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Cap stake in software spinouts at 10%, universities urged 

Universities software spinouts
Image credit: cowardlion / Shutterstock

Universities have been urged to reduce the stake they take in spinouts to encourage more software startups to be born out of academic research.

TenU, which represents major universities including Oxford, Cambridge, Imperial and Edinburgh, has recommended tech transfer offices (TTOs) take between 5% and 10% equity stakes in software spinouts.

The group argued that a founder-friendly approach would encourage more startups to be founded and that those startups would have a greater chance of securing external investment.

The recommendation comes from the USIT for Software guide, launched on Monday.

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

“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.”

The guide follows the release of the government-commissioned spinout review last November, which recommended that “less IP-intensive” spinouts such as software firms should give up less equity than is generally taken by universities.

Research published this month by Beauhurst and the Royal Academy of Engineering found that despite these recommendations, which were broadly celebrated by universities and investors, the average stake taken by UK universities in spinout companies increased over the last year from 19.1% to 22%.