University spin-off
Encyclopedia
University spin-offs transform technological inventions
developed from university
research
that are likely to remain unexploited otherwise. As such, university spin-offs are a subcategory
of research spin-offs
. Prominent examples of university spin-offs are Genentech
, Crucell
, Lycos
and Plastic Logic
. In most countries, universities can claim the intellectual property
(IP) rights on technologies developed in their laboratories
. This IP typically draws on patents or, in exceptional cases, copyrights. Therefore, the process of establishing the spin-off as a new corporation
involves transferring the IP to the new corporation or giving the latter a license
on this IP.
between commercial and academic work. In addition, the university’s reputation
may be at risk if founders of spin-offs act inappropriately. Moreover, the antagonism between academic research and technology commercialization by way of spin-offs is likely to create fairness issues, for example regarding the distribution of royalties
or equity
. This antagonism can be managed by installing transparent procedures for the spin-off formation process that enhance fair treatment of all participants.
Invention
An invention is a novel composition, device, or process. An invention may be derived from a pre-existing model or idea, or it could be independently conceived, in which case it may be a radical breakthrough. In addition, there is cultural invention, which is an innovative set of useful social...
developed from university
University
A university is an institution of higher education and research, which grants academic degrees in a variety of subjects. A university is an organisation that provides both undergraduate education and postgraduate education...
research
Research
Research can be defined as the scientific search for knowledge, or as any systematic investigation, to establish novel facts, solve new or existing problems, prove new ideas, or develop new theories, usually using a scientific method...
that are likely to remain unexploited otherwise. As such, university spin-offs are a subcategory
Subcategory
In mathematics, a subcategory of a category C is a category S whose objects are objects in C and whose morphisms are morphisms in C with the same identities and composition of morphisms. Intuitively, a subcategory of C is a category obtained from C by "removing" some of its objects and...
of research spin-offs
Research spin-off
A research spin-off is a company that falls into at least one of the four following categories:#Companies that have an equity investment from a national library or university#Companies that license technology from a public research institute or university...
. Prominent examples of university spin-offs are Genentech
Genentech
Genentech Inc., or Genetic Engineering Technology, Inc., is a biotechnology corporation, founded in 1976 by venture capitalist Robert A. Swanson and biochemist Dr. Herbert Boyer. Trailing the founding of Cetus by five years, it was an important step in the evolution of the biotechnology industry...
, Crucell
Crucell
Crucell is a biotechnology company specializing in vaccines and antibodies. The firm, a subsidiary of Johnson & Johnson, is headquartered in Leiden, Netherlands...
, Lycos
Lycos
Lycos, Inc. is a search engine and web portal established in 1994. Lycos also encompasses a network of email, webhosting, social networking, and entertainment websites.-Corporate history:...
and Plastic Logic
Plastic Logic
Plastic Logic is a spin-off company from Cambridge University's Cavendish Laboratory and specializes in polymer transistors and electronics.The firm was founded in 2000....
. In most countries, universities can claim the intellectual property
Intellectual property
Intellectual property is a term referring to a number of distinct types of creations of the mind for which a set of exclusive rights are recognized—and the corresponding fields of law...
(IP) rights on technologies developed in their laboratories
Laboratory
A laboratory is a facility that provides controlled conditions in which scientific research, experiments, and measurement may be performed. The title of laboratory is also used for certain other facilities where the processes or equipment used are similar to those in scientific laboratories...
. This IP typically draws on patents or, in exceptional cases, copyrights. Therefore, the process of establishing the spin-off as a new corporation
Incorporation (business)
Incorporation is the forming of a new corporation . The corporation may be a business, a non-profit organisation, sports club, or a government of a new city or town...
involves transferring the IP to the new corporation or giving the latter a license
License
The verb license or grant licence means to give permission. The noun license or licence refers to that permission as well as to the document recording that permission.A license may be granted by a party to another party as an element of an agreement...
on this IP.
