and having close links to academia can really help with product evaluation and ongoing research/ innovation funding applications (providing you can avoid any conflicts of interest).
We were successful in achieving two large Innovate UK funding bids in our first year of incorporation and I have no doubt that our academic background and ongoing links helped with this. Originating from a good academic institution can also assist in building a credible and trusted brand for your product.
Spin-outs seem to behave slightly differently to non- spin out companies in the investment world. Spin-outs are less likely to raise investment in the growth stage, tend to have higher value at seed stage, and are more likely to exit at the venture stage than non- spin outs. Academic spin-outs are statistically 4 times more likely to survive than their peers. Despite raising more than £1 billion equity investment in 2017, spin-outs would still benefit from more early stage growth funding and support to realise their true potential.References: