New fast track equity model

Supporting academic commercialisation and entrepreneurship

The University of Cambridge IP policy is unique. It provides significant freedom to our academic community and ensures a flexible and adaptable approach as our researchers commercialise their research.

This has greatly enhanced the entrepreneurial culture at Cambridge and been a notable contributor to the success of the Cambridge Cluster.

The benefits of the policy for our academic entrepreneurs can be seen from recent data published by the Royal Academy of Engineering which showed over the last decade that the average stake in a Cambridge spin out was approximately 10% versus 22.8% nationally.

Enhancing support, accelerating journeys

Although the policy positively differentiates Cambridge and provides the best outcomes for our research community, it has still resulted in frustrations in relation to transparency, consistency and speed of process. In addition, the experience of our founders has been diminished and we need to work to create a frictionless process to support their journey.

Following a consultation with academic staff, founders, mentors and investors, Cambridge Enterprise is making a new offering available to our research community which will allow an immediate agreement on the equity portion of an IP licence to enable a spin-out.

The offer is structured to reflect the different circumstances of different businesses. It is an opt-in model which we hope will rapidly accelerate the time take to create a spin-out.

Critically it is important to note this is not a proposal to re-open the University IP policy. This is about optimising and clarifying how we can implement that policy in a manner that provides greater support to our staff, researchers and students, and can enable greater impact from University research.

The opt-in fast track equity model

The model utilises the following definitions to categorise technologies:

• Therapeutic Technologies Where the licensed technology includes a possible active ingredient or device that provides therapeutic or prophylactic benefit to humans.

• Life Science Technologies Where the licensed technology (incl. software/copyright) is not a Therapeutic (as defined above) but is principally used by the spin out to develop a product or service with a life sciences application. Life sciences applications would include but not be limited to agriculture, environmental, food sciences, healthcare, medicine, pharmaceuticals, veterinary and the study or analysis of living organisms.

• Other Technologies Any licensed technology (incl. software/copyright and other types of innovation) other than ‘Therapeutic Technologies’ and ‘Life Science Technologies’ (each as defined above).

The fast-track model will have four streams:

1. 5% equity for non-patented Other Technologies
2. 10% equity for patented Other Technologies and non-patented Life Sciences
3. 15% equity for patented Life Sciences Technologies and non-patented Therapeutic Technologies
4. 20% equity for patented Therapeutic Technologies

University of Cambridge founders do not require a licence to non-patented Other Technologies in certain situations under the University IP Policy. In the fast-track model, in return for 5% equity Cambridge Enterprise will in such situations confirm that the University of Cambridge has no hold over the founders’ rights to the non-patented Other Technologies and the company will be considered a University of Cambridge spin out company. Both provisions are a real value to a company as they raise capital or face due diligence on acquisition or exit.

The range of equity stakes proposed is to reflect the market reality of licences in these fields, the rights of research funders and the nature of the capital level required to succeed within these industries.

In all cases there will be a secondary discussion on a royalty bearing licence which will be structured to ensure it does not drain investment capital from the business in the early years.

This approach builds on evidence of deals done over the last decade and recognises the different kinds of capital required to drive business growth and the customs of different markets.

Choice and flexibility

All faculty will be able to choose whether to opt-in to opportunities or whether to enter a bespoke negotiation. It is hoped that this opt-in approach will be accepted as pro-faculty and will provide them with the best equity deal in the sector. The preference is that these fast-track models will become the standard choice.

In addition, we are also open to a non-dilute equity stake with a cap based on nature of the technology being licensed. This can be agreed on a case by case basis.

We believe this approach will significantly improve the experience of our academic founders, transform the time involved in getting a licence to a spin-out and further position Cambridge as the most entrepreneurial university in Europe – committed to delivering impact from our research.