Pathway Map
TECHNOLOGY TRANSFER OFFICER
Technology Transfer Officer overview:
The negotiation of the spin-out deal will involve the TTO, the founders, and the investors. The TTO’s role is to protect the University’s interests. This includes working to ensure that overall, the best outcome for the spin-out can be achieved and research impact is maximised.
The main discussion point during the negotiations will be the equity position of each of the founding parties. Other elements of high significance will be the IP licence, possible consultancy, or collaboration/contract research at the university. Some of these elements will be simplified by the University’s IP policy, the TTO will advise and negotiate these points with founders as needed.
TTO due diligence on investor
Each university’s TTO will follow its own internal policy to conduct due diligence. This will primarily be a financial, reputational, regulatory and responsible innovation evaluation, on potential investors. If initial concerns arise, the TTO may carry out further checks using searchable databases such as FAME (previously provided by Bureau van Dijk), which offers access to detailed financial data, adverse filings, and industry profiles for millions of companies across the UK and Ireland.
The due diligence process typically includes reviewing external databases and official records to identify financial risks, provide recommendations, and flag potential concerns. Key aspects the TTO should assess include:
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the role and credibility of the lead investor
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the level of commitment from follow-on investors
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who is leading negotiations?
These elements help the TTO evaluate possible risks and ensure that investor involvement aligns with the University’s strategic and financial interests.
Heads of Terms with investment
The Technology Transfer Office (TTO) typically advises founders on drafting the Heads of Terms (HoTs) for the spin-out formation and the investment deal. The HoTs template provided in the Deal Readiness Toolkit includes all the standard elements usually required.
The HoTs must be negotiated, agreed upon, and signed by the university, the founders, and the investors. While the document is not legally binding, it reflects a serious commitment to proceed with the deal on those terms, so it is essential to invest time and care in getting it right for all parties involved.
TTO staff should also be aware that some investors may prefer to use their own in-house HoTs or term sheet formats. These should closely align with the Toolkit’s version, as the template was co-developed with input from venture capitalists and professional services firms.
Be aware that most universities have standard licensing terms for spin-outs. The USIT Guide and the USIT Guide for Software are excellent references for understanding these typical terms.
Heads of Terms for IP
The Heads of Terms (HoTs) is a non-legally binding document that outlines the key licensing and commercial terms for the IP licensing agreement between the University and the spin-out. It is agreed in principle before the full licence agreement is formally negotiated and concluded.
The HoT typically includes:
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a description of the university-owned IP being licensed to the spin-out
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the main commercial terms, such as equity, royalties, and/or other fees
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any restrictions on how the IP may be used
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the spin-out’s obligations to actively pursue commercialisation
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general provisions, including warranties, liabilities, and termination terms.
Although the HoT is not legally binding, it should be negotiated in good faith by all parties. If any terms deviate from a party’s standard negotiating position, the necessary approvals and permissions should be obtained.
Importantly, all owners of the IP being licensed must be consulted during the preparation of the HoT to ensure proper alignment and authorisation.
Draft licence agreement with equity
The IP relevant to a new spin-out is typically owned by the university. The spin-out generally gains rights to exploit this IP through a licence agreement (or, in some cases, an assignment) in exchange for equity and possibly other financial terms.
The TTO leads and manages the negotiation of the licence, which covers:
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the university’s equity stake in the spin-out
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any financial payments, such as upfront fees, royalties, and milestone payments
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the scope of the licence, including permitted indications, markets, and territories
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whether the agreement is a licence or an assignment, or if an assignment is triggered upon achieving specific milestones.
This stage can be complex, as the TTO represents the university’s interests, while the founders, often University employees, are now stakeholders in the spin-out. If founders are receiving a significant portion of the equity, this dual role can create tension. While the university’s IP policy typically outlines its default equity position, negotiation is almost always required to reach a mutually acceptable outcome.
If the spin-out is securing external investment at formation, additional negotiations with investors will also take place, focusing on equity and licensing terms.
In parallel with external negotiations, the TTO must also secure internal approval for the terms of the licence agreement.
Corporate bible negotiations
Every spin-out will require a set of legal agreements to support its formation and early operations. This suite of documents is often referred to as the ‘corporate bible’. It comprises a comprehensive collection of agreements, letters, resolutions, and other legal documentation that collectively provide clarity, protection of rights, and operational structure for the spin-out.
The corporate bible typically includes documents that do not directly relate to the core intellectual property or technology. Instead, it focuses on governance and relationships between key stakeholders or shareholders, outlining how they will work together. The three most critical documents are:
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the shareholders’ agreement: defines rights, obligations, and governance structures among shareholders
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the subscription agreement: outlines the terms under which new shares are issued to investors
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the articles of association – the company’s constitutional document governing its internal management
These documents are crucial for ensuring all parties are aligned on how investment funds will be used, typically in line with the business plan, and how progress toward key milestones will be managed.
Additional supporting documents often include:
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employment contracts for key executives and early employees
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facilities access or tenancy agreements with the host University, if shared office, incubator, or lab space is involved
The structure and expectations for these documents should be defined during the negotiation of the Heads of Terms for investment, with all stakeholders engaged in early discussions. Since many elements are interdependent, the negotiation process must be carefully planned, identifying key activities, responsible parties, required approvals, and critical dependencies.
As a TTO professional, you will need to project manage the overall process, working closely and collaboratively with the spin-out founders. They are responsible for driving the launch and securing investment, while the TTO ensures that all legal, governance, and institutional requirements of the University are met. Establishing clear operating rules and maintaining a coordinated project or action plan are essential responsibilities at this stage.