Loans & Finances Today

Spinouts, because of the nature of their assets, the make up of their shareholders and the academic (rather than business) background of their managers, face particular problems in becoming successful enterprises. Some would say that their track record in overcoming these problems has not been good.

The problems we have identified in this article centre on capital-raising and achieving a successful exit, and the reasons we have suggested for the problems are lack of management expertise, confusion over the value of IP, inability to attract funding from investor institutions and inability to maintain sound relations with their investors.

Some universities, notably Oxford, Cambridge and Imperial College, appear to have been more successful with their spinouts than others in both capital raising and successful exits (and, probably, by other measures also, such as income and employment generation), but even they appear to lag behind the more successful American universities.

Undeveloped land is for optimists. The idea is to buy the land, do absolutely nothing, and then cash out at a huge profit.

Overconfidence is an issue. The factors that will increase or decrease the value of your land are not predictable. Raw land has many uses or none.

The person who sold it to you knew more about the prospects than you do and he wanted out. The Realtor wanted you in as she collected a nice commission.

Laziness is another issue. Extensive research is required to prevent a huge loss. Land in a flood zone or on a fault line may be worthless. Welllocated land that cannot be subdivided into marketable lots has no value.

Environmental contamination has ruined millions of acres. Even if your land has none of these problems, you are powerless over the factors that will increase the value of your dirt. Cities grow in unpredictable directions and fall into recessions, depressions, even ghost towns. Vacation spots are hot and cold. Farm uses are not predictable. Meanwhile, taxes must be paid and assessments can come without warning. In addition, you have to keep the mortgage current, if you were able to find one.