Negotiating IP transfer out of universities and public research institutes is often hard. Founders are doing it for the first time and don't know how standard terms look like. During our online panel "Clueless about: Spinning IP out of university?" Georg Püschel, Co-founder of Wandelbots, Patrik Aspermair, Founder of NOSI and Barbara Diehl, Chief Partnership Officer at Germany's Federal Agency for Disruptive Innovation, SPRIND, shared their perspectives and reflected back on their own approaches.
Effective preparation is the cornerstone of successful IP transfer negotiations. First and foremost, you can start with a white paper from SPRIND as your strategic roadmap. Then you make sure you have a vision for your company and a clear plan for your tech so that you can already define what kind of IP you actually need to transfer from your Institute or University. Pay attention to what will be absolutely essential for your startup, and what is just nice to have, and opt-in only for the former.
Try to understand your institution's Tech Transfer Office (TTO) processes beforehand. Talk about it with the other founders who have spun out their tech from your institution. That way you can start from a position of mutual understanding, positioning you for informed and productive negotiations. Request that the TTO come to the first meeting with suggestions, framework, and reasons behind each step. Find an experienced advisor or investor who can support you at the negotiation table. Learn from them and other founders what a good deal looks like to avoid problems down the road.
Plan to go into these negotiations early enough, approximately 1.5 years in advance of your planned spin-off. This proactive approach affords enough time for thorough negotiations and minimizes the pressure associated with tight timelines.
Learn more about our Clueless No More community for (aspiring) scientist founders or follow First Momentum on LinkedIn to get notified when our next panel happens.
Read below the full AI-generated transcript of the recording. 👇
Ana Koller
Hi, good evening everyone. I'll start with the event and while we wait for people to show up, there will be enough time before Barbara's talk. So, welcome to Clueless about spinning the IP out of University. My name is Anna Koller, the Head of Research at First Momentum Ventures and your host for this evening. Before I jump into introducing the rest of the crew with me this evening, I would like to get to know you better. So this event is part of the clueless. No more network for aspiring scientist founders. So let's see who we have around here. You can scan the QR code or go to Mentee.com and enter the code that you see at the top of the screen and tell us if your research or spinoff is focused on software or life sciences or engineering and physics.
01:45
Ana Koller
So throughout the duration of the event, you can always jump back to Mentee and leave the questions or upvote those if you see already posted there. So we'll tackle them during the second half of the event. So starting from the most upvoted ones. So now back on to the intros. So, as I mentioned, my name is Anna. Good to meet you all. So I'm here on behalf of the first Momentum Ventures. So we are an early VC firm that invests predominantly in software as a service, industrial tech and deep tech topics. And due to our affinity to early stage deep tech startups, we have been particularly curious about university and research spinoffs. So this is why we have created and are fostering the network for scientist founders and aspiring scientist founders called Coolest No More. So if you're not familiar by some miracle about the network and you are the target audience, I have left some links in the comments where you can read about it, get informed and signed up.
03:01
Ana Koller
So basically this Coolest About panel is part of what we offer within the network this evening. The panel is co hosted with Sprint, a German federal agency for disruptive innovation. There are, among other many amazing things that they do, spearheading initiatives for facilitating IP transfer to research based spin offs on their behalf. With us this evening is Barbara, their chief partnership officer, who is going to give you in a minute a great overview on this topic and how Sprint can help you. So fear not, if you are clueless about all things IP related, we got you covered this evening. And of course, we have also assembled an amazing panel and I can't wait to tackle their brains a bit about the topic. So these are the two founders so successful companies in tech spaces in Germany and Austria. So we are talking today with Gerg from Wendelbots.
04:02
Ana Koller
I hope that Georg is here. So, Wendelbots is a spin off from Technical University of Dresden that specializes in developing technology to make it easier to humans to teach robots how to perform tasks without code. So they spun out of university in 2017 and raised over 120,000,000 in funding since then. Joining us as well is Patrick from Nosy Tech. A spinoff from am I pronouncing it right, Patrick? Yeah, a spinoff from Oceanicity.
04:39
Ana Koller
That gives the sense of smell to every electronic device. So the company span out four months ago, and so this is all very fresh to Patrick. So we are all excited and very eager to see what they built and how they went about it. So welcome everyone. And as I promised, the intros will be short. So if you guys want to learn more about our panelists, feel free to go to visit their LinkedIn profiles, get connected, ask them questions directly. With that, I'm going to finish up here and give the floor off to Barbara.
