Creating a research-based spin-out is exciting. It can also be confusing.
We've talked to researchers, founders, investors and research organisations to answer some common questions you may have when considering a spin-out company as a pathway for your research.
The language of commercialisation
Not sure what some of the terms on this page mean? Check out our A-Z guide explaining some of the new language you might come across during your commercialisation journey.
A-Z of Commercialisation Guide
The most pivotal question: Am I ready for the founder journey?
Spin-outs usually begin because the technology is exciting — but commercial success is rarely determined by the quality of the science alone.
Once a company is formed, the challenge becomes attracting capital, building a team, securing customers and making difficult decisions under uncertainty.
For researchers, becoming a founder is a significant career transition. Before pursuing a spin-out, it's worth considering what this change means and what role you want to play.
Questions to consider:
- What motivates me to pursue a spin-out?
- Am I seeking impact, financial return, scientific advancement, or all three?
- How much time am I willing to commit?
- What risks am I prepared to take professionally and personally?
- What aspects of company building excite me?
- What aspects do I find uncomfortable?
There is no single path to success. Some researchers become outstanding CEOs. Others go on to create greater value as chief scientific officers, technical advisors or board members.
The goal is not necessarily to become the CEO. The goal is to find the role that gives the technology the best chance of success.
The founder reality check
Research rewards expertise, precision and careful validation. Startups reward speed, adaptability and execution. It is easy to underestimate how much your role as the founder changes after a spin-out forms.
In the first few years a founder may spend more time:
- Raising investment
- Recruiting staff
- Talking to customers
- Managing cashflow
- Managing governance
- Negotiating commercial agreements
- than working directly on the technology.
Key takeaway
Many successful researcher-founders describe a period where they realise they have become managers of innovation rather than creators of innovation.
Understanding this transition early helps founders make informed decisions about their role in the venture.
Customer validation
One of the most common reasons spin-outs fail is building a company around a technology before validating that customers genuinely need the solution.
Before a company is even formed, consider:
-
What problem are we solving?
Not just "What can our technology do?" but "What pain exists in the market that customers will pay to solve?" - Who owns the problem?
The person using the technology is not always the person paying for it. - How painful is the problem?
Minor inconveniences rarely create large companies. - What happens if nothing changes?
If customers can comfortably continue with existing solutions, adoption may be difficult regardless of technical superiority.
A useful rule is:
Fall in love with the problem, not the technology.
Leaving the institution: Practical decisions
For many researcher-founders, forming a spin-out is not simply a commercial decision — it's the beginning of a transition from one professional identity to another.
While some researchers choose to leave their institution entirely, many remain connected through part-time appointments, secondments, advisory roles, contract research arrangements, student supervision or ongoing collaborations. There is no single correct pathway.
What matters is that expectations, responsibilities and boundaries are made explicit early. Ambiguity can create challenges for founders, research organisations, investors and future employees alike.
There is more than one path
Researchers commonly assume they must choose between remaining an academic and becoming an entrepreneur. In reality, there are often several transition pathways:
- Remaining employed by the research organisation while contributing to the spin-out in a founder or advisory capacity.
- Taking a temporary secondment or leave arrangement to focus on company formation.
- Moving into the spin-out full-time as CEO, CSO or another executive role.
- Remaining primarily within the institution while acting as a board member or scientific advisor.
- Gradually reducing institutional commitments as the company matures.
Each option brings different opportunities and challenges. Some technologies benefit from the researcher remaining closely connected to the institution and its expertise. Others may require a founder to commit to the venture full-time to attract investment and move quickly.
Investors often seek clarity on whether founders have the capacity and availability to execute the commercialisation plan.
Be clear about institutional resources
Many spin-outs emerge from years of publicly funded research undertaken using institutional facilities, equipment and expertise. Researchers should not assume these resources will remain available to the company on the same basis after formation.
Before launch, founders should seek clarity around:
- Laboratory access
- Equipment usage
- IT systems and software
- Specialist facilities
- Technical support services
- Administrative support
- Office and incubator space
Where access will continue, the terms should ideally be documented. This helps align expectations and avoid disputes about how institutional resources are being used.
Clarify intellectual property (IP) arrangements
Once a spin-out is formed, the distinction between institutional IP and company IP becomes increasingly important.
Before exiting the institution, founders should understand:
- What IP is covered by the licence agreement
- What future developments fall within or outside that licence
- Whether improvements made after formation belong to the company, the institution or both
- What obligations exist regarding disclosure of new inventions
- How jointly developed IP will be managed
Investors often review these areas as part of their due diligence process. Uncertainty over ownership can slow funding processes and create unnecessary risk for the spin-out.
Should this even be a spin-out?
A spin-out company is just one way to get research out into the world.
