Visuel DicoValo EN

Start-up - Spin-off

article written by Isabelle Chéry

A start-up is a company that develops an original concept (innovative technologies and techniques) to radically differentiate itself from what already exists. It learns from the market in order to develop a value proposition and a real offer adapted to an initial customer target, and then duplicates its offer under viable economic conditions. A start-up has a great potential for growth, which requires external capital (fund-raising).

In practice, the term “start-up” is often used to designate any type of new enterprise. In reality, there are many definitions. For Steve Blank (1) “start-ups are temporary entities designed to seek a scalable and replicable model”. For Pedro Bados (2) “being a start-up depends more on the state of mind, oriented towards permanent innovation, than on the number of employees”. For Eric Ries, author of “The Lean Startup”, a start-up is “a human institution designed to create a new product or service under conditions of extreme uncertainty”.

A spin-off is a new organisation created by a “parent” organisation involving the departure of individuals from the parent organisation to the new organisation. In practice, a spin-off is created from an existing business activity in a private company that speculates that one of its technologies can be applied to another field. For strategic reasons, this company may not be interested in this new field. In this case, the employees can use the patents to create a so-called spin-off company. Often the original company is a shareholder and follows the development closely in order to buy it out if the business is important. If not, the investors will have taken most of the risk.

According to this business vision, in common parlance, spin-off is not used for a university-type organisation because there is no commercial activity. Start-ups are used for universities. However, from a theoretical point of view, a university spin-off refers to a new company created from within a university for the purpose of exploiting knowledge developed there through commercial activities involving teachers, researchers or students of the university. Therefore, the university spin-off may or may not be a start-up, with a logical propensity to be one.

(1) Steve Blank, born in 1953, is a serial entrepreneur and academic in Silicon Valley
(2) Pedro Bados, 35, co-founded the Nexthink company to commercialise a technology he had developed during his time at EPFL and which EPFL had patented.