The USIT Guide: Fuelling the success of spinouts

2 mins

A group of leading investors and universities have collaborated to introduce the University Spinout Investment Terms (USIT) Guide, which seeks to accelerate the process by which the Higher Education industry creates and spins out new innovative companies that contribute to groundbreaking discoveries.

What is the USIT Guide?

The purpose of the USIT Guide is to provide clear and uniform suggestions for investment terms in order to reduce expenses and simplify complicated negotiations. While the guide mainly concentrates on the life sciences sector, it offers negotiation techniques that can be applied across various industries. Its goal is to speed up business deals and empower university entrepreneurs to establish impactful companies.

Many of the UK’s most successful innovative businesses started off as spinouts. Investors believe this trend will continue, making it important to realise an efficient way to help these spinouts succeed.

Who created the USIT Guide?

The idea for the USIT Guide originated during a meeting of TenU, an international collaboration focused on promoting best practices in research commercialisation and sharing them with governments and academic communities. TenU comprises technology transfer offices of ten universities, including the University of Cambridge, Columbia University, University of Edinburgh, Imperial College London, KU Leuven, University of Manchester, Massachusetts Institute of Technology, University of Oxford, Stanford University, and University College London. The group works together to enhance the societal impact of research. Over the past five years, they have already aided with setting up 376 new companies and securing over £8.6 billion in funding.

What does the USIT Guide consist of?

The USIT Guide has four sections that offer common negotiation approaches and unbiased distinct positions. The first section shares the vision for the guide, while the second section contains case studies of real-world deals and company stories from foundation to exit. The third section provides detailed recommendations for negotiating deal terms, while the fourth section offers a glossary of investment terms.

Guidelines were created for investment deals involving university spinout companies, which cover twenty-two related items. These items define various aspects of the investment deal, including how economic returns are distributed, and terms that ensure the spinout, university, and investor have operational freedom. The UK Government cited and praised this work in their Digital Strategy policy paper released in June 2022.

Takeaways

The USIT guide offers a comprehensive look at the creation of spinouts, providing a framework that will allow a larger number of scientists, innovators, and researchers to transform their ideas into the next generation of innovative companies. It has the potential to fully utilise the research capabilities of UK universities, by facilitating the creation of spinouts at a faster pace and attracting higher levels of venture investment. Whilst following the recommendations outlined in the USIT Guide can help universities spin out companies, it also provides a great insight into the art of negotiation and securing finance, which are invaluable to all entrepreneurs, not just university born.

Written by: Andrew White