The decision to form a spin-out should be made deliberately, with a clear understanding of the opportunities, challenges and alternatives available.
Depending on the technology, market opportunity, and team, other commercialisation pathways may be more appropriate or effective. These include:
- Licensing the technology to an existing company
- Selling the intellectual property outright
- Creating a joint venture with industry
- Establishing a strategic partnership with industry
- Continuing development within the research organisation until further evidence is generated
Key takeaway
The goal should not be the creation of a spin-out company for its own sake, but to identify the pathway that creates the greatest possible impact from the research.
Questions to consider
Is there a significant market opportunity?
A spin-out company is generally most appropriate where:
- There is a substantial market opportunity
- There is significant growth potential
- The technology can support scalable commercial activities
- New investment capital will likely be required to realise the opportunity
If the market is relatively small, specialised or already well served by established participants, licensing may be a more efficient pathway.
Does the technology require dedicated development?
Many research outputs require substantial additional work before they are ready for market.
Consider:
- Does the technology require years of further development?
- Will specialised expertise need to be assembled around the technology?
- Is substantial technical risk still to be retired?
- Is there a need for dedicated management and governance focused exclusively on commercialisation?
Where significant development remains, a dedicated company may provide the focus required to advance the technology.
Is external investment likely to be required?
If the pathway to market requires substantial capital, a spin-out structure may make it easier to attract investment and align stakeholders around a long-term growth plan.
However, external investment is not free capital. Investment introduces expectations regarding growth, governance, milestones and eventual exit opportunities. The venture must therefore be suitable for the type of investment being sought.
Would an existing company be better placed to commercialise the technology?
Existing industry participants may already have:
- Established customer relationships
- Existing manufacturing capability
- Regulatory approvals
- Distribution channels
- Market credibility
If these assets are critical to success, licensing to an existing company may create impact faster and with less risk than building a new venture.
Key takeaway
There is no formula for deciding whether a spin-out is the right pathway. The best commercialisation approach depends on the technology, team, market opportunity, funding requirements, timing and level of risk involved.
Is the technology ready?
No two spin-outs start from the exact same place. Some begin with early-stage ideas still being tested in the lab; others are much closer to real-world application.
A compelling piece of research does not automatically translate into a viable company. Before committing to the spin-out pathway, consider whether the technology has reached a stage where a company can realistically create value.
Understanding how developed your technology is helps you and others involved in a spin-out work out whether it is ready to commercialise, what still needs to be done, and what type of funding or support is needed next.
Technology Readiness Levels
During the spin-out process, you may hear people use Technology Readiness Levels (TRLs) to describe the maturity of a technology.
This is a 1-9 scale used across research, commercialisation and investment to create a shared understanding of what stage the intellectual property (IP) is at. This helps inform:
- What needs to happen next, and when
- How much investment is needed
- How a spin-out deal should be structured
- How early conversations are framed with partners and investors
| Level | What this looks like | What to think about next |
|---|---|---|
| TRL 1 | You've made a scientific discovery, but potential applications are still emerging. | Clarify the potential commercial application – what problem could this solve, and which markets might benefit? Start thinking about IP protection. |
| TRL 2 | You've identified potential applications but they have not yet been tested. | Identify which applications to focus on first. Is there a real customer problem worth solving? Is the market large enough to attract investment? |
| TRL 3 | Early experiments prove the concept could work. Key elements of the technology have been tested. | Focus on generating the evidence needed to show the technology can scale and support decisions about next steps. Explore grants and pre-seed funding opportunities. |
| TRL 4 | The technology has been validated in a laboratory setting, with components working together as intended. | Identify the major technical risks, define what a minimum viable product (MVP) might look like, and plan the next stage of development aligned with your funding. |
| TRL 5 | The technology is tested in conditions that resemble its intended real-world environment. | Secure pilot partners or test sites aligned with your development milestones and funding roadmap. |
| TRL 6 | A prototype or working system has been demonstrated in a relevant or simulated environment. | Address engineering, regulatory and safety requirements. Build evidence that the system can operate reliably outside the lab. |
| TRL 7 | Early users or partners are engaging with a near-final prototype in real-world settings. | Secure early-adopter customers, generate performance data, and refine business model to show a clear path forward. |
| TRL 8 | The technology is functionally complete and has been tested through more rigorous validation. | Prepare for scale-up: certifications and demonstrating repeatable manufacturing and quality control. |
| TRL 9 | The technology is successfully operating in the market | Focus on scaling customers, partnerships, and commercial growth. |
TRLs provide a useful framework for assessing maturity. They are not a substitute for commercial judgement, but they can help identify whether critical technical risks remain and how much development work is likely to be required before commercial adoption.
Most spin-outs in Aotearoa begin around TRL 3, with PreSeed investment used to progress through TRL 3 and 4.