05:13
Barbara Diehl
Yeah. Thank you very much, Anna. And hello, everyone. Hello to the crowd out there. And pleasure to be joining you. And thank you for asking us to co host. Yes, maybe I should give you a quick overview about how and why Sprint has sort of waded into the arena of university based or let's say research institution based IP transfer. So the story is oh, and I should mention that I'm also joined here by three of my great colleagues who are kind of you boats here. But if I can't answer the question, probably one of them can feel also free to jump in. Yeah. So how did we get involved in this?
05:59
Barbara Diehl
So, yes, we are the Federal Agency for Disruptive Innovation, and of course, for most of our projects, I would say for 99.9 of 9% of our projects, we're very deeply wedded into the deep tech space. Right. And where does most of the deep tech get developed? Of course, it's in research institutions and universities. So if we want to get that great research and get it onto the route to translation, in order for it to become really breakthrough products and services in the future, we have to get it out. And this is essentially what the situation was at the beginning of last year, that we had a handful of negotiations ongoing with a few universities and research institutions in Germany, and they turned out to be somewhat complex and difficult.
07:04
Barbara Diehl
And so we said, oh, okay, so there's obviously an issue here and maybe we should address that. And we did by assembling a working group. And actually, I'm also glad that we had the support of first momentum here because Sebastian Burma, one of the founding partners, was member of that working group. We assembled a working group in March and then published a position paper in April, which was, I would say, written in a deliberately provocative way in order to actually create a little bit of momentum around that. We were actually surprised by how much momentum, what kind of storm we reaped when this position paper was published. It was also helped a lot with it being publicized as well by then current State Secretary in the Ministry for Research and Education. So he was a big supporter of this.
08:10
Barbara Diehl
So it went all on social media and yes, so we sowed some wind and reaped some storm, and the reactions were either zero or one. There wasn't 0.1, sorry, 0.5 in the middle. It was either saying, yes, of course, or it was basically bedeviling the whole suggestions that we made in that. And were a bit surprised and said like, okay, now we actually have to do something about this. And what we did was then we basically assembled, we said, okay, let's do a pilot. Let's assemble a group of, let's say, 15 to 20 universities and research institutions who really want to rethink IP transfer in order to make it faster in order to make it more standardized.
09:02
Barbara Diehl
In order to make it more equitable to all the parties involved, in order to be focused on the actual growth of the companies that are spun out from university and also to take, of course, the viewpoints of investors. In who may invest in those companies and who are a crucial link in, obviously, the growth trajectory of many of these companies going forward. So we did that, and we have this working group now working on what we called this initiative, the Swiss Pocket Knife for Intellectual Property Rights Management and transfer. We're not there yet, so please don't expect some sort of silver bullet or kind of magic thing jumping out, but we're working on that. And it is really our firm belief that things can be standardized, things can be made easier, and things can be made faster. And we're of course, assembling sort of coalitions on all levels, be it political, be it within the university space, be it within the investment space and of course, being in the founding team space because they are, of course the people who are really in need of the most support in these very crucial negotiations that will determine how successful they're going to be with their spin off in the future.
10:39
Barbara Diehl
So, yeah, I would like to leave it at that to say watch the space. So we are working on that, and we would love to hear from all of you who have maybe great suggestions about how things can be made easier, how things can be made faster. So please feel free to contact me not only, of course, if you are in a difficult negotiation situation at the moment with your university or research institution. Of course we will try to help as best as we can, but also if you have really good suggestions about how things can be made easier and faster and more standardized and more oriented towards the growth of the companies that come out of deep tech. Thank you very much, and I'll leave it at that. All right. Thank you.
11:31
Ana Koller
Barbara, are there any pressing urgent questions to Barbara on this topic. We can allow two now and then you can park them on mentee for after the discussion with the panelists. We can do this with show of hands. OK, I'm not seeing any. So thank you Barbara, again for that rundown. That was incredibly informative and I hope very kind of motivating for people to hear that there is somebody watching their back. So with that, we can jump onto the chat with our panelists. I'll start with Patrick, since this was all very fresh for you. So let's kick off with your experience and started negotiating with the Institute. What type of IP you were after and what was then your strategy for effectively negotiating the IP transfer agreement.