Critical steps in developing a spin-off
University spin-offs typically go through a number of critical steps to develop the initial invention into a successful business venture. The following steps are critical in creating a successful spin-off (not necessarily in this order).- Developing a proof of conceptProof of conceptA proof of concept or a proof of principle is a realization of a certain method or idea to demonstrate its feasibility, or a demonstration in principle, whose purpose is to verify that some concept or theory that has the potential of being used...
, or proof of principle, that demonstrates that the invented method or new theoryTheoryThe English word theory was derived from a technical term in Ancient Greek philosophy. The word theoria, , meant "a looking at, viewing, beholding", and referring to contemplation or speculation, as opposed to action...
is probably useful in a particular application - for example a new productProduct (business)In general, the product is defined as a "thing produced by labor or effort" or the "result of an act or a process", and stems from the verb produce, from the Latin prōdūce ' lead or bring forth'. Since 1575, the word "product" has referred to anything produced...
. - Developing a fully functioning prototypePrototypeA prototype is an early sample or model built to test a concept or process or to act as a thing to be replicated or learned from.The word prototype derives from the Greek πρωτότυπον , "primitive form", neutral of πρωτότυπος , "original, primitive", from πρῶτος , "first" and τύπος ,...
of this new product; the prototype also serves to learn about how to produce, use and sell the new product. - Attracting startup funding to finance the development of prototypes and new products; this may involve acquiring financial resources from venture capitalVenture capitalVenture capital is financial capital provided to early-stage, high-potential, high risk, growth startup companies. The venture capital fund makes money by owning equity in the companies it invests in, which usually have a novel technology or business model in high technology industries, such as...
firms, angel Investors, banksBankA bank is a financial institution that serves as a financial intermediary. The term "bank" may refer to one of several related types of entities:...
, or other providers of early-stage financial capitalFinancial capitalFinancial capital can refer to money used by entrepreneurs and businesses to buy what they need to make their products or provide their services or to that sector of the economy based on its operation, i.e. retail, corporate, investment banking, etc....
. - Developing a successful business modelBusiness modelA business model describes the rationale of how an organization creates, delivers, and captures value...
for the spin-off; a business model depicts the rationale of how the spin-off will create, deliver and capture value. - Acquiring the first customers. The first customer, also called an early adopter, can provide candid feedback to help the spin-off refine future product releases and also provide access to a distribution channel or other forms of support.
Conditions for spin-off creation
Some universities generate substantially higher numbers of spin-offs than others. Universities with high numbers of successful spin-offs …- draw on university-wide awarenessAwarenessAwareness is the state or ability to perceive, to feel, or to be conscious of events, objects or sensory patterns. In this level of consciousness, sense data can be confirmed by an observer without necessarily implying understanding. More broadly, it is the state or quality of being aware of...
of entrepreneurial opportunities and/or benefit from a strong entrepreneurship culture at the national or regional level; - have developed a university culture that thrives on entrepreneurial role modelsRole modelThe term role model generally means any "person who serves as an example, whose behaviour is emulated by others".The term first appeared in Robert K. Merton's socialization research of medical students...
among their alumni and academic staff as well as successful spin-offs that serve as inspiring examples (e.g. LycosLycosLycos, Inc. is a search engine and web portal established in 1994. Lycos also encompasses a network of email, webhosting, social networking, and entertainment websites.-Corporate history:...
at Carnegie Mellon UniversityCarnegie Mellon UniversityCarnegie Mellon University is a private research university in Pittsburgh, Pennsylvania, United States....
); - actively stimulate the development of entrepreneurial talent and help founders of spin-offs obtain access to investors, consultants and other forms of support; these activities are particularly critical in (e.g. continental European) countries that suffer from an entrepreneurial culture that is weaker than elsewhere (e.g. USA).