Technology readiness checklist
Before committing to a spin-out, ask:
- Do we understand the key technical risks?
- Do we know the next technical milestone that must be achieved?
- Do we have a realistic plan to achieve that milestone?
- Is the remaining development work suitable for a company rather than a research project?
- Do we understand what technical evidence investors, partners and customers will require?
If most answers are "no", additional technical de-risking may be required before creating a spin-out.
Key takeaway
Agreeing early on the stage of the technology helps set clear expectations and supports smoother deal negotiations later.
Is this the right team?
Ideas do not create successful spin-outs. People do.
The quality, commitment and capability of the team is often one of the strongest predictors of a company's success. Some questions to consider include:
Are the founders aligned?
Misalignment between founders is one of the most common causes of difficulty in early-stage companies. Before formation, it is valuable to discuss:
- Why are we creating this company?
- What does success look like?
- What level of commitment is expected?
- Who will take operational responsibility?
- How will decisions be made?
- What happens if roles change over time?
These discussions can feel uncomfortable, it's usually easier to have them before equity is issued than after.
What can team members commit to?
Not every founder needs to work full-time in the venture from day one, but clarity is important.
Consider:
- Who is committing full-time?
- Who is contributing part-time?
- Who will join later?
- What expectations exist regarding future involvement?
Investors often look for evidence that the people critical to success have the capacity to deliver the proposed plan.
What roles are needed?
While every spin-out is different, successful ventures often require a combination of several capability areas, including:
Scientific and technical leadership
- Advancing the technology
- Maintaining technical credibility
- Managing technical risk
- Translating research into products and services
Commercial leadership
- Market development
- Customer engagement
- Partnerships
- Revenue generation
Operational leadership
- Execution
- Team management
- Organisational development
- Resource allocation
Governance
- Strategic oversight
- Risk management
- Accountability
- Stakeholder confidence
In early-stage ventures one person may perform several roles, but all functions ultimately need to be addressed.
What are the capability gaps?
Very few spin-out teams begin with every capability required for success. This is normal.
The objective is not to have a complete team on day one. It's to identify what is missing and develop a plan to address those gaps, which may include:
- Commercial leadership
- Industry experience
- Regulatory expertise
- Product development
- Manufacturing capability
- International market experience
- Fundraising experience
Recognising gaps early is usually a strength, not a weakness.
Who will lead the company?
The biggest decision in a spin-out is who should lead the company.
While many researchers become successful CEOs, others choose to focus on the science and contribute in other roles, such as:
- Chief Science Officer (CSO)/Chief Technology Officer (CTO)
- Scientific Advisor
- Interim CEO, transitioning to another CEO as the company grows
There is no "right" choice. The best role for each person will depend on their strengths, interests and aspirations – and how those align with what the spin-out needs at different stages.
Questions to consider include:
- Do you want to build a company?
- Do you want to take on a CEO role (including fundraising, sales, and business development)?
- Or would you prefer to focus solely on advancing the technology?
- What skills does the team already have, and where are the gaps?
- What is your appetite for risk and uncertainty?
- How comfortable are you with rapid decision making and commercial pressure?
- If you weren't the CEO, what role would allow you to contribute most effectively?
- What conversations do you need to have now to set expectations early?
Team readiness checklist
Before proceeding, ask:
- ✔ Do we know who will lead the company?
- ✔ Do the founders understand their respective roles?
- ✔ Have we discussed commitment expectations?
- ✔ Do we understand our capability gaps?
- ✔ Do we have a plan to fill those gaps?
- ✔ Can the team can credibly achieve the next value-creating milestone?
If the answer to several of these questions is "no", the focus may need to shift from building a company to building a team capable of building a company.
Reality check
Many successful spin-outs are led by researchers. Others are led by CEOs who come from outside the research team.
Success comes from having the right team around the technology.
How spin-out deals work
Spin-out deals bring together two key elements:
Equity and governance
- Who owns the new company, and how ownership is shared between the various parties such as founders, investors and the research organisation.
- How decisions are made, and what rights different shareholders have.
IP licensing
- The rights the company has to use and commercialise the intellectual property relating to the innovation.
These are usually documented in separate agreements, but they are closely connected. Decisions made in one area will often affect the other.
Together, they form the foundation of the new venture and influence how founders, research organisations and investors assess value, risk, and long-term potential.
Why this matters
Early-stage spin-outs operate with significant technical, commercial and funding uncertainty. As a result, deal structures often seek to balance flexibility with protection, allowing the venture to progress while managing risk for all parties. This means there is rarely a single "right" deal structure.
When discussing equity, licensing and investment terms, it's important to consider the overall package rather than negotiating on any one element in isolation.
