Universities and investors have joined forces to boost the number of software spinouts from academic innovations.

TenU – which represents world-leading universities including Cambridge, Edinburgh, Imperial, Manchester, Oxford and UCL – has teamed up with a group of top investors and professional services firms to launch a new expert guide for the speedy and efficient formation of spinouts from cutting-edge university research.

The USIT for Software Guide will be launched at an event today at Mansion House attended by Andrew Griffith, Minister of State at the Department for Science, Innovation and Technology. 

Many of this country’s most successful technology firms – Solexa, Oxford Nanopore, Synthesia – started off as spinouts from a university. A Government review of the sector found that UK university spin-out investment increased five-fold from £1.06 billion in 2014 to £5.3bn in 2021.

The new guide provides a common approach to negotiations across the sector to make the process much more efficient, especially for less experienced parties. This includes a recommendation for founders to take between 90-95% equity in software spinouts.

The guide reflects the unique characteristics of software spinouts if compared with those in the life sciences and deep tech, including shorter development times, relatively low initial funding, and the need for rapid growth in a highly competitive, rapidly evolving market.

The guide says: “Software businesses evolve through relentless engagement with customers, understanding their new needs and spotting where the technical advantages of the software can deliver some distinctive performance.

“This different distribution of value between founding IP and accumulated founder-customer interaction contributes to the justification for different founding equity stake.”

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Speaking ahead of the launch, Simon Hepworth, director of enterprise at Imperial and chair of USIT for Software said: “Maximising the real-world impact of cutting-edge university research is crucial to advancing the UK’s reputation as a world leader for innovation. 

“The new USIT for Software Guide demonstrates the sector’s continued commitment to building stronger relationships between TTO offices of leading universities, investors and founders, for the benefit of spinouts, the economy and society.”

Kerry Baldwin, managing partner at IQ Capital said: “There is so much exciting potential within UK universities. If we are going to continue building the dominance of UK technologies, we need to make it as easy as possible for investors and academics to come together and establish companies. 

“We have listened carefully to the investment community and this guide is built on their feedback. A critical factor for success of a software start-up in addition to the visionary founders, is speed.  The faster a minimum viable product (MVP) can be tested and launched, the faster the product can go to market, generate recurring revenues at scale and deliver returns to the investors and other shareholders in university software spinouts. 

“So, we hope this blueprint will encourage more investors from across the world to see the opportunity in the UK innovation ecosystem.”

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Mycardium AI was founded in 2022 by Professor James Moon, Professor Mark Westwood, Professor Charlotte Manisty and others. They developed ‘superhuman AI’ for measuring the heart, and a clinically-led lab service. 

Mycardium was set up through UCLB’s Portico Ventures which helps UCL researchers set up technology-based businesses that can thrive in a fast-moving ecosystem by providing spinout companies with an exclusive and royalty-free licence in return for a fixed percentage of equity. In Mycardium’s case that was just over 4.3%.

Professor James Moon, CEO at the Liverpool-based firm, said: “When we founded MyCardium in 2022 as a spinout from UCL after years of research, our biggest motivation was in delivering fundamental improvements in cardiac care, redefining certain diseases and making a global difference. We are now a company of circa 50 people and are growing quickly.

“To take the software and expertise to market, a commercial vehicle needed to be created, and having a straightforward process of agreeing equity splits was key to us progressing at speed and with confidence. That is why the USIT guide is so valuable – it will help the next generation of founders to strike deals with investors and universities quickly and easily.”

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