Other issues
University spin-off activity may give rise to potential conflict of interestConflict of interest
A conflict of interest occurs when an individual or organization is involved in multiple interests, one of which could possibly corrupt the motivation for an act in the other....
between commercial and academic work. In addition, the university’s reputation
Reputation
Reputation of a social entity is an opinion about that entity, typically a result of social evaluation on a set of criteria...
may be at risk if founders of spin-offs act inappropriately. Moreover, the antagonism between academic research and technology commercialization by way of spin-offs is likely to create fairness issues, for example regarding the distribution of royalties
Royalties
Royalties are usage-based payments made by one party to another for the right to ongoing use of an asset, sometimes an intellectual property...
or equity
Equity (finance)
In accounting and finance, equity is the residual claim or interest of the most junior class of investors in assets, after all liabilities are paid. If liability exceeds assets, negative equity exists...
. This antagonism can be managed by installing transparent procedures for the spin-off formation process that enhance fair treatment of all participants.
See also
- Angel Investors
- EntrepreneurshipEntrepreneurshipEntrepreneurship is the act of being an entrepreneur, which can be defined as "one who undertakes innovations, finance and business acumen in an effort to transform innovations into economic goods". This may result in new organizations or may be part of revitalizing mature organizations in response...
- Intellectual propertyIntellectual propertyIntellectual property is a term referring to a number of distinct types of creations of the mind for which a set of exclusive rights are recognized—and the corresponding fields of law...
- Proof of conceptProof of conceptA proof of concept or a proof of principle is a realization of a certain method or idea to demonstrate its feasibility, or a demonstration in principle, whose purpose is to verify that some concept or theory that has the potential of being used...
- Research spin-offResearch spin-offA research spin-off is a company that falls into at least one of the four following categories:#Companies that have an equity investment from a national library or university#Companies that license technology from a public research institute or university...
- Spin-offSpin-offSpin-off may refer to:* Corporate spin-off, a type of corporate transaction forming a new company or entity* Government spin-off, civilian goods which are the result of military or governmental research...
- Venture capitalVenture capitalVenture capital is financial capital provided to early-stage, high-potential, high risk, growth startup companies. The venture capital fund makes money by owning equity in the companies it invests in, which usually have a novel technology or business model in high technology industries, such as...
Key sources and references
- Bird, B., Hayward, D.J., and Allen, D.N. (1993). Conflicts in the Commercialization of Knowledge: Perspectives from Science and Entrepreneurship. Entrepreneurship Theory and Practice, vol. 17(4): 57–79.
- Clarysse, B., Wright, M., Lockett, A., Van de Velde, E., and Vohora, A. (2005). Spinning Out New Ventures: A Typology of Incubation Strategies from European Research Institutions. Journal of Business Venturing, vol. 20(2):183–216.
- Di Gregorio, D. and Shane, S. (2003). Why Do Some Universities Generate More Start-Ups than Others? Research Policy, vol. 32(2): 209–227.
- Klofsten, M. and Jones-Evans, D. (2000). Comparing Academic Entrepreneurship in Europe - The Case of Sweden and Ireland. Small Business Economics, vol. 14: 299–309.
- Kondo, M. (2004). University Spinoffs in Japan: From University–Industry Collaboration to University–Industry Crossover. Report by National Institute of Science and Technology Policy (NISTEP). Tokyo: Yokohama National University.
- Shane, S. (2004). Academic Entrepreneurship: University Spinoffs and Wealth Creation. Cheltenham, UK: Edward Elgar.
- Slaughter, S. and Rhoades, G. (2004). Academic Capitalism and the New Economy. Baltimore: John Hopkins University Press.
- Van Burg, E., Romme, A.G.L., Gilsing, V.A. and Reymen, I.M.M.J. (2008), Creating University Spinoffs: A Science-Based Design Perspective. Journal of Product Innovation Management, vol. 25: 114-128.
- Vohora, A., Wright, M., and Lockett, A. (2004). Critical Junctures in the Development of University High-Tech Spinout Companies. Research Policy, vol. 33(1):147–175.
- Wright, M., Clarysse, B., Mustar, P., and Lockett, A. (2007). Academic Entrepeneurship in Europe. Cheltenham, UK: Edward Elgar.