Key takeaway
A spin-out deal is more than a single agreement. Equity, ownership, IP rights and investment terms all work together and should be considered as a whole.
Scroll to the next section for more detail on deal components.
Understanding term sheets
Term sheets set out the key terms for how a spin-out will be formed and funded. They often set the tone for how a spin-out begins its journey – ideally with clarity and shared understanding from the start.
Transparency and goodwill are particularly important in the New Zealand context, where spin-outs are built from publicly funded research and early-stage capital markets are relatively small compared to other ecosystems. At the same time, many spin-outs are aiming for global markets, so early deal terms also need to make sense beyond New Zealand.
The following section outlines key elements commonly found in terms sheets, and explains what they mean in a spin-out context. >>
Common term sheet clauses
These are some of the key terms you'll see in spin-out negotiations.
Pre-Money Valuation (and Investment Instruments)
Early spin-outs are hard to value because there is limited commercial data.
Instruments like SAFEs and convertible notes allow investment to be made before a valuation is fixed, with a value decided later when there is more information.
SAFE Notes
A SAFE (Simple Agreement for Future Equity) is a contract between a company and an investor. The investor provides capital now, and in return receives the right to receive equity (shares) in the company at a later date.
The company is not valued at the time the SAFE is signed – the valuation is set later, when the SAFE converts into equity.
Key features:
- No debt (and therefore no interest or repayment obligation)
- Converts into shares at a future trigger event, such as a new funding round or acquisition
- Often includes a discount rate to reward early investors (SAFE holders convert at a lower price than new investors)
- May include a valuation cap, which sets the maximum valuation at which the SAFE converts
- May never convert if no qualifying event occurs
SAFEs are commonly used because they are fast and simple. However, be aware that multiple SAFEs can create dilution and ownership complexity when all are converted.
Convertible Note
A Convertible Note is a loan from an investor to a company that converts into equity at a later date. The company receives capital now, and the loan (plus any interest) is converted into shares when a future trigger event occurs.
The company is not usually valued at the time the note is issued; valuation is determined later.
Key features:
- Structured as debt (so has interest and a repayment obligation)
- Converts into shares at a future trigger event, such as a new funding round or acquisition
- Usually includes a discount rate and/or valuation cap to reward early investors
- Has a maturity date – if no trigger event occurs, the loan may become repayable or renegotiated
- Accrued interest typically converts into equity along with the original investment
Convertible notes are commonly used because they allow early capital to be raised before a valuation, and they can also help bridge financing between funding rounds.
However, unlike SAFEs they include interest as well as repayment obligations if conversion does not occur.
Minimum & Maximum Rounds
Defines the range of capital being raised during a funding round.
- Minimum = the base amount needed for a spin-out to reach its next meaningful milestone
- Maximum = upper limit of realistic capital deployment
Helps manage dilution and keeps the raise aligned to execution capacity.
Rolling Close
Enables a spin-out to accept funds from investors in stages over time, rather than at a set date. Useful when seeking additional investors that may join at different times, but should be carefully managed.
Completion Date
The date investors will complete their investment once all conditions are met.
Exclusive Period
A window of time where investors can complete due diligence without competing offers. The duration should be proportionate to the scope of diligence and stage of the company.
Legal Costs
Term sheets often require the company to pay some (or all) of the lead investor's legal costs. These should be negotiated to avoid disproportionate burden on the spin-out.
Confidentiality
Term sheets may include confidentiality clauses that restrict who can be told about the terms of the deal. Founders should ensure these do not prevent sharing necessary information with key people such as advisors or institutions.
Pre-Money Valuation
The agreed value of the company immediately prior to the investment, forming the basis for pricing and dilution.
Issue Price
The price per share paid by investors in the current raise.
Ordinary vs Preference Shares
Preference shares sit ahead of ordinary shares in certain outcomes (e.g. liquidation or exit). They may also give investors additional rights or protections.
ESOP (Employee Share Option Pool)
Reserves equity for current and future employees to support recruitment and retention.
Cap Table
A cap table shows who owns what in the company.
It records all ownership interests including shares currently held and instruments that may convert into equity in the future (such as employee share options, SAFE notes and convertible notes).
Due Diligence
The process where investors verify assumptions about the business – including technical, legal, commercial and financial review.
Warranties
Warranties are statements made by the company about the information it has provided to investors during the investment process.
Investors rely on these statements when deciding to invest and may have rights to make a claim if they are later found to be incorrect.
Where information has been fully and fairly disclosed in a data room, there is generally no claim to be made.
Shareholders Agreement
A contract between a company's owners that covers:
- Decision-making
- Control
- Transfers
- Exit processes
- Dispute resolution
It should balance investor protection with operational flexibility and reflect the company's expected growth.
