Spinning cutting-edge research out of a university lab and building a new venture is one of the most exciting, and daunting, journeys a researcher can take.  Deep tech entrepreneurship promises real-world impact, but before you can revolutionise quantum computing, biomanufacturing, or bring to market game changing climate solutions, you need to start from a strong legal foundation.

In my role as in-house legal counsel at Main Sequence, I’ve seen the full spectrum of spin outs.  Some that feel smooth and easy, with strong alignment and clear expectations, and others that get bogged down in the detail.  Here’s a practical guide to help researchers and first-time deep tech founders navigate the key legal steps when spinning out a new venture.

Clarifying IP Ownership

The first and most important question in a spin-out is understanding who holds intellectual property rights.  Universities typically own intellectual property rights created using their resources or by their employees in the course of their employment (noting that PhD students are treated a little differently). To commercialise the technology, the new venture needs legal rights to the underlying IP. This usually takes one of three forms: 

1. an outright assignment, where the university transfers full ownership to the company, typically for a larger equity stake; 
2. a license, where the university retains ownership but licenses the rights to the company in exchange for royalties, equity, or some combination of these.  Ideally, this licence would be exclusive (or, at a minimum, exclusive in the relevant field), and  crystallise into an assignment on satisfaction of key triggers, i.e. the close of a qualifying financing round, an exit event or reaching an agreed upon revenue target; or 
3. in certain cases, a disclaimer, where the university disclaims rights altogether, often in situations involving some student inventors or work outside of university that has been properly disclosed and managed from a conflict perspective. That disclaimer should always be provided by the university in writing, and early on.  

Whatever the arrangement, it’s essential to push for clarity and specificity. Founders should understand exactly what’s being licensed or assigned and clearly define it. Were there any relationships with third parties, like a CRC, that could impact the IP position?  Don’t forget to clarify rights to improvements, especially when further development will still involve university infrastructure or personnel.

Separately, if you or your co-founders are still employed by the university, make sure you understand conflict of interest rules and any limitations on your ability to be engaged by the company or third parties. You may need a conflict management plan approved by the university. 

Well rounded IP arrangements are non-negotiable for investors, and any ambiguity can haunt you in due diligence.  This should be squared away as early as possible, when the company has leverage to negotiate a favourable outcome.

Co-Founder Alignment

Equally important is setting clear expectations within your founding team. Your lab mates may be brilliant collaborators, but forming a company is a high-stakes commitment. To avoid confusion or conflict down the line, you need a well-drafted shareholders agreement from the outset.  Some early stage start ups may have a founders agreement as a precursor to a shareholders agreement.  The purpose of both documents is to spell out the responsibilities of each founder, how major decisions are made, and crucially, what happens if one of you leaves.

One of the most critical features of any founder arrangement is vesting. This means that founders "earn" their shares over time, rather than owning them outright from day one. A standard schedule might vest over four years with a one-year cliff, ensuring that a founder who walks away after six months doesn’t retain a permanent stake in the company. The reality is that this happens more than you’d think - building a company doesn’t happen in a vacuum.  Life gets in the way and plans change.  Furthermore, failing to implement vesting can severely damage your fundraising prospects. Investors are reluctant to invest in a company with large chunks of “deadweight” equity on the cap table.  

It’s also important to talk honestly and early about your shared vision. Are all of you committed to going full-time? Does someone intend to remain in academia or take on other commitments? Misaligned expectations are a major source of friction, and no document can fully resolve that unless open and honest conversations happen first.

Dealing with Founder IP

Even with a clean IP agreement from the university and an established team structure, one common issue that trips up early-stage companies is failing to document ownership of all relevant intellectual property. Many founders assume that because they created something, they will naturally bring it into the company.  However, unless it’s formally assigned, that IP might still belong to an individual at law.

Any venture investor will require that every person who contributed to the company’s foundational IP, whether through code, designs, data, models, or lab notes, sign an IP assignment deed transferring their intellectual property rights to the company. This includes not just the primary inventors, but also student contributors and consultants. Investors will expect to see comprehensive evidence proving that the company owns all of its IP. Gaps in documentation or missing signatures can throw your entire fundraising process into jeopardy.

Engaging Quality Legal Counsel

It may be tempting to avoid early legal costs by relying on free templates, budget law firms or informal advice from mentors. But deep tech spin-outs are legally complex, and early shortcuts often lead to expensive cleanups later. Good legal counsel is an investment, not a cost. A startup focussed lawyer with experience in spin-outs can help you negotiate favorable IP terms, structure your company with a clean and scalable cap table and draft a well rounded shareholders agreement with appropriate vesting. They can also help engage and incentivise your hires via an ESOP and prepare you for future fundraises.

While incurring hefty legal fees is a painful reality, many firms offer fixed-fee packages or startup friendly prices. Cleaning up shoddy contracts, undoing cap table bungles or renegotiating IP arrangements on the eve of a financing round will cost far more in the long run.

Final Thoughts

Starting with quality legal foundations will ensure you can put your energy where it’s most needed. You’re already doing the hard part in pushing the frontiers of science.  By securing your IP, aligning with your co-founders, documenting IP rights and engaging experienced legal counsel early, you’ll give your venture the foundation it needs to raise capital, scale, and (hopefully) succeed!