Equity sharing

Spinout Equity Policy

When a University spinout company is created, the sharing of equity is agreed between the University founders and the University. The founding equity share in spinout companies is 80% for the founding team and 20% for the University in nearly all cases. There are some conditions under which the split will be 90% for founding team and 10% for the University. These positions apply before any investment is raised by the spinout and have no anti-dilution protections, as set out further below. 

This Spinout Equity Policy aligns with the TenU USIT Guide and the recommendations in the Government's independent review of university spin-out companies. It was agreed at the Council meeting on 12 July 2021 and became operational in September 2021. The University instructed Oxford University Innovation (OUI) to apply the policy to the formation of all spinout companies. 

This Policy supports the University’s aim to foster innovation and entrepreneurship in order to maximise the global impact of the University’s research and expertise. It provides upfront clarity to University founders and investors about how equity will be shared. It gives a visibly low equity stake for the University, which enables the spinout to incentivise University founders and attract experienced management teams and investors. It removes the need for case-by-case negotiation which will make spinout formation faster, easier and more transparent.

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This Policy applies to all University members (refer to Statute I (8) and (11)). 

Students: The University makes no claim for equity in new ventures formed by matriculated students, except when the new venture will use University-owned IP, in which case the split will be 90% for the founding team and 10% for the University. If the founding team also includes employees of the University, then the standard terms of the Spinout Equity Policy apply. 

This is summarised in the table below: 

  Contains University-owned IP   No University-owned IP  
Team only includes matriculated students 90% for the founding team and 10% for the University 100% for the founding team
Team includes one or more University founders Standard Spinout Equity Policy applies Standard Spinout Equity Policy applies

 

If a University founder receives (or is offered) shares in a new company after its incorporation, the policy may still apply. 

Unless and until an appropriate licence has been agreed, Oxford spinout companies are not entitled to use intellectual property owned by the University or by OUI; and Oxford spinout companies are responsible for ensuring that their licensing requirements are correctly identified (both at establishment and subsequently). Accordingly, the University and OUI do not provide any category of assurance to Oxford spinout companies or related third parties (including founders, investors and purchasers of Oxford spinout companies) in relation to the intellectual property used by Oxford spinout companies (including those Oxford spinout companies established with no intellectual property licences from OUI). References to Oxford spinout companies in this policy statement include Oxford startups.

80% to the founding team is appropriate in most cases where the University has provided support through infrastructure or salary or student or researcher support and/or has enabled the creation of relevant University-owned patents or patentable intellectual property.

90% to the founding team is appropriate where there is no University-owned patented or patentable intellectual property and either  

  1. a spinout is created in the absence of any support from the University in terms of infrastructure, salary, students or researchers, or  

  2. when a spinout is a university software spinout. 

A university software spinout for these purposes is defined as a company that 

  1. requires only source code and/or object code to be licensed or transferred from the university to the company at formation for the business to be viable; and 

  2. whose business will be software products only or consulting services provided by the use of software; and 

  3. that will operate in a regulatory-light environment.  

External founders or managers

If the founders decide to include external individuals who are not University employees as members of the founding team (for example, as a CEO or other key post in the company), those individuals will share in the 80% or 90% that the University founders will receive at formation. This includes the issue of shares or the creation of option pools for management teams at formation prior to any funding round.  

Research supported by third party funders

Where the University is required to share any part of its institutional founding equity with a third party funder, this reduction of the founder equity held by the University will normally be borne pro-rata by the University and the founding team. 

Research collaboration with other institutions

Where the spinout includes external institutional founding shareholders (for example, other universities) and potentially individual founders associated with such institutions, OUI and the University shall work with such parties to agree a founding equity allocation that fairly reflects the relative contributions (both past and future expected) of such parties to the company in question. This may require variation from this Policy that applies where the University is the sole founding institution involved. 

Other partnerships that affect shareholding

Existing partnerships will be honoured with Oxford Science Enterprises (who receive 50% of the University Stake for MSD and MPLS spin outs), Technikos and other partners

Spinout companies may or may not be created with the need for University-owned Intellectual Property, as defined in Statute XVI Part B.  

If a spinout does need access to University-owned IP, the spinout will require a fee-bearing licence from OUI.  

All University-owned IP licensed to a spinout at inception will be offered to the company on the full and un-negotiated terms of the Oxford Express Licence. If the spinout chooses not to take the Oxford Express Licence on its full and un-negotiated terms, then OUI will negotiate an alternate licence agreement with the spinout. 

Any University-owned IP that is not declared by the founding academics at company inception and that the company subsequently wishes to licence from the University will be subject to negotiation of appropriate commercial terms and will not be licensed under the terms of the Express Licence.

The University’s overarching aim for innovation activities is to maximise impact. Financial return is not the primary goal. Nevertheless, the University must be financially sustainable and, as a charity, is obliged to balance individual incentives with receiving an appropriate return for commercialising its charitable assets. Retaining some of the returns from the successful ventures enables the University to provide financial resource to its charitable activities. 

In the event that shares are sold or produce other financial returns such as dividends, any returns are used by the University to support departments, invest in strategic research and innovation projects (through the Strategic Research Fund and John Fell Fund) and provide all University members with innovation support services, many of which will not generate a financial return. Details can be found in the Council Regulations 7 of 2002. 

Anti-dilution provisions will not apply to the University’s shareholding. The University will take ordinary shares and will be diluted along with other founder shareholders as investment comes into the company.

There are a number of options for those staff who wish to spend time founding and developing University spinouts. The most appropriate option will depend on the circumstances, including the period and proportion of their time that an individual wishes to spend working on the University spinout. 

Options include: 

  1. Using the 30 days per annum allowance for consultancy and other paid outside appointments 

Staff who are founders or directors of spinouts are required to work through OUI for managing consultancies to their spinouts in the first year following formation of the spinout. (See Consultancy Policy and Procedures.) 

In the first year, OUI provides a mechanism for consultancy returns to departments for individuals consulting to spinouts. The consultancy fee structure gives the department the 10% OUI fee in the first year and 5% after that. 

  1. Taking sabbatical leave 

Those holding qualifying academic posts (Statutory Professor and Associate Professor) should use any accrued but untaken sabbatical leave before considering seeking a buyout. 

  1. Variation of duties 

Those who hold Associate Professor posts who wish to spend a proportion of their time establishing a University spinout can seek to vary their duties through the existing scheme. 

  1. Innovation Leave Scheme for University spinout founders 

This is where a spinout funds a buyout for a spinout founder from all or part of University duties for a defined period of time (up to one year). 

  1. Seeking approval for a permanent change to part-time working hours 

Further information  

University of Oxford 

General enquiries for Intellectual Property Rights Management Team (IPRM): iprm@admin.ox.ac.uk  

Oxford University Innovation 

General enquiries: enquiries@innovation.ox.ac.uk 

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