Access Rights
Access rights allow investors to gain reasonable access to information about the company and its performance after they invest. This is subject to confidentiality obligations and does not require disclosure of trade secrets or other commercially sensitive information.
Right of First Refusal
These provisions require a selling shareholder to first offer their shares to existing shareholders before transferring to third parties, maintaining ownership stability.
Participation Rights (Pre-emptive Rights)
Allow existing shareholders to invest in future funding rounds pro-rata, so they can maintain their ownership stake.
Drag Along Rights
Allow a majority of shareholders to require other shareholders to sell their shares as part of a company sale. For example, if 75% of shareholders agree to a sale, the remaining 25% are required to sell at the same price and conditions.
Tag Along Rights
Protect minority shareholders by allowing them to "tag along" and sell their shares on the same terms as majority shareholders, if the majority owners decide to sell.
Founder (or Key Person) Restricted Share Transfers
Provisions that restrict founders (or key people) from selling or transferring their shares for a defined period. This signals commitment and gives the company stability.
Founder (or Key Person) Vesting
Vesting means that shares are earned over time rather than received outright from day one. If a founder or key person leaves early, their unvested shares may return to the company for future team members.
Non-competition / Non-solicitation
These clauses restrict key individuals from competing with the company or soliciting staff for a defined period after they leave, subject to enforceability limits under local law.
Board Composition
Sets out who sits on the board and how governance decisions are made. Early boards often include founder, investor and independent representatives, The goal is to ensure the company has the skills and oversight needed for its stage of growth.
Who owns what? Equity allocation in spin-outs
Equity allocation is often one of the most debated aspects of forming a spin-out, because it determines how ownership is shared between founders, investors and the research organisation.
There's no single formula for how equity should be allocated. Every spin-out is different, and it depends on the technology, the team, the support provided, and the commercialisation pathway ahead.
New Zealand's national IP policy states that research organisations may hold up to 10% equity in a spin-out at formation, with the ability to exceed this in certain circumstances. This provides an outer boundary, not a default position.
Rather than aiming for a specific number, equity discussions should focus on what each party is contributing and what is needed for the spin-out to succeed.
What influences equity outcomes?
Equity discussions typically consider:
- The relative contribution of IP, infrastructure and expertise
- Any upfront funding or support provided
- The nature and stage of the research asset being licensed
Transparency around contributions and expectations is key to reaching an agreeable outcome.
Key questions to consider
Funding & support
What funding or support has the research organisation provided beyond normal (BAU) operating costs? For example:
- Lab space and equipment
- Access to specialist expertise
- IP protection and associated costs
- Commercialisation support (e.g. market validation, commercialisation planning and budgeting, strategic insights, IP assessment and strategy); either expertise within the research organisation, or a contracted third party
- Direct financial investment
These may be provided below market rate or at no cost to date. Where they are included in equity discussions, they should be clear and able to be substantiated.
Intellectual Property (IP)
- How mature is the IP, using the TRL framework?
- How much technical risk remains at the point of spin-out?
- How much additional development is required to reach a commercial outcome?
In some cases, the IP is already well developed and relatively de-risked. In others, more value will be unlocked through future technical development after the spin-out is formed.
Team
- What personnel will the research organisation continue to provide?
- Will the spin-out have access to specialist knowledge / an advisor?
- Will the spin out have access to students to help advance the technology?
- Will this support be provided at no or reduced cost?
The nature and duration of this support should be understood and reflected in discussions.
Licensing Agreements
A licensing agreement gives a spin-out the right to use, develop and commercialise intellectual property (IP) owned by another party, such as a research organisation.
A well-structured licence gives the spin-out enough freedom to attract investment, recruit talent and grow the business, while protecting the research organisation's ongoing interests.
While there are common approaches across New Zealand's research commercialisation ecosystem, licensing practices can vary between institutions.
Key takeaway
While equity determines who owns the company, licensing determines how the company can use the underlying IP. Both are important and should be considered together.
Common Licensing Terms
Field of Use
Defines the application areas, industries or markets in which the spin-out may use the IP.
Territory
Defines the geographic regions where the spin-out can use the IP. Many spin-out licences are global in scope to support international growth.
Exclusivity
Defines whether the spin-out has exclusive rights to use the IP within the agreed field of use.
Royalties
Royalties are payments made to the owner of the IP, typically structured as a percentage of the revenue generated from the licensed IP.
Milestone Payments
Some licences include milestone-based payments linked to technical, regulatory or commercial achievements.
Licence Fees
Some licences include upfront fees for access to the IP. For early-stage spin-outs fees are often reduced or deferred to reflect the company's stage of development.
Performance and Diligence Obligations
Licensing agreements commonly include obligations requiring the spin-out to actively develop and commercialise the IP.
