A Corporate IP Spinout typically has the following characteristics:

• Completed product or prototype in an advanced phase of development
  
• Significant prior corporate investment and several years of prior R&D
  
• Early customer interest and engagement
  
• Initial revenues, or less than 12 months from first revenue
  
• Highly capital efficient due to reduced equity investment needs going forward
  
• Technology team and other key employees available as part of the spinout
  
• Availability of critical IP via assignment or exclusive licensing

Our Corporate IP Spinout strategy fills a gap between raw patent licensing and buyout-style deals. Early-stage patent licensing often requires significant development dollars to bring to market and suffers from high technology risk. Buyouts typically have significant revenues and mature products but lack the upside associated with early-stage investments. Corporate IP Spinouts balance these two extremes, offering a low risk, high reward approach to technology investment.

For Corporations

We are the “partner of choice” for Corporate IP Spinouts, having structured and executed 14 Corporate IP Spinouts over our careers. We work with several dozen high-tech corporations at the CTO, CIO, business development, business unit, and corporate venture levels to identify technologies that are good candidates for potential spinout.

Hundreds of billions of dollars are invested in corporate R&D annually, generating a huge amount of IP and patents. Yet many R&D projects lose their relevance over time, and most patents never result in commercial products or licensing value. The resulting technology may be useful and quite valuable in another setting, but it is considered non-core for its current home.

Novel technology and IP become stranded within corporations for a variety of reasons:

Strategic misalignment – Corporate executives sometimes choose to shelve R&D projects because they are no longer “core.” The high-tech landscape changes quickly, causing a company to pursue a new product or market focus and halt once-critical R&D projects. Companies exit business lines and shift strategies all the time, leaving projects in those product areas stranded.

Lack of market clarity – Many corporations invest a portion of their R&D budget in basic research, where researchers focus solely on innovation rather than revenue opportunities. While this approach occasionally translates into blockbuster products, basic research projects rarely reach the commercialization phase because they fail to find a practical application within the company’s markets of expertise.

Competing with a customer or supplier – Corporations occasionally invest in internal projects such as tools or IT applications to support their business. For example, a financial services company may fund internal development of compliance software because it couldn’t find a third-party application that met its needs. Over time, the company realizes that the software is not providing enough competitive advantage to continue maintaining the application, and may also see that other companies could benefit from this type of software.

Acquisition appendages – In M&A transactions where a large corporation acquires another large corporation, the acquiring company may obtain smaller ancillary product lines that they do not consider strategic. The acquiring company would prefer not to distract themselves by operating these non-strategic product lines yet would be destroying value if they chose to shut them down.

Our Corporate IP Spinout strategy offers corporations a new way to make existing technology and IP assets work for them. We structure Corporate IP Spinouts in a manner that aligns the interests of the investor group, the new venture, and the corporation and offers upside opportunities to corporations through equity appreciation. The Corporate Parent – at no additional expense – may recoup its initial R&D dollars and potentially reap substantial rewards if the start-up blossoms.