Spinning-out a company from a university is no small feat. It’s often described as an art because it rarely happens smoothly or easily. This is due to the various assumptions we make, the conflicting drivers we each bring to the table, and the different processes we all follow to get these deals across the line. Everyone — researchers, venture capitalists (VCs), tech transfer offices (TTOs) — has their own priorities, making negotiations challenging.

Researchers often come to the table expected to understand everyone else’s jargon and technical language which can complicate and slow the process. They are asked to upskill on the go, often feeling on the back foot throughout negotiations. To help remove this barrier, we’re working on a vocabulary guide that will be published in the coming months. This resource aims to bridge communication gaps and make the process more straightforward for researchers.

TTOs, meanwhile, often find themselves portrayed as the "villains at worst, middle-men at best” in these negotiations. The truth is that they want to reach reasonable decisions, but they have complex bureaucratic and policy frameworks they can’t work outside processes to navigate. Commercialisation often represents just a tiny fraction of the university’s overall funding, making it difficult for senior management to prioritise. TTO teams are passionate about innovation but are limited by the policy frameworks within the university system. 

On the other side, VCs can be seen as sharks or the devil — greedy, impatient — how hard can it be once the invention has been created!? VCs have their own set of principles for investment. This is because they have made a commitment to their LPs to return their capital and then some! These principles differ from fund to fund and investor to investor. They are not always immediately apparent to others in the process, leading to further confusion. 

Why, despite having the shared goal of commercialising research, do we still face confusion, delays, and frustration? This very question sparked the development of our ‘Spin-out Simulation.’

When entering negotiations to spin-out a company, having all stakeholders in the room is key. This helps ensure everyone is clear on each party’s needs to get the deal done while balancing the interests of future spin-outs.

This lesson became even clearer through a research commercialisation wargame we’ve developed and played twice now. The game highlights how quickly negotiations become adversarial due to conflicting goals. Despite knowing that time kills deals, we still struggle to spin-out opportunities quickly without overwhelming researchers or exhausting stakeholders.

Originally, our simulation aimed to find better ways to spin-out research from universities. What we discovered was that the game allows players to understand how each stakeholder thinks. For example, valuation is an issue that seems straightforward but is actually viewed differently by different stakeholders. Some VCs focus on securing a specific ownership stake and the quantum of capital needed and the stage the company is at defines the valuation, while TTOs often emphasise the value of the research and resources already invested and that drives how they define valuation of the company and their contribution. They can lead to very very different valuation expectations. These conflicting approaches can extend negotiations, but by understanding each other’s value drivers, we can move forward more efficiently.

Some other observations on varying approaches from stakeholders are below: 

Here are some insights from those who’ve participated in the game so far:

We hope to bring this Spin-out Simulation to all states over the coming year. If you’re interested in co-hosting or participating, please reach out!

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