University equity stakes in spin-outs

How much equity should a university receive from spin-outs? Indeed, why does it appear that university equity varies so widely, ranging between 5 and 50 per cent or more? Why can’t all universities receive just 5 per cent of equity all of the time?

These are questions that we have been asked repeatedly, including at TenU Hosts events (see here and here). So we created this quick start guide on university equity stakes to outline the main reasons why there is no one-size-fits-all approach to sharing equity from a university’s perspective. The guide illustrates the complexity inherent in allocating equity in an easy and comprehensible way and offers up-to-date references for those wanting to delve a bit deeper into these questions.

The guide is an international effort across all of our members that supports the view that, while there is no one-size-fits-all to sharing equity, there are some common themes in international university tech transfer. It is with this understanding that, last year, university tech transfer offices in the US joined efforts with the largest venture capital firms to discuss challenges that both parties routinely face when working together on life science deals. These discussions resulted in a set of effective practices, including recommendations for improving the negotiation process and for structuring term sheets, meant to benefit universities and venture capital firms more broadly. Crucially, these recommendations demonstrate that most of the approaches taken in sharing equity are often more equivalent than they would appear and acceptable to both parties.

This guide is part of TenU’s wider effort to extend such discussions beyond the US, so that the tech transfer community can effectively support the UK government’s innovation strategy and, more broadly, contribute to a much-needed economic recovery across the world.

Download the quick start guide by clicking on the image below.