Spinouts

Spinouts turn publicly funded research into real-world impact, creating high-growth businesses, driving innovation and strengthening resilience and sovereign capability. They consistently outperform traditional startups and, together with university-partnered investment funds, are emerging as a distinct asset class critical to economic growth. Thriving spinout ecosystems could also provide a sustainable funding source for universities, with returns recycled into research, teaching, and infrastructure. 

When a university licenses intellectual property (IP) into a new company, it typically does so in exchange for an equity stake and/or royalties, often alongside the founding academic(s). Spinouts are usually supported by a university Technology Transfer Office (TTO) which helps assess IP, structure deals, form the company, and raise early funding.

A standard spinout journey involves: (1) disclosing research and assessing protectability, (2) deciding between licensing to an existing company, spinning out, or alternative routes (3) forming the company, agreeing equity and licence terms, and appointing directors, (4) raising pre-seed/seed finance and developing  the technology ready for market, (5) scaling the company, with IP and know-how as its core assets.

Deal terms vary by university, and there has been a push to make them simpler and more founder- and investor-friendly. If the university’s initial equity or running royalties are too high, founders and early employees may hold too little ownership to be fully incentivised to scale the company, and investors may deem a spinout less attractive to back.

In 2023, the Independent Review of University Spin-out Companies was published, with the government accepting all of its recommendations. These included greater TTO transparency, model term sheets, and clearer, more proportionate equity policies (with lower university equity where institutional IP contribution is limited). Research England and universities have also begun implementing changes, such as publishing standard policies with target equity ranges, adopting model term sheets and template licences, capping running royalties, and committing to faster TTO decision timelines.

Further Reading

• GOV.UK — Independent Review of University Spin-out Companies (and government response)

• The Entrepreneurs Network — Academic to Entrepreneur: Unlocking the Potential of UK Spinouts

• RAEng and Beauhurst — Spotlight on Spinouts 2025

• Onward — Venturing Out

• University of Oxford — Equity sharing