CorporateSpinouts.com works with promoters from their initial idea for spinning something out into a new venture through the following sequence of stages:

• Assessment of the market for the potential offering
• Reaching provisional agreement with the key stakeholders (e.g. colleagues, employer, clients)
• Robustly verifying the market and identifying specific prospective customers
• Completing a credible executive team, with focus on the CEO and commercial roles
• Raising working capital and grant aid
• Commencing trading - GO

We do this for a mix of sweat-equity and cash. How this mix is comprised will not be determined until after some initial discussion, for which there is neither payment nor commitment required.

If you believe you have a product or service with potential, then we can help you to assess whether it would work outside of your company or outside the client company that commissioned it as a once-off project. You need to know this before it makes sense to do anything else about it. You can speak with us in confidence and you don't need a business plan or anything other than a good understanding of the product or service in question and a gut feeling that it has commercial potential. Ideally you will have been closely involved in developing or managing this product or service and will be an employee of the company.

None of the Irish enterprise support organisations is in a position to provide grant assistance to individuals who are still in full-time employment. This limits the assistance available to individuals who are considering creating a spin-out from their employer. For the right spinout opportunities CorporateSpinouts.com can provide a significant body of assistance and potentially raise funds before an individual has committed to leaving their current job to create the spin-out.

Similarly principals of software companies may be aware that they have used up all available grants from Enterprise Ireland and other sources. They may be considering productising a piece of software that was developed for one or two clients. By presenting this as a new startup/spinout they will make this opportunity more attractive to investors and to grant-aiding bodies than their existing company is.

The profile of person who benefits from the expertise of CorporateSpinouts.com is normally one of the following:

1. Individuals, usually at a middle-management level, who have been responsible for the development of a product or service within a large company. They have an idea for a spinout but they do not have the authority to make it happen.
2. Principals of companies (mostly software companies) who have successfully completed what was expected to have been a once-off development for a client. However, they now see wider potential for the solution delivered but their companies are not product-oriented, they don’t want them to be
3. Principals of companies who can see that a line of business or an inhouse-developed product or service would be better developed if it were spun out into a new venture.
    

According to one study Corporate spinouts "combine failure rates, which are about one third of those of “normal” start-ups, with the high growth of new or refocused companies."

In general, there are a lot of generous state supports for early stage and start-up companies. These enable the preservation of income for individuals starting all sorts of new companies and also allow for the recouping of income tax previously paid for the purposes of investing in the venture. However, many of these ventures have an idea but have no product, no customer and little market validation. Many fail in their search for a first customer or in their efforts to develop the product or service.

In contrast, corporate spinouts begin with product or service and a customer i.e. the company who originally spent money developing this product or service. The commercial case for the spin out aided by the analysis that if a large company felt it necessary to develop something in-house then there is clearly a business demand and a lack of supply – two factors essential for a successful enterprise. Added to this, there is an existing development team and a first customer. In addition it is often possible, for reasons set out in the other answers below, to negotiate terms with this company which will provide much of the required initial capital. So, provided they can validate the market for this product or service, individuals or companies initiating such spinouts stand to lose little but potentially gain a great deal.
 

Yes. Many of our clients work with us in confidence to build the case for approaching their colleagues with the idea of creating a spinout.

These ventures are not like other start-ups and for employees seeking to initiate such spinouts a good deal of income continuity can be ensured through:

• Negotiating favourable terms for the spinout (see below regarding what can be sought from employer)
• Getting access to income tax paid in recent years
• State (primarily Enterprise Ireland) supports for salary costs in new ventures
• Initial funding from one of the seed capital or venture capital providers

Links to some of these funding schemes are provided on the Resources page.

Yes, CorporateSpinouts.com will take spinouts from the first stage which is the idea/concept identification to the final stage which is the securing of funding, which is largely driven by the results of the market assessment exercises. We access funds from a number of specialist investors who have experienced the benefits of spinout investments.

CorporateSpinouts.com is primarily paid via sweat-equity i.e. after the new firms are incorporated and funded CorporateSpinouts.com will be a shareholder. Our goal is to build a strong portfolio of shares in spun out firms. If a firm is intent on not giving away equity then we can work for a fee but normally everyone is best served by there being an equity based incentive. The work of CorporateSpinouts.com is very market facing (i.e. we aim to talk to potential customers directly). From this direct communication we can confidently decide which spinouts to work with on an equity basis, recommend certain spinouts to other investors, and recommend to our clients whether or not to proceed with creating the new venture.

The initial discussions with CorporateSpinouts.com will deliver value to you and will not involve any fee or agreement regarding equity. Our goal in promoting CorporateSpinouts.com is to encourage people to talk to us. From each initial conversation we are confident that we can easily assess the merits of investing more time at our risk initially. Equally we offer a robust means for you to determine whether or not the venture is worth pursuing.
 

There are a variety of reasons why this initiative could be beneficial for your employer:

• After it is spun out they can continue to use the same service or product
• As you achieve economies of scale, resulting from selling the product or service to others, the cost to them will diminish
• In the current climate, they may be attracted by the prospect of reducing their direct head-count by your creating a new entity which will employ some of their existing staff
• Your employer stands to gain from their taking a shareholding in the new entity
• If it looks like the venture is going to go-ahead anyway, they may co-operate in order to ensure continuity of service from a proven team of people that they may otherwise lose
• They will benefit from improvements to the product or service as you develop it for other clients, without the company alone funding such improvements
• It will generate positive publicity for their company
• It will appeal to the public spirit of the decision makers in the company, some of whom may seek a role in the new venture

Many client firms have standard clauses which give them ownership of all custom-developed IP but this is primarily to prevent their vendors from selling the same product to their major rival for half the price they paid for its development. Other than that they often do not really care about these clauses e.g. a major bank is not in the software business and provided their interests are protected (in the manner described in the answer to the previous question) they often do not care. They may seek a return from your venture by way of a licence fee, access to future versions or a fee to buy out their claim. Large companies will usually not require shares in the spinout because of governance concerns. If the original bespoke development contributed significantly to the core business of the client company then they may only allow it to be spun out with restrictions as to whom you may sell to, if they allow it out at all.

You may need to lobby the company at the top level and make that case that there is an employment creation opportunity which can be enabled merely by their waiving rights which are otherwise of no financial benefit to them. CorporateSpinouts.com will support you in all of these negotiations.
 

They may not, and the venture may be limited to selling to similar companies in markets in which your employer does not operate. On the other hand, they may not be able to stop you, e.g. if you are not bound by a non-compete agreement, and they may prefer to co-operate with you on the venture than lose you and your team to a new venture providing this service in an unfettered fashion to their competitors.

There is a long wish-list:

• Amicable co-operation
• Clean transfer of intellectual property rights, if required (and it may well not be e.g. the market-ready version of the product or service might be quite different)
• Co-operation in telling the story and acting as a reference site
• A two to five year contract of service committing them to a level of spending with the new entity at the level of the present employee loaded cost in year one and diminishing thereafter
• An investment in kind by way of office space, light, heat and ICT infrastructure
• Permission to transfer certain key staff to the new venture
• A cash investment equivalent to the company’s redundancy obligation in respect of the transferring staff
• A further cash investment in co-operation with new investors
• A leave-of-absence mechanism which will allow the originally transferred staff to revert back into the company in the event of the venture’s not succeeding commercially
• Co-operation in promoting the product or service to other companies in the same group