Improvements and Future IP
These clauses define what happens to new intellectual property created after the licence is signed, including any improvements made to the original technology.
Termination and Reversion
Licensing agreements usually include termination provisions that set out when a licence can end and what happens to the IP if it does (for example, allowing the research organisation to reclaim rights to the IP in certain circumstances).
Understanding perspectives in a negotiation
Why do spin-out negotiations feel different for each party?
Researchers, founders, research organisations and investors may all be working toward the success of the same venture, but they approach decisions from unique starting points.
Understanding these differences can help explain why stakeholders view the same scenario differently, making negotiations easier to navigate.
Key perspectives
Researchers
- Transitioning from discovery to application
- Weighing up personal risk, changes to professional identity and uncertainty about future roles
- Motivated by impact, scientific integrity, and seeing their work create real-world impact
- Navigating unfamiliar commercial and negotiation environments
Founders (especially first-time founders)
- Focused on building a viable company under significant uncertainty
- Responsible for execution, fundraising, team building and market engagement
- Operating under pressure for speed, flexibility and decision-making clarity
- Seeking sufficient ownership to justify the personal risk involved
Research organisations / Technology Transfer Offices
- Act as the link between publicly funded research and the commercialisation of IP
- Accountable to multiple stakeholders
- Must balance commercial outcomes with public value, policy settings, and institutional obligations
- Focused on consistency, risk management, and long-term portfolio impact
Investors
- Assess opportunities based on risk vs. potential reward
- View spin-outs as part of a broader investment portfolio
- Consider growth potential, downside risk, and how investors will eventually exit and realise returns
- Guided by capital allocation, market comparables and financial responsibility to their stakeholders
None of these perspectives is more "right' than another. Each reflects a rational response to the role being played in the ecosystem.
Challenges often arise when we make assumptions about what others value, need, or are able to concede.
Key takeaway
Better understanding leads to better negotiation outcomes.
By understanding how different parties may view the same deal, participants are better equipped to engage in transparent, efficient and constructive negotiation.
Negotiating common deal terms
Different stakeholders often view the same term sheet clause through different lenses.
The prompts below explore some of the questions that founders, investors and research organisations may be considering when negotiating common deal terms.
They're not an exhaustive checklist, and there are no "right" answers. Think of them as conversation starts to help surface assumptions and negotiate with more clarity.
Select a clause to explore common considerations from each perspective.
Minimum & Maximum Rounds
Setting a capital range is about balance – raising enough to reach a meaningful milestone, without over-diluting or creating execution risk.
Researcher / Founder
- What specific technical, commercial or regulatory milestones does the minimum amount enable us to achieve?
- Will this get us to a clear inflection point that improves our next valuation, or will it leave us under resourced or overly constrained?
- Does raising closer to the maximum dilute us more than the value we can realistically create before the next round?
- Are raising more because it can genuinely increase value, or just because it's available?
- Does the range allow flexibility to close the round efficiently without repeated renegotiation?
- How does this range signal ambition, confidence and capital discipline to future investors?
Research Organisation / TTO
- Is the minimum raise enough to properly de-risk the licensed IP and demonstrate commercial viability?
- Does underfunding increase the risk of the spin-out stalling or failing before validation?
- Is there a credible pathway from this round to follow-on investment?
- Does the range encourage disciplined execution rather than scope creep?
Investor
- Is the minimum amount clearly tied to measurable milestones that reduce technical and market risk?
- Is the maximum realistic for deployment capacity in the proposed timeframe?
- If less than the maximum is raised, is there a clear plan for prioritisation and sequencing decisions?
- How does this raise position the company for its next financing in terms of valuation and momentum?
Rolling Close
Allows flexibility in completing a round while managing fairness, signalling and governance risk.
Researcher / Founder
- Will a rolling close materially improve our ability to complete the round?
- Can we maintain focus on execution while fundraising remains open?
Research Organisation / TTO
- Are institutional rights and ownership outcomes consistent across tranches?
- Is there a clear end point to avoid permanent fundraising mode?
Investor
- Will I be disadvantaged relative to later investors in price or information?
- How are material developments between closes handled?
- Does the structure signal fundraising uncertainty?
Completion Date
Sets out when the capital actually lands – aligned with plans and milestones.
Researcher / Founder
- Does the completion date align with our cash runway and key milestones?
- Are conditions realistic and within our control?
- What happens if completion is delayed?
Research Organisation / TTO
- Does delayed completion increase risk to the IP or programme?
- Are institutional approvals aligned with the timing?
- Is there a fallback if completion does not occur?
Investor
- Is the timeline realistic for the required diligence and approvals?
- What flexibility exists if issues arise late in the process?
Exclusive Period
Exclusivity gives investors confidence to undertake due diligence while limiting company lock up risk.
