Inventors guide

How we decide: Spinout or Licence

Innovations takes many factors into account in deciding whether to license its technology to an existing company or to establish a new spinout company to develop and commercialise the technology.

There is no pre-determined point during the technology evaluation process by which the decision must be taken. The criteria described below (and others) are continually monitored during the evaluation, and it may take some time for the final licence vs. spinout decision point to be reached.

Factors that may favour the decision to license to a third party

Subject Condition

Intellectual Property

  • Narrow IP position.
  • New IP unlikely.
  • Background IP dominated by third party (i.e. there is only one potential licensee).
  • The IP alone (+/- data) sufficient for licence.
  • Significant post‑licence support not needed.

Inventor

  • Technology not core to inventor's current/future research.
  • Pressure to generate cash upfront or to bring in research income promptly.
  • Inventor is not motivated to form a spin-out

Market opportunity vs. Investment required

  • Incremental technology/improvement in established/mature market.
  • Area is unattractive to investors currently.
  • Market too small to justify even a small investment.
  • Spin‑out would need major, long term, high-risk investment.

Resources

  • The best management, development skills and facilities already reside in a third‑party business.
  • The technology could be progressed using consultants and project managers in‑house, if further development were required and funding available.
  • No suitable management can be identified for a spinout.

Technology

  • Single market, validated application and/or component of a larger system.
  • Technology Readiness Level and supporting data suffice to attract a licensee (or can be quickly generated at modest cost)

Availability of prospective licencees

  • Target licensees can be readily identified in a concentrated market (not too many players, market not too fragmented).
  • A ready made licensee is available who could act as launch customer

Control & Influence

  • Imperial Innovations is content to remain remote from the control of the development by licensing to a third party

Economics

  • The overall, long-term value to Imperial Innovations is estimated to be greater from third-party licensing than from a spin out route.

Business case

  • A stand alone business case cannot be made. A technology, not a company.

Factors that may favour the decision to form a new spinout around the technology

Subject Condition

Intellectual Property

  • There is a suite of IP (patents and Know How). New IP is expected. IP covers a potential range of products.
  • No blocking IP identified so far - predicted Freedom to Operate.
  • The IP alone may be insufficient but a value-added proposition can be crafted (e.g. including consultancy, design, services).

Inventor

  • Inventor wishes to remain involved and supportive and can commit (some) time.
  • Alternatively, where we can manage development without inventor, Inventor willing to take a longer term view and prepared to defer reward(s).

Market opportunity vs. Investment required

  • A disruptive or novel technology in a market receptive to new entrants or capable of creating a new market.
  • A diffuse market with many players - no dominant players to license to - better to spin out, make product and serve all of the many players via distribution agreements.
  • Market area is attractive to investors.
  • The market size can justify the future investment required.
  • Founders and investors can accept major investment requirement coupled to high risk.

Resources

  • The best management, development skills and facilities do not already reside in a third party business.
  • We are confident we can locate, or have located, such a management team.

Technology

  • Disruptive, Platform technology or entire system (rather than component) that spreads risk and increases opportunities. (Presents a higher chance of seeing a greater investment return vs. a single technology)
  • Technology Readiness Level and supporting data not yet sufficient to attract a licensee (and cannot be quickly generated at modest cost).
  • A spinout is required to build the technology to a point where the full value can be realised.

Availability of prospective licensees

  • Licensees cannot be readily identified

Control and Influence

  • Imperial Innovations wants to influence the technology development indirectly through licensing the technology to a spinout company (and potentially investing in it)

Economics

  • The overall, long-term value to Imperial Innovations is estimated to be greater from a spinout than from third-party licensing.

Business case

  • A business plan/business case can be made for creating a company around the technology

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