Spin-out companies are a commercial organisation created by the University and the academic founder(s), which commercialises research originating from the University for commercial use. The main reason for creating a spin out is to undertake activity which would not be considered part of the University’s remit, for example sales of a medical device. A Spin-out company is only created when there is no existing business to approach as a collaborator. Finally, the spin-out will only be created if the work has clear opportunity to generate products and/or applications which could potentially be extremely valuable due to the effort and risk involved.
In addition, it is vital to understand the desire of the academic/s to create, manage and support a business, and for the Head of Department (HoD) to agree to staff focussing a proportion of their time on the endeavour. The spin-out will be owned by the University and the academic founder(s) in the first instance, with additional shareholdings being given to other parties that contribute to the development of the business, for example investors. The ultimate aim may be to sell the company, thereby realising financial rewards, or the academic may receive financial returns via shareholder dividends and other such financial incentives common in small businesses.
There are a number of risks to spin-out companies, mostly around the diversion of staff time, possible risk to the reputation of the University if the enterprise is poorly run, and also financial and legal concerns. As a result, no spin out can be created without the required approvals as set out in the commercialisation process.