Starting a company as a faculty member in India: what NISP 2019 allows

Many Indian professors have a result that industry could use, and a growing number want to build the company themselves rather than wait for a licensee. The rules are friendlier than most faculty assume. They are also more specific than most assume, and a startup that ignores them can run into trouble with the institution later.

This guide explains what the National Innovation and Startup Policy (NISP) 2019 says about faculty startups, what your own institution's policy will add, and the practical steps from lab result to registered company. It is written for teachers and researchers in universities, colleges and institutes.

Where the rules come from

NISP 2019 was issued by the then Ministry of Human Resource Development as a guiding framework for higher education institutions. It covers students, staff and faculty, and deals with incubation, IP ownership, equity, royalties and leave. Institutions are expected to adopt their own innovation and startup policy in line with it.

Two consequences follow. First, NISP gives you the national baseline. Second, the document that binds you is your institution's own policy, plus any terms in the funding agreements behind your research. Read both before you incorporate.

What faculty can and cannot do

NISP allows faculty to be an owner, founder, co-founder, director-promoter, adviser, mentor or consultant in a startup. It does not expect a faculty member who draws an institute salary to hold a managerial post or draw a salary from the startup at the same time. You can receive profits or dividends as a shareholder.

The time rule is simple: while you keep your post, you may spend up to 20% of office time on the startup, in an advisory or consulting role, provided your academic and administrative duties do not suffer.

NISP also asks for a clean separation between institute research and startup work. Do not use research staff or students on institute projects for startup tasks without a proper arrangement.

Leave to work on the startup

NISP lets faculty and staff take a semester or a year off to work on a startup, as sabbatical, unpaid, casual or earned leave, and return afterwards. If the startup is selected for an incubation or acceleration programme, longer leave can be allowed on the recommendation of an institute committee. Check which kinds of leave your institution offers and how far ahead you must apply.

Who owns the IP

Under NISP, where institute funds or facilities are used substantially, or the IP comes from curriculum or academic work, the IP is jointly owned by the inventors and the institute. Where the institute's facilities are not used, the inventor may own it. Your institution's IP policy will define what "substantial use" means. Our post on who owns a PhD student's invention covers the same question for students.

In practice, this means your startup usually needs a licence from your own institution to use the technology, even though you invented it. Start that conversation early with your TTO or IPR cell, and submit an invention disclosure before you present or publish. Our guide on writing an invention disclosure explains how.

Royalties and equity

NISP gives clear guidance on the commercial terms between the institution and an inventor's startup:

• Royalty: when inventors license the product to their own company, the royalty should be no more than 4% of the sale price, preferably 1 to 2%. Pure software products are an exception, with terms agreed between the parties.
• Licence paid in shares: if the licence is paid in equity instead, NISP suggests a 1 to 4% share.
• Incubation: an institution's incubator may take 2 to 9.5% equity in return for services such as space, mentoring, seed funds or legal and patent support. It can also charge a fee or offer services free.
• Faculty startups: where the faculty founder draws an institute salary, NISP suggests the institute's stake should not exceed 20% of the faculty member's shares, within the 9.5% ceiling.

These are guidelines, not fixed law. Your institution may have adopted different numbers, so ask for its current policy in writing.

If you also plan to file patents in the startup's own name, a company recognised by DPIIT under Startup India pays the lower startup fee at the Patent Office. See how a startup can file a patent at a fraction of the cost.

From lab result to company, step by step

1. Read your institution's startup and IP policies, and any sponsor agreements for the research.
2. Disclose the invention to the TTO or IPR cell before any publication or talk.
3. Agree the IP position: who owns it, and whether the institution will file.
4. Negotiate a licence from the institution to the startup: field, exclusivity, royalty or equity.
5. Declare your role and time, and apply for leave if you plan to work on it full time.
6. Incorporate and seek incubation, inside your institution or elsewhere.
7. Keep records separate: lab notebooks, accounts and staff for institute work and startup work.

Common mistakes

• Incorporating first and asking later. If the IP is jointly owned and unlicensed, investors will find the gap in due diligence.
• Publishing before disclosing. A paper or conference talk before filing can destroy patent rights in most countries.
• Taking a salary or a CEO title without leave, against the policy.
• Using grant-funded staff or equipment for startup work without a written arrangement.
• No conflict of interest declaration, especially when the institution later buys from or partners with your startup.

Preparing to pitch your technology

Before you talk to the TTO, an incubator or a co-founder, it helps to be clear about who could use the technology and how to describe it. TT Co-Pilot, Zernyx's AI assistant for technology transfer, is built for TTO teams and university faculty on Zernyx's proprietary technology licensing dataset, and is a useful place to test how you frame the problem, the application and the likely users.

FAQ

Can a government college or university professor start a company in India?

Generally yes, but the service rules of your institution and any state government rules also apply. NISP 2019 supports faculty startups in higher education institutions, and your institution's adopted policy sets the details. Check both before you incorporate.

How much time can a faculty member spend on a startup?

NISP 2019 allows up to 20% of office time, in an advisory or consulting role, as long as teaching and administrative duties are not affected. For more, take leave.

Does the university own part of my startup?

Not automatically. It may take equity for incubation services or in return for licensing its IP, and NISP suggests ranges for both. The exact terms come from your institution's policy and the licence you negotiate.

What royalty will my institution charge my startup?

NISP suggests no more than 4% of the sale price, preferably 1 to 2%, when inventors license to their own startup, with software terms agreed separately. Your institution's policy may differ.

Can I take leave to run my startup full time?

Yes. NISP allows a semester or a year of sabbatical, unpaid, casual or earned leave, and longer on committee recommendation if the startup is in an incubation or acceleration programme.