Pathway Map

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ACADEMIC FOUNDERS

Preparation overview.

Founders are the core stakeholders around whom a spin-out company is built. They are often the originators of the relevant IP, though not all IP contributors may choose—or need—to take on the formal role of a founder.

Founders are responsible for:

• working closely with the Technology Transfer Office (TTO) to define and legally formalise the spin-out’s relationship with the university • clearly articulating the commercial potential of the venture to potential investors • ideally, identifying one or more investors willing to make an initial funding commitment.

While some academic founders may already have commercial and managerial skills or be keen to develop them, many benefit from partnering with an external entrepreneur who brings complementary business experience.

Together, the founders must combine scientific, technical, and commercial expertise and engage collaboratively with university stakeholders to maintain momentum throughout the spin-out process.

TTO staff are available to provide ongoing support, including access to training resources and help address gaps in the founding team.

Originators and founders

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While originators and co-founders of a spin-out are often the same individuals, they are not always identical in role or function.

  • Originators are those who have made an inventive contribution to the intellectual property (IP) that is the subject of the proposed licence agreement between the university and the spin-out. Their role is tied specifically to the creation of the IP.

  • Founders (or co-founders) are individuals who have played a key role in establishing and launching the spin-out and are considered critical to its future development and success. Founders may include originators, but may also include individuals who bring essential business, commercial, or operational expertise.

The distinction is important because investors and other stakeholders expect co-founders to demonstrate a high level of commitment to the spin-out. Based on their skills and roles, founders will be expected to contribute significant time and resources, often defined through formal contractual obligations between each founder and the spin-out company.

Capitalisation table

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The capitalisation table (CAP table) is a foundational tool for planning how the future rewards from building a high-growth, venture-backed spin-out will be shared. It outlines the proposed equity ownership structure of the company and is typically developed in collaboration with the TTO.

Depending on the university's policies, some of which may specify fixed starting equity positions, the CAP table will be shaped by factors such as:

  • the sector of the spin-out

  • the expected scale and stages of fundraising

  • the forecast risk profile over time

A standard CAP table typically includes share allocations for co-founders, the university (or its commercial affiliate) and current or potential investors.

These allocations must be negotiated among all parties. While some early discussions may happen one-to-one, it is often most effective to bring all stakeholders together for joint negotiations to reach an agreed final structure.

Founders should refer to recent guidance from the TenU consortium, particularly the University Spin-out Investment Terms (USIT), which offers clear reference points for sector norms and best practices.

For founders, the CAP table is not just about ownership. It’s a strategic tool that guides decision-making, reflects how key contributors are incentivised and supports long-term alignment as the spin-out develops

Because of its importance, all individuals involved, whether founders or IP originators, must be well-informed and comfortable with how the equity split has been determined.

Business plan

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The business plan is typically developed by the co-founders with support from internal or external advisors. It is a key document that outlines the spin-out’s strategy, operations, and vision. Often accompanied by a presentation slide deck, the business plan provides detailed information on the product or service the spin-out will offer, the objectives it aims to achieve, and the development strategies, including timelines and financial forecasts.

This document is an essential communication tool and will often be shared with potential investors and other stakeholders. As such, it needs to be both professional and audience-appropriate. The business plan not only helps the founders articulate their vision but also highlights any risks or challenges they may face, allowing them to plan accordingly.

A central aspect of the business plan is the financial summary, which outlines how much funding is needed, how it will be spent, and what milestones or deliverables are expected as a result. This financial plan helps the founders manage resources effectively and demonstrate to investors that the business is on a clear path forward.

Most importantly, the business plan is a living document that will evolve as the business progresses and as new insights, challenges, and opportunities arise.