Researcher / Founder
- Is the exclusivity period proportionate to the due diligence required?
- What happens if diligence drags or stalls?
- Does the exclusivity weaken our negotiating position?
Research Organisation / TTO
- Will exclusivity delay alternative funding pathways?
- Is the period appropriate?
- Does it increase the risk of spin-out failure through delay?
Investor
- Is the exclusivity period sufficient to complete proper diligence?
- Are we committing resources without deal certainty?
- Does the scope of exclusivity match the intent?
Legal Costs
Who pays for what – ensuring that transaction costs are fairly and predictably allocated.
Researcher / Founder
- Are we funding investor costs disproportionate to our size and stage?
- Is there a cap to avoid open ended exposure?
- Are costs conditional upon completion?
Research Organisation / TTO
- Do the cost allocations impair early-stage capital efficiency?
- Is this consistent with institutional policy?
Investor
- Are costs reasonable and aligned with deal complexity?
- Is cost recovery appropriate given risk assumed?
Confidentiality
This clause protects sensitive information – but it shouldn't block necessary disclosures.
Researcher / Founder
- Can I still disclose terms to co-founders, TTOs and advisors?
- Does this limit future fundraising flexibility?
- What happens if something is accidentally disclosed?
Research Organisation / TTO
- Are reporting and internal approval requirements still workable?
- Is IP disclosure adequately protected?
Investor
- Is commercially sensitive information appropriately protected?
- Are confidentiality obligations enforceable?
- Does this protect the deal position?
Pre-Money Valuation
The agreed value of the company before the investment.
Researcher / Founder
- Does the valuation fairly reflect technical and commercial risk?
- Where do we see the IP sitting on TRL levels?
- Will this valuation support a credible uplift in the next round?
- Are we optimising long-term ownership rather than short term optics?
Research Organisation / TTO
- Does the valuation appropriately reflect IP maturity?
- Where do we see the IP sitting on TRL levels?
- Will this valuation support downstream fundability?
Investor
- Is the valuation justified relative to risk and comparables?
- Where do we see the IP sitting on TRL levels?
- Does it allow for meaningful upside?
- Is dilution aligned with capital contribution?
Issue Price
The price per share an investor pays to acquire stock in the company.
Researcher / Founder
- Is the issue price consistent with the cap table narrative?
- Does the price align with future option pricing?
Research Organisation / TTO
- Does the issue price preserve institutional value?
- Is dilution transparent and defensible?
Investor
- Is pricing consistent across instruments?
- Are discounts or caps appropriately reflected?
Ordinary & Preference Shares
Assist with the allocation of economic and control rights.
Researcher / Founder
- Do preference rights materially change what I receive in an exit?
- Are preferences simple or stacked?
- Do they limit future flexibility?
Research Organisation / TTO
- Does the structure impair long term value realisation?
- Are preferences market standard for this stage?
- Is founder motivation preserved?
Investor
- Do preference rights adequately protect downside risk?
- Are protections proportional to investment risk?
- Do rights survive future rounds?
ESOP (Employee Share Option Pool)
Key purpose is to attract, retain and motivate talent.
Researcher / Founder
- Is the pool large enough for future hires and growth?
- Is it created pre or post investment?
- How does it affect founder dilution?
Research Organisation / TTO
- Does the ESOP support researcher risk in professional change?
- Is dilution aligned with value creation?
- Are institutional holdings treated fairly?
Investor
- Is the ESOP sufficient to build the team?
- Is unused ESOP recycled?
- Does the pool reduce future financing risk?
Cap Table
Gives transparency over ownership and dilution.
Researcher / Founder
- Do I fully understand diluted ownership?
- Are SAFEs/other instruments accurately modelled?
- Does the cap table support future funding rounds?
Research Organisation / TTO
- Is institutional ownership transparent?
- Are conversion mechanics understood?
- Is dilution defensible to stakeholders?
Investor
- Are there hidden dilution risks?
- Is the cap table clean and auditable?
- Does it support future raises?
Due Diligence
Helps all parties validate assumptions and manage risk.
Researcher / Founder
- Have we provided the right information proportionate to stage?
- Are requests reasonable and manageable?
- Does diligence delay execution?
Research Organisation / TTO
- Is IP diligence robust and accurate?
- Are institutional representations correct?
- Is sensitive information protected?
Investor
- Does due diligence adequately de-risk the opportunity?
- Are red flags addressed transparently?
- Is it scoped efficiently?
Warranties
Exist to allocate information risk based on what is known at the time of investment.
Researcher / Founder
- Can I realistically stand behind these warranties?
- Are caps and time limits appropriate?
- Is disclosure sufficient?
Research Organisation / TTO
- Are institutional warranties limited appropriately?
- Is IP risk correctly allocated?
