Creating Successful Spin-outs

09:00 - 09:30    Course introduction

09:30 - 10:30    When and why to spin-out

There are basically two ways of commercialising a new technology as a result of academic research: licensing as is and adding value in a spin-out. How do you decide whether to form a spin-out: what are the criteria and when is the decision made? Here we explore the decision-making process and some bad reasons for spinning out.

10:30 - 11:00    Coffee break

11:00 - 12:30    Agile approach to creating a new venture

In the bad old days we needed a business plan to be taken seriously internally or by investors. Such plans looked lovely but were often works of fiction. Then came a new, and to most of us, a refreshing methodology called ‘lean’. This prioritised purposeful experimentation and ‘customer discovery’ over planning. In this session, explore what ‘lean’ means for us and how it shapes our role.

12:30 - 13:30    Lunch

13:30 - 14:45    Acting like an entrepreneur

What does it mean to be a Commercial Manager of an tech-based entrepreneurial venture? We need to know, partly because to begin with we are often thrust into this role and partly because most ventures need to recruit such a person. So, we really need to know what role they fulfil, the right skills and attitudes and what might go wrong if there is not a good, peer-to-peer, relationship with the academic leads.

In this session we study the tactics of a one such person, learning what, how and why he prioritises to add value to a new venture.

14:45 - 15:15    Coffee Break

15:15 - 16:30    Building a management team and distributing equity

Most new ventures develop for a year or more before they raise any money. However, a lot of people can be involved and somehow their input has to be paid for, or at least recognised. The only currency a spin-out has is equity and it is tempting to start allocating shares to contributors. Sometimes this is a good thing but mostly it is not (or is premature) especially when talking percentages.

Here we look at one case where equity is being carved up and ask who should get what and whether there are alternatives form of compensation.

16:30 - 17:30    Licensing IP to your spin-off

Alongside an entrepreneurial team, Intellectual Property is one of the core assets in any new venture. It serves as a deterrence to imitators, should the venture become successful, and gives investors assurance that they will have a monopoly position and a healthy return on their investment. It also acts as a non-compete clause from the academic founders themselves.

However, spin-outs are fragile so we need to take greater care when licensing to a new venture in case it fails. In this session we examine the terms under which IP should be licensed to a spin-out.

19:00 - 19:00    Networking dinner

09:00 - 10:15    Valuation methods

How do you determine the value of an early stage venture? There are a number of different methods. Some are theoretical to the point of useless, some are vague but defensible while others are without any basis whatsoever but are still in use. The truth is that each method has merits and are best used in combination, but how?

In this session we study the different methods of early-stage valuation. In order to give you a better understanding, we will attempt to weave them together using a simulation.

10:15 - 10:45    Coffee Break

10:45 - 11:45    Creating and analysing a Term Sheet

In the process of creating a startup, a Term Sheet is a relevant document to summarise the basic elements of a (to be agreed upon) negotiation or discussions.

A Term Sheet summarises the IP agreements, sets out the financing details of your startup and can be used for a SPA agreement. A good Term Sheet covers all potentially divisive issues.

In this session you will learn the key elements, the do’s and don’ts and learn how to analyse and interpret Term Sheets.

11:45 - 12:45    The Legal process – Due diligence, negotiations, agreements…

The legal process for forming a spin-out is far more complex than any research and development or license agreement.

There can be many separate agreements covering different aspects of the investment, the company, and the relationship with the university.

The structure of these documents can set the agenda for the negotiations and it is vital that the KTO has a clear understanding of what and who (potentially, up to four sets of lawyers) is involved.

12:45 - 13:30    Lunch

13:30 - 14:30    How to use Proof-of-Concept (PoC) funds

Many KTOs have access to early-stage financing (PoC-type) funds and this will be the first independent source of dedicated finance. The tragedy is that this funding is very often wasted, spent either on the wrong things or the right things but in the wrong order. The key is prioritisation. In this session we explore spending early-stage financing to greatest effect. We also show how such thinking links to investment strategy.

14:30 - 15:15    Bootstrap business models

In this short session we explore when it is better NOT to raise finance for a business – instead running the venture – initially anyway, as service-based consultancy that reinvests profits in the business and grows organically. There are significant upsides to this model, especially when you are unclear about the ‘killer appplication’ and when you think you have time before competitors will emerge.

15:15 - 16:45    Coffee Break

15:45 - 16:45    The instruments investors use to balance risk and reward

There are three basic instruments that investors/ universities use to be rewarded for their money/IP. These are equity debt and royalty. However these are often used in strange combinations and dressed up in investorspeak.

In this session we outline these instruments, talk about their purpose and the impact they have (usually shifting power and returns in favour of the investors to investors) over multiple rounds of funding.

16:45 - 17:30    What an investor looks for in potential investments

For this session we invite in an investor, by Zoom, to discuss their own perspective on early stage investment, in particular what they’re looking for in an investment (product and team). An opportunity to ‘test’ some of the suggestions we have made over the last couple of days.

09:00 - 10:15    Joint Ventures

So far we have focused on spin-outs financed through bootstrapping (eat what you kill) or from independent venture capital.

In this session we briefly consider joint-ventures, where the investment comes from an existing company but (unlike pure license deals) the university receives shares in the new venture. This is a more complex situation since a ‘strategic investor’ has mixed motives which may conflict with those of the university. We study a real joint venture set up in the midst of Covid-19.

10:15 - 10:45    Coffee Break

10:45 - 11:45    Managing conflicts of interest

Founding academics are vital to the business in the early years but few leave their posts within the university. It is better for the company and the university, and the academic, if they keep a close association with both. However, this entails the academic wearing multiple ‘hats’ and creates the potential for conflict of interest situations which need to be managed. What is the KTO’s role in minimising and managing these conflicts?

11:45 - 12:45    Preparing for exit

Everyone is looking to exit someday. So what are the primary routes and alternatives? What are the stages along the way in terms of company-building, finance and regulatory? How does the exit strategy affect the strategy within the company, the behaviour and thinking of those involved in the company? What preparations and processes need to be in place from the start?

12:45 - 13:00    Course Wrap-Up