Data room

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The founders, with the TTO, will be expected to provide the information needed to populate the data room, mainly for use by the investors. The data room is a secure, confidential folder consisting of key documents that the investors and their legal team will need to review to invest in the spin-out. The data room will contain the documents and information from the IP register and any agreements that the university or the founders have previously entered into that are relevant to the spin-out.
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Data room playbook Data room checklist
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Incorporation

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When founders reach the point that forming a spin-out is more likely than not, they may want to consider incorporating a limited UK company. Different universities advise undertaking this action at slightly different points, and may have different approval processes, but some time before the date of formal spin-out is strongly advised, which your TTO can advise on. Founders may want to take independent legal advice on this matter, but TTO staff will explain how the standard approach works at that respective university. Often, one of the founders will incorporate the company at Companies House via the online process. This is often created as a shell company with a small number of shares and one director, the director being one of the founders.  This approach and structure allow the company to open a bank account, a helpful early action in the process. Note the order of founders getting shares is important to ensure that founders benefit from specific income tax relief applicable to university spin-outs. See here:  ERSM100000 - University spin-outs: contents - HMRC internal manual - GOV.UK & ERSM100070 - University Spin-outs - HMRC internal manual - GOV.UK
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TTO

IP due diligence

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IP due diligence is the process that the TTO will undertake in partnership with its founders and originators to ascertain the origins of the intellectual property (IP). This process includes understanding what work was done to create the IP, how the work was funded, who was involved in the development of the IP and if any third parties hold rights in the relevant IP. This is an essential process to identify any potential issues relating to the commercialisation of the IP to be raised ahead of investor conversations, so that the spin-out is not unnecessarily delayed in spinning from the University. The due diligence process also includes answering key questions around the commercial viability or social value of the IP, what problem does this solve, is there an existing market, and who is the customer base. This justifies ongoing support to the originators/founders, such as financial support by the University for patent costs.
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Intellectual property due diligence playbook (Founder)
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Identify

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After a founder has submitted their idea on a University invention disclosure form, identifying the types of intellectual property in their innovation is the first step towards commercialisation. Different types of IP have different protection mechanisms and the TTO will help to identify the appropriate level of protection so that the founder has the best opportunity for commercialisation. The protected IP will be key to securing commercial interest and the value of the resulting spin-out or licensing deal. Each university TTO will have a strategy to protect IP, and resources are not unlimited, so the founder will need to commercially justify the level of protection they are seeking as the costs can be considerable. This detail is then recorded in an IP register for any future investor or potential licensee.

Ownership

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Ownership of the IP is typically held by the employer by virtue of employment law, but other cases may be when originators are students (since they aren’t employed) or can be more complex, e.g. joint when there has been collaboration with another institute. Therefore, the TTO needs to work with the originators to understand the history of the IP, who has ownership of it and on what basis this is established. From an individual orginator’s perspective, there are advantages and disadvantages to owning an invention as well as legal implications when filing for a patent application or other legal protection.  If a founder feels unsure about whether they or the University are the owner of any IP, the founder should raise this with the TTO, who will justify the evaluation they have made and be willing to discuss any arising questions. Your university may require you to sign a confirmatory assignment. Please speak to your TTO to learn what this means.

Barriers

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During the overall due diligence process, the TTO may identify some barriers or restrictions on how the IP may be licensed.  In licensing language, these are referred to as encumbrances and need to be identified, evaluated and for which a mitigating solution needs to be proposed. These are quite common and can be research funders’/sponsors’ terms (which may include written consent to commercialise and/ or obligation to enter revenue sharing arrangements) or intellectual property joint ownership, which most often, but not in all geographical jurisdictions, requires written permission of the other joint owner to commercialise.  If restrictions of these types are discovered, the TTO needs to identify, negotiate the terms of and implement additional arrangements such as IP management agreements or revenue share agreements before licensing to the spin-out.

IP register

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The founders of the spin-out will be expected to help the TT team create and maintain the IP register, this includes all types of IP, including any knowhow that might be licensed to the company.
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Investor due diligence and analysis

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Spin-out founders need to be aware that investors will require potential risks (to their investment) to be transparently disclosed.  When considering university-generated IP for licencing to the spin-out, there are two main risks:
  1. does the University have the right to licence the IP?
  2. due to the generally more open nature of university research, has there been any ‘leakage’ of IP?
Founders should expect to confirm statements identifying former project collaborators and other companies with whom they may have discussed the IP (or similar technology), including under Non-Disclosure Agreement terms. Founders can consult with experienced TTO staff to navigate some complex circumstances.  Other elements of investor due diligence will cover the commercial/ investment risk, so you should therefore be entirely transparent with sources of information included in any business plan submitted.
Continue to Stage 2: Negotiation
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