12:35
Patrik Aspermair
Yeah, okay. Hello to everyone in this group. It's very nice to be able to talk to you and to tell you a bit about my experience. So, first of all, was really the thing like what do we actually want from the host facility that hosted us for so many years? And we developed a few things together and finally you get to the point where you have some IP, some intellectual property, and in our case there were like a few patents and we thought, okay, can we commercialize them? And this was then part of the negotiation. We wanted to get the IP out, which was patents and the know how and the freedom to use the already generated know how. And so that they would not say, like, after a month or a year or ten years. Hey, wait a minute. This data is actually something that we produced and not you.
13:31
Patrik Aspermair
But it was us. But during the period of the research, let's say. So we negotiated also the know how into the negotiation process and now finally have a little paper that says that we get the intellectual property, meaning patents also know how. And we also wanted to have lab facility, some equipment and so on. But this was in the end then something that we said it is a nice to have thing and when it comes to the price, let's say, is it really worth it? Do you really need it? Do you maybe find some cheaper labs, some cheaper infrastructure somewhere else? Is it maybe cheaper just to rent a flat somewhere where you can put all people together rather than staying at the host institution? And so we decided in the end to not have the facility in the negotiation process, but just the intellectual properties.
14:35
Ana Koller
And how did you go about the strategy? Did you have any help in the process? And how long did this all take?
14:46
Patrik Aspermair
You mentioned it in the beginning. We come from the Austrian Institute of Technology, which is like research institution. It's not university, it's not industries, it's basically in between. And this institute has since a few years the initiative to push spin offs. So they have a scout inside the company who is looking for let's say, novel ideas that would have the potential to be commercialized. And since we already had the idea, we contacted this person and he was actually already aware of us. So we started talking and this person jumps in and basically he takes over the role of someone who is between the spinoff and the host institution. So he's mostly in the negotiation process on our side, but he understands also the host institution, the sea levels. You need to talk to the CEO, the CFO, maybe the law department and so on to set up the contract.
15:59
Patrik Aspermair
And it actually facilitates it a lot to speak up with the people because you're maybe sometimes a bit afraid to take the phone and call the CEO of your host institution or you do not want to bother them in a way. But you this guy really helped us because he said, yeah, let's talk with him, I arrange a meeting, we talk tomorrow. And so it actually makes everything faster and easier.
16:28
Ana Koller
All right, thank you. Thank you for sharing that garag. As you spun out software, what was that kind of process for you? What was your strategy back in 2017?
16:40
Georg Püschel
Yeah, thank you for having me. I was a bit too late for the event. Sorry for that. I had an event before that. In our case, it was not only software, it was also some hardware stuff that we developed during our PhDs and that was the thing that we most cared about because of course, the VC asks for business guarantees to really get those things out of our faculty and our chairs. And the software thing was actually quite easy because from the beginning on we started in a business besides university. So as a, so to say, side story of the whole thing, because were absolutely aware of that. The university likes to participate in whatever startup or entrepreneurship thing we are doing afterwards with the intellectual property that we have. But we avoided, so to say, in the process even two years before spinning out of the university to even use resources in our spare time.
17:38
Georg Püschel
But of course were very friendly because it's indeed our alma mater and we needed to talk to the transfer office at the university at this time. It was completely understuffed and a mess. So I hope at your university that works a bit better. And I also believe that it's nowadays also better. In Traysten, where I'm living.
17:59
Georg Püschel
The best.
18:00
Georg Püschel
Consultancy that we got was from the exists, from the local exists institution that we have. And they told us, of course, go to the transfer office, but they were very much too slow to even answer our questions. So we just took some risk also, of course, and told our VC that we are going to have all the IP in our pockets and talk to the professors if they want to have a share of the company. And that was our way out basically. So we took a bit a pirate way. So for all public institutions that sounds of course a bit like not the best way and not the lowest risk taking but for us it worked out and after some months we overworked what we had as an intellectual property so much that it was unrecognizable from the thing that we had when really leaving the university.
19:05
Georg Püschel
So in that way there was not a real problem and everything was fine. So that was our way out basically.
19:14
Barbara Diehl
Okay, yeah.
19:15
Ana Koller
Thank you. Thank you for sharing your story. Barbara is someone who has helped spinoffs get through this process and witnessed or at least heard a bunch of these cases that went bad or didn't or went well. What are some common misconceptions or misunderstandings that researchers may have when negotiating IP transfer and how they can best prepare themselves for these negotiations?