- Are founders unfairly exposed?
Investor
- Do warranties provide meaningful protection?
- Are disclosures complete?
- Are enforcement mechanisms practical?
Shareholders Agreement
Sets the rules of the relationship: governance, rights and exits.
Researcher / Founder
- Does this enable efficient operational control?
- Are reserved matters reasonable?
- Does it scale with growth?
Research Organisation / TTO
- Does governance support commercialisation objectives?
- Are institutional rights protected but proportionate?
- Is exit flexibility preserved?
Investor
- Are governance rights sufficient?
- Is downside protection enforceable?
- Does it allow clean exits?
Access Rights
Allow investors access to key company reporting, balancing transparency with information protection.
Researcher / Founder
- Are the access obligations manageable?
- Is sensitive IP still protected?
- Will this distract management?
Research Organisation / TTO
- Is institutional confidentiality preserved?
- Are IP boundaries clear?
Investor
- Is access sufficient to monitor risk?
- Are reporting rights enforceable?
Right of First Refusal
Controls how shares can be transferred.
Researcher / Founder
- Does this restrict future liquidity?
- Are timelines workable?
Research Organisation / TTO
- Does this preserve strategic alignment?
- Is institutional consent required?
Investor
- Does this protect against unwanted additional shareholders?
- Is it commercially workable?
Participation Rights (Pre-emptive Rights)
Protect existing shareholders from dilution in future rounds.
Researcher / Founder
- Does this limit flexibility in future rounds?
- Are exceptions defined?
Research Organisation / TTO
- Are institutional rights preserved?
- Does this affect syndication?
Investor
- Can I maintain my ownership?
- Are rights waived appropriately?
Drag Along Rights
Enable a majority to approve a sale and bind minority shareholders, enabling clean exits.
Researcher / Founder
- Is the threshold fair?
- Could I be forced into a suboptimal exit?
Research Organisation / TTO
- Does this protect institutional value?
- Is public good value considered?
Investor
- Can I achieve liquidity efficiently?
- Is the threshold achievable?
Tag Along Rights
To protect minority shareholders if majority shareholders sell.
Researcher / Founder
- Am I protected in a control sale?
- Are the thresholds appropriate?
Research Organisation / TTO
- Does this ensure fair treatment?
- Are institutional exits aligned?
Investor
- Does this constrain exit flexibility?
- Is it market standard?
Founder (or Key Person) Restricted Share Transfers / Vesting
Ensures the commitment and continuity of key contributors through critical stages.
Researcher / Founder
- Is vesting fair given prior contribution?
- What happens if I leave involuntarily?
Research Organisation / TTO
- Does vesting protect IP continuity?
- Is talent retention supported?
Investor
- Are key people locked in?
- Is downside risk mitigated?
Non-competition / Non-solicitation
Protect the company value post after key people depart.
Researcher / Founder
- Is it enforceable and reasonable?
- Does it unfairly limit future career opportunities?
Research Organisation / TTO
- Does it protect institutional IP?
- Is it legally defensible?
Investor
- Does it adequately protect value?
- Will it survive legal challenge?
Board Composition
This clause aims to provide effective governance
Researcher / Founder
- Does the board add capability, not just oversight?
- Is decision making efficient?
Research Organisation / TTO
- Does the board support translation and scale?
- Is institutional perspective represented appropriately?
Investor
- Is governance robust?
- Do board members add strategic value?
Further reading & support
Engaging with your Technology Transfer Office (TTO)
Your university or research organisation's Technology Transfer Office (TTO) is usually the first point of contact when considering commercialisation.
They can help you:
- Understand whether your idea may be suitable for a spin-out (or other pathway to impact)
- Navigate intellectual property (IP) disclosure and protection
- Explore funding and commercialisation options
- Connect with partners, investors, and advisors
If you're unsure where to start, your TTO is a good first conversation.
New Zealand IP policy and guidelines
In Aotearoa, the commercialisation of publicly funded research is guided by a National Intellectual Property (IP) Management Policy.
Introduced in 2026, the policy and accompanying Commercialisation Engagement Guidelines set expectations around:
- How intellectual property is managed
- How benefits from research are shared
- How researchers and research organisations work together on commercialisation
You can read more about the policy and guidelines on MBIE's website.
IP policy & guidelines
Going further
If you want to dive deeper, this guide is a useful resource:
The Deep Tech Spinout Guide for New Zealand Researchers (Outset Ventures): A founder-tested roadmap through the spin-out journey, including how investors assess early-stage research, how IP and university agreements are structured, and how to translate research into real-world traction.
Deep Tech Spinout Guide
Bringing research into the world takes a team effort. Our thanks to the New Zealand researchers, founders, commercialisation professionals, investors and government partners who shared their insights and experiences to help shape this guide.