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Why create a spin-out company? Section 1 Successful spin-out companies need four very necessary ingredients: n IP – The innovation which you have created and which is protected by IP will be indispensable to the spin-out company. In 2005 the British Venture Capital Association in its report on university spin-out activity in the UK rated IP protection as particularly important for a spin-out company (see Section 2 – Intellectual Property). You do need to consider how IP and the ideas which it protects will be applied in the market. They need to be able to form the basis of a sustainable business opportunity which can generate a return for investors. Do your market research early. The "proof-of-market" is as important as the "proof-of-principle". n Management – Investors in the company will expect the company to be led by a team with proven management skills. This will involve the need to attract a range of individuals with a balance of top-class skills in fields such as management, finance, marketing and sales. Probably many will have had previous successful experiences of start-ups. It may also require you to take more of a back seat in terms of the company's management. Success will be dependent on new people becoming involved at various stages in the growth of the company. It cannot remain under the control of one person forever. n Money – the company will need money to develop and grow. There are various possible sources of funding available (see section 5). These may range from your institution's own resources to business angels or venture capitalists. Some researchers even raise money from family and friends. Whomever you turn to you will need some sort of plan to put before them. You will therefore need to create a Business Plan. n You – as the IP originator, you are essential to the transfer of IP to the company. Your continuing involvement with the IP's development and your ongoing commitment to the enterprise and support to the company's business managers is vital. 5

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