How to negotiate with a TTO
I don’t have many crusades, but if there was one that I’ve gained a bit of a reputation for, it’s my frustration with European University Tech Transfer Offices (TTOs). I’ve debated my perspective privately countless times, and last year I documented it in what quickly became my most popular post of all time. My general perspective is that the system is broken. As I said in my first post, rent-seeking equity grabs, hyper-opaque IP terms, and glacial negotiations are far too common. This is a truth I have experienced firsthand within the Fly portfolio and, to a lesser extent, during my time at EF.
I’ll first admit that this blog post has a 100% clickbait title because my primary negotiation tactic is, don’t. I will outline the reasons as to why, but the TL;DR is that in most cases you’re trying to strike a deal with a committee mired in political red tape, fiefdom thinking, misaligned incentives, and a woeful lack of creativity. Whatever you think your IP might be worth, your time is worth more. With that said, I don’t mean to be glib or dismissive of what is a stressful situation for the many researchers who legitimately want to start a company and have grown up in an environment where this is normal. It would be insensitive of me to simply ignore these concerns, so with all of that preamble established, here is a how-to guide.
First, to level set. I am a VC that exclusively focuses on backing pre-seed startups that I believe (hope? pray?) will become generational companies, resulting in outsized financial returns for my investors. I explicitly do not deal with corporate IP licensing of any kind, which is a fundamentally different asset class. I also focus heavily on computationally driven innovation and pretty religiously avoid startups built around a single asset. While therapeutics and advanced materials can generate significant financial returns, they are largely out of scope for the limited size of our fund.
Negotiations 101 - Goals
Any professional course on deal making will always begin with knowing what you want. For purposes of this guide, I will assume that a founder’s desire raise venture funding and follow the typical startup path. There are a lot of terms that can get thrown into a spinout agreement and I won’t go into all the nuances of every point but at a macro level you want to get your company on as clean of a foundation as possible. You are, after all, competing for a limited pool of venture dollars. Ideally you own the IP outright with virtually no strings attached, but that is a unrealistic in nearly all circumstances so a more realistic best case is:
University owns <10% with no dilution proections
University owns common / ordinary shares
Exclusive and perpetual IP rights
No royaties or annual licensing fees
Previous legal costs from patents are clearly outlined
Not all terms are created equal. While it’s not great for a University to have information or pro-rata rights, it’s not that big of a deal. A Board Observer right is also something that gets argued a lot and while I think it’s a stupid viewpoint, I wouldn’t pass on a company for it. The things that really matter are equity stakes, dilution protections (“golden shares”), IP exclusivity and license fees / royalty rates in that order.
Note: If you’re unfamilair with this terminology I would point you to Venture Deals or Founder vs. Investor.
Negotiations 201 - Tactics
If you find yourself lucky enough to be working at a university that has transparent, reasonable terms (see S Tier), then you’re in a great spot, and congratulations. Unfortunately for Europe, these are outliers. It’s far more likely that you will have to deal with outdated thinking and off-market standards. In those situations, you need to establish leverage from the outset. You cannot reason your way into a solid spinout agreement. To them it is a a zero-sum game. That is a hot take, and I’m sure there are exceptions, but having spent a lot of time engaging with the TTO community, I can tell you very honestly that this is a massive time sink. Europe does bureaucracy better than anyone, and the cultural norm in these organizations is to stonewall because they can.
There are basically two schools of thought to gaining leverage, and both involve the threat/promise of walking away. Conventional wisdom suggests that you should run a fundraising process, secure a term sheet, and then use the VC as the bad cop to force a TTO’s hand, i.e., “Listen, we have to change these terms or my investor won’t fund the company.” This works, and I’ve done it, but I think it’s a bad strategy. This requires you to actually secure that investor to offer terms, and the very presence of this unknown spinout end state is serious deal friction. I can assure you that the number of VCs that are willing to put up with a months-long TTO negotiation (and it will absolutely take months) is very low. Speaking from personal experience, the bar for me to back a spin-out now is very, very high.
The alternative path is to not negotiate at all. Instead, you make it abundantly clear that without [INSERT DEMANDS] being agreed to, you will forgo the IP and start fresh in a new entity. That may sound crazy or even irresponsible, but I would bet that the majority of investors you asked would agree with me. A couple of things:
At the pre-seed stage, an investment decision is 99% about the founders. Patents don’t matter. I’m paying for what’s in your brain.
I would rather fund you today with a cold start and six months of rebuild time than spend that same time dealing with bureaucratic incompetence. For a multitude of reasons, this is usually a better setup.
A weakpoint - the academic co-founder
It’s not uncommon to have a PI or senior researcher serve as a part-time founder. That brings a host of other questions on equity split and time commitment, but that’s outside the scope of this post. What I do want to point out is that if you are founding a company alongside an individual who will continue within the university, this can create a pressure point to be exploited. I have seen this firsthand, and it can range from uncomfortable conversations to formal administrative reviews. There is too much nuance to provide any meaningful advice, but it’s something to be aware of. Go in with eyes wide open.
FCP: Frequently Cited Pushback
I’ve had this debate dozens of times with founders, researchers and TTO staff so allow me to attempt to get ahead of a few angry comments sure to follow:
We used to take much more. Founders should be happy with how generous we’re being. - Sins of the past don’t justify marginally better sins of the present. If you’re a TTO demanding B- or C-tier terms, you’re still off-market. You’re just working off a super low baseline.
The data shows that our terms don’t impact our startups’ ability to fundraise. - This is the flawed logic of survivorship bias. Countless startups were never funded because of toxic terms. I realize that I can’t prove a counterfactual, but ask any VC working in a moderately mature market and they’ll side with me.
Licensing fees are required to recoup our investment. - I get that some organizations have limited budgets, and I recognize that licensing may be an important revenue source. I don’t take issue with one or the other, but you’re double dipping. Either be an equity investor and optimize for the long-term best interests of the company, or mitigate your risk through a repayment structure. Either is fine, but not both. If any VC issued similar terms, they would be radioactive within a week.
We are government funded and we owe taxpayers a return. - I actually do think it’s important for universities and research organizations to have upside in the innovation they enable. I’m a capitalist after all; it’s in the job title. It would be crazy for a VC to suggest that ownership doesn’t matter, but I think this mindset misses the forest for the trees. Unlike any other organization, a university has the privileged position to create its own dealflow. You can literally index innovation at a scale even spray-and-pray firms never could. Surely the global maxima financial strategy is to have a small piece of a thousand blooming flowers rather than idiosyncratic rent-seeking.
Most of the founders that start spinouts need a lot of support on connecting with investors and figuring out a business model.
On the former, for all the reasons stated, a warm intro via a TTO is really not much signal at all. Furthermore, as venture has matured across Europe, more and more investors have taken strides to be more accessible. This isn’t the 80s anymore.
On the latter, I challenge the level of experience and relative quality of said advice. Go-to-market strategies are honed through direct market engagement, especially in deep tech, especially in 2026. Moreover, if this were true, we would see a gradient of terms across the relative strength of the founders, just as we do (within reason) across venture financings. In reality, a bespoke service argument is being given for a one-size-fits-all pricing scheme.