Oxford versus Munich in tech based spinout creation

Lamin Ben-Hamdane compares and contrasts how two very different universities both create and support a vibrant spin-out community.

Oxford University and the TU Munich are two very successful universities in terms of spin-out creation. Spin-outs in this article are defined as new ventures that are based on university-owned IP and with academic founders.

There are some differences though in the spin-out environment and how these universities have organised the process of spin-out creation. The article below describes some of these differences which should be considered as neutral observations without any valuation. It is clear that each model has its own pros and cons.

Traditional Tech Transfer Office (TTO) versus Accelerator approach: Oxford University Innovation (OUI), a separate legal entity but owned 100% by Oxford University, acts as a traditional TTO. The whole process from invention disclosure, filing of patents down to traditional licensing as well as commercialisation via spin-outs is handled by the TTO. OUI provides full support for spin-out formation including contacts to a large investor network (e.g. the Oxford Sciences Innovation fund and a huge Business Angel network) and helps with finding external management and business planning support. Furthermore, OUI owns a proof of concept fund which finances prototype & business plan development to facilitate commercialisation.

In Munich by contrast, these IP commercialisation activities are split across three different entities. Patenting is handled by the patent office of the TU Munich. Tech marketing and licensing are done by BayPat, a state-owned non-profit organisation that offers its services not only to the TU Munich but also to many other Bavarian Universities. Finally, in case the academics wish to form a spin-out, the TUM start-up coaches, provided as a joint service from TU Munich and UnternehmerTUM GmbH (UTUM), act as main contact point. UTUM accelerates spin-outs by providing a big variety of services from “early stages to IPO” (support e.g. for business plan development, team matching, raising seed investment, education in entrepreneurship) and even a Maker Space, a high tech workshop for prototype building. The academics have to negotiate a license themselves directly with the Patent Office of TU Munich for the IP they intend to use for their venture.

The TU Munich does not get any equity in the spin-out and purely benefits from licensing revenues. Oxford University in contrast usually gets a significant equity stake of up to 50% (before seed investment) and benefits from the licensing of IP into the venture via OUI.  Because of this, OUI is very flexible regarding the terms of the license.

Money available pre- and post-incorporation:

In Germany, academics can apply to the EXIST grant provided by the government which fully funds the academics while they establish a business plan or build a prototype. Academics are relieved from their teaching and research duties at the university and can fully focus on their new venture. The EXIST grant also provides initial seed funds after incorporation for further product development in the spin-out. These kind of grants exist also in the UK (e.g. from the Royal Academy of Engineering) but on a much smaller scale.

In Oxford, all activities that academics are involved in pre-incorporation usually have to be done in addition to their normal university job. They get extensive support from OUI during the pre-incorporation phase (as mentioned above).

When it comes to seed investments, the UK is markedly different in that there is plenty of private risk capital available. Notable investors in the UK and especially Oxford are companies like IP Group, Imperial Innovations, Oxford Sciences Innovation or Parkwalk Advisors. These funds exclusively invest in University spin-outs at seed stage.  In Oxford there is also a wide network of highly qualified Business Angels. They benefit from very generous tax advantages for early stage investments, the so called SEIS/EIS scheme.

In Germany, the most important source of seed investment is driven by the government: In addition to the EXIST grant, the High-Tech-Gruenderfonds is a public-private partnership fund that invests in early stage spin-outs. Smaller private funds exist as well, for example UnternehmerTUM Venture Capital Partners GmbH.

One reason for these different sources of money available (public vs. private) might be different attitudes towards risk, with investors in the UK in general being less risk averse than in Germany. Another reason could be that in the UK there is the Alternative Investment Market (AIM), an unregulated stock exchange where young companies can be listed with very low regulatory hurdles. Thus a listing on AIM represents an excellent exit opportunity for private UK funds.

Spin-Out Management resources: The above mentioned risk taking approach in the UK leads to the fact that OUI has a large pool of CEOs with considerable industry & management experience available. In the Munich environment CEO candidates are still mostly younger (e.g. MBA students) and thus with less experience.

In summary, I see some notable differences in the spin-out environments in Oxford and Munich that have reasons rooted in mentality, the economic environment and tech transfer history. Both Universities have recognised the importance of creating impact in society with science and are two European hotspots in terms of technology based spin-out creation.

I would like express my thanks to Harald Jenull from UnternehmerTUM GmbH who gave unique insights into the spin-out environment at the TU Munich.