University spin-outs, like other high tech start-ups, face numerous challenges. One critical success factor is quality of management, not least because this is crucial in securing further investment. Recognising this challenge, Newcastle University adopted an ‘acceptable management solutions’ policy five years ago. To spin out a business, one of the following solutions had to be adopted:
- One of the founder academics chooses to leave the employment of the university to become CEO or equivalent of the spin-out and the university agrees that the academic has the necessary skills to be a success in that role
- The founder academics continue to pursue their academic careers together with an agreed (time and terms) involvement with the spin-out, and the university, in full consultation with the academics, identifies and recruits an external CEO to run the business.
While the second option was much preferred, funding restrictions meant universities traditionally attracted executives to spin-outs through ‘sweat-equity’, providing shares in the business for time invested, which is viable only for a few candidates.
Northern Accelerator overcomes this challenge of attracting experienced, talented business executives and does so during the pre-incorporation phase, allowing them to work with the university and academic founders to set up a strong viable business. Northern Accelerator offers executives remuneration in addition to traditional ‘sweat equity’ (shares in the business for time invested). This has broadened the candidate pool, improving early-stage access to experienced, high-quality management, which in turn has improved investment readiness.