19:44
Barbara Diehl
Well, first of all, I think maybe sometimes we get a bit of a skewed image because, of course, we only hear when things go really spectacularly wrong and belly up so we don't hear about all the deals that go very smoothly because that's usually when people turn for help and when they are trying to sort of course, engage with the wider startup community. Of course I would say the common misconception is that most well let's say deep tech teams is the fact that they actually don't own the IP. So that the IP is actually owned by the research institutions and by the university. In most cases they actually have developed it. So I think that kind of realization that you have to pay for something that actually you have developed and that is owned now by the institution that employs you, I think it's somewhat of a well something of a rude awakening.
20:55
Barbara Diehl
And so I don't know Patrick, correct me if I'm wrong, but that's certainly where I would say a lot of feathers get flustered at the beginning but then of know it's like any other negotiation. I mean once you have come to realize that you say okay, there's a party at the other end so I better clue myself up and actually try to understand all the ins and outs of the various scenarios that are on the table and essentially there aren't very many mean. It's just that you have to kind of as Patrick mentioned, you have to kind of also ask yourself what are my plans for this company? How far do I want to take it? Do I think that this is something where I for example, need large amounts of external investment in order to get to market? Or is it something where a product will be developed that in let's say three to five years actually has a reasonable chance of actually already being in the market and generating sales and generating revenue?
22:10
Barbara Diehl
I mean I think these are all questions that you have to answer for yourself also as a founding team and saying not only as yourself, as a founder, but probably also with all your co founders and all the people who are part of that journey. I mean, to really look each other in the eye and say like, okay, what is it that we actually want to get out of this? Right? And I think this is a process, this is not a decision that is to be taken lightly. And I think it's probably causing a lot of sleepless nights in the founding scenario, but I would say take good time to actually think this through. What is it that you want to get out of this and how far do you want to take this? Is it something where you see you have the vision, ambition and motivation for this to become a complete game changer that is going to change the world?
23:11
Barbara Diehl
Or is it maybe something where you are also happy for it to maybe grow organically and be on a more stable and organic growth path? I mean, all of this is something that you have to figure out with yourself and obviously with your co founding, with your co founders on the team. And I think then you can ask the right questions. I mean, of course there's a lot of terminology that you would have to probably dig through, but there are also a lot of resources online. There are lots of resources around explaining term sheets and explaining all the legalities pertaining to them. So you have to take some time to kind of learn a new language, I would say, but it can be learned, that's the good thing.
24:01
Ana Koller
Thank you. This is an awesome list of tips to pay attention to and I think both Patrick and Gerg had some stories that they shared with me that reflect some of your topics. So for instance, Patrick, you mentioned that one of the main AHA moments was realigning and so feel free to share that story with the yeah, I think.
24:33
Patrik Aspermair
It was really the process of finding what we want, who we are, and where we want to be, exactly as Barbara just said. And this was really the moment where we thought, okay, now we have some invention. We came up with a new idea in our labs, let's bring it now to the market. And it's all easy, all cool, but in the end, you have a technology in your hand and this is just a fraction of what you need to have a product. And this was a realization process that took me more than a year that you have a technology. But that's not all. There's so much more behind it. Probably some of you already realized there is really a lot of things that need to be taken into account to get out from the laboratory, from the research. You are doing whatever it is from the computer and really find your way and really find out how can you pack this into a product that someone is willing to pay for?
25:34
Patrik Aspermair
And then when you know this, then you go back and then you think, okay, now I know which IP I need. Now I know what know how I need, and now I know which devices, tools, whatever I need. And then you can create it. But you really should have sort of the pathway in front of you. You should see it rather clear. It took us really long to figure out, but this is a negotiation process within your team, because you think you have a technology. Maybe if you are really lucky, you're just one person and you know everything. But in my opinion, it's better to have some team members. Just one body is good, two is better, and you can talk with them. And if you have two people maybe around you, then you think, yeah, we know exactly what our technology is, but you probably never talked about it, what your product will look like, what your product can do.
26:32
Patrik Aspermair
And then maybe you have different phases. First the product is capable of doing this, and then maybe in five years this, and then in ten years we can do the best thing in the world. But you must not think of the ten year business and the ten year product, because in ten years you probably ran out of money immediately. So you should have a good plan how to reach this. And that was for me an AHA moment even way before the negotiation process.
27:03
Ana Koller
For the well, better late than ever. No, just joking. But it's a great point to share. And Garrett, from your perspective, if I remember correctly, from our chat, you said that it's not necessary to bring out the IP for everything because in two years you're going to overrun it anyways. Could you elaborate on that for the audience, please?
27:30
Georg Püschel
Yeah, of course. It's exactly like Frederick said, right? So what I said also before, that the solution that we had at the university became totally in the recognizable after some months. And indeed, technology is, in my opinion, never the problem, at least for a software startup, right? Because you are iterating over it. And in our company history, which is now almost six years, we did 2180 degree pivot, so to say. And the thing that we had is not anymore that important for now. So that means whatever you have as an IP in your software might turn out to be not that worth in later phases. So the most problems are always in the business model and in productizing, so to say. What you have as a technology. Even though when you have, for instance, nowadays, talking about an artificial intelligence model and you say super high quality recognized objects for our domain, robotic objects or something from workpieces or so, but that's not the problem, to recognize the things.
28:39
Georg Püschel
After six months, the technology already turned over again, and you can use something very much cheaper to do that. And all that you found in the university or which you research and develop is maybe not anymore the thing that you need now for having a good product that is efficient and can make money for you. And that's what we experience. And of course from that reasoning just take really the things that are absolutely unavoidable to get from the university, other things are know how that no one.
29:14
Georg Püschel
Can take from you.
29:16
Ana Koller
Yeah. And now we are back exactly at the must have versus nice to have and the benefits of each. So I'm not sure if all of you are aware, but we had a third panelist with us and she negotiated a very tough IP transfer process with Zoom here in Munich. So she got engaged elsewhere for this kind of from my chat with her before, I managed to pin down the seven key points to kind of prep yourselves for the IP transfer process. So she said number one, take the Sprint white paper and bring it with you to the first meeting. Number two, talk with other founders about your tech transfer office and learn about the process there. Step three already upfront ask the Tto to come to the first meeting with suggestions and framework and reasons behind every of these steps. Four, sniff the situation out alone, but bring in someone experienced, like an advisor or an investor in a negotiation table five, learn what a good deal looks like.
30:34
Ana Koller
This can have a huge impact down the road. Six, do it early. Plan at least one and a half years so that you don't have to do this under time pressure. So the TTOs are afraid of selling the IP for cheap and making a bad deal. So they will wear you off to make sure that they are thorough. And seven, the more stuff the Tto, the more complex the process will. So this is kind of like a rule of thumb if you need to eyeball this before you go in. So Patrick, is there anything you could add to this list?
31:11
Patrik Aspermair
Very wholesome list, I would say maybe really be prepared about some numbers. Like sometimes you sit in front of an audience who come from not techies, someone who is not deep tech or whatever, and they just know numbers and they ask you but how much will you earn in five years? And then say like, well, I don't know, a lot, maybe not a lot, I don't know yet. So be prepared for questions that come from a completely different setting as you are used to. So you're not, I don't know in a conference you're not pitching in front of an audience with other scientists. You talk to lawyers, you talk to CFOs and they ask different questions and so maybe be prepared for their mindset.
32:00
Ana Koller
That's an excellent one. Barbara, anything to chime in here?
32:05
Barbara Diehl
Well, I think from the seven bullet points that you just mentioned, you can probably glimpse that the negotiations were very tough. So it sounds as if you have to arm yourself up to your teeth before you even have the first talk. But there are also quite a good number of TTOs there who are reasonable to say that. And as Patrick said of know, they are at the moment under the political pressure actually that universities and research institutions should actually do more in order to encourage spin off activity from the research base. So there is a lot of kind of, let's say fermentation and momentum in the community at the moment. Nonetheless, it is of course something where you have to talk numbers. If I would have to add something to the list, it is probably the first thing they're going to ask you is send me your business plan.
33:14
Barbara Diehl
Right? And in those business plans and everybody who has ever been in the entrepreneurial space or talked to founders and knows something about entrepreneurship knows that everything you put in a business plan that is beyond eight months from the point you're writing this is creative writing, right? So you have absolutely no clue about what you put in there is actually going to become reality or not. And that is the same for the numbers you put in there. So if they ask you to say like, okay, what are your projected revenues in three to five years? I mean everybody knows that everything beyond year one is just complete and utter speculation. But in the worst case, these kind of numbers are then used in order to value your IP, right? Or kind of put a price tag on the IP that you want to get out.
34:15
Barbara Diehl
And I would be very wary of actually using those numbers and basing those numbers in the valuation of the IP. Instead, I would say try to do your own valuation. Based on what? Well, based on first looking at the market that you're going to enter and look at, let's say similar companies in that space try to get their numbers in terms of past revenue and basically try to kind of get an estimated guess about how high is the share of that IP in the actual product for these companies and also for your own company when you go into product development. So try to get as much information about companies operating in the same space, trying to base that on past numbers and not on future projections. That's sort of the advice that I would give you because everything that you predict about the future is probably not going to hold true.
35:30
Barbara Diehl
And everybody knows that taking a product to market takes twice as long and costs three times the money. So everything that you put in there beyond year one, I would say not really a good basis for value of putting a price tag and valuing your. IP that you want to get out.
35:52
Ana Koller
That's an awesome piece of an advice.
35:54
Barbara Diehl
Thank you.
35:54
Ana Koller
Thank you so much. I'd like to do something a little bit different now. So given that in the clueless, no more network, we have a few people going through the IP negotiations right now. Please show off emoji hands if you're going through the like, I was expecting more. OK, there you go. So I'd like to ask invite one of them that already shared his story with us internally to chime in as well. Lucas Green Delta, if you're there, and if you don't mind being under the limelight, sorry for the ad hoc invite, but please do you mind chiming in and share what you are witnessing in DLR right now?
36:49
Lukas Werling
Yeah, hi. No problem. Anna, I can say something. That's why I'm here at least to learn something new. Yeah. What we are suffering a little bit. I also wrote it, like in our slack is yeah, it's very intransparent for us. I work for DLR since 13 years, so I know a lot of the processes which are ongoing and how all the machinery like a large research institution works. And I was really astonished about not the transparency because we work for a long time there. So we just did at the initial stages intend that we would have a fair treatment, I would say. And it was very saying, not transparent. They want to have all the input, like you said, our business plan, this, the market size and so on and so on. And then we had a term sheet where we should put all our information in.
37:43
Lukas Werling
And we asked them many times like, okay, what's your process? How does it work? How is this ongoing? And there was never and that's what also were angry about. They said on this time, yeah, it works like this and this does not work. And then the next meeting they said something different and it was really intransparent. And I mean, we started the process like in December last year and we just get the first draft, which was like where a lot of conditions were in also, other people might know here also, we are not the only ones from DLR here, which is completely not payable. Like, we do the spinoff and we have to sign the contract. We got like insolvent just at the moment we're signing the contract and we don't think this is they want to have those spin offs, but on the other hand, they make like conditions initially they are not acceptable, they're not feasible anymore.
38:43
Lukas Werling
So this was really what we learned. What we did then a lot is like, okay, how to negotiate. I mean, we had negotiations in our work at DLR for third party projects also. So it was nothing completely new. But we initially thought they would be interested in more like a win and we could achieve a win. But then this negotiation process was not familiar with us as we thought, okay, we are in the last deal, we are not spinned out, we are not a foreign company or something like this. And this was what we struggled a lot. Of course, now we realized a lot of stuff. We realized what to do and what not to do and have a fair not to be getting angry, so to say. And also it's very interesting also to shift, to have the other position. And what's on the other hand, for us was very interesting.
39:35
Lukas Werling
We talked a lot to people around to other spin offs and also saying also our Institute, and they completely agreed with our point of view. They said, oh, we want to have the spin offs, we want to have the technology getting to the market. I mean, our university, our head of Institute says, if you want to earn money with this afterwards, it's fine. We want to have some royalties, but we want to have you started. We want to have the best conditions for you now to start, because then afterwards we get some contracts and some payback. So talking to your head of institute, I don't know how it's in other research institutions is very useful to have the agreement with your head of department, your head of institute and so on. So they really support us. And then they said, yeah, we want to make everything possible.
40:28
Lukas Werling
And this was then a big step forward. Yeah. Also, like asking other founders, there is a podcast with Max Gulder from Constella also Space, one of you, I think I also wrote it in The Slack. We get in contact with him and he was very helpful. He always is asking how is your license negotiation going? And he gave us such a list of tips and tricks, and he said, if you want to have some, we can discuss it, because he suffered the same from fraunhofer. And so he said, okay, if you have any trouble, I can help you. This was also very helpful. So talking to other founders, that's also what we heard here. So that's a very short. Yeah, we're just in it. We got the first contract, we made a proposal. Now, from our point of view, we talked also to all, to even our board of directors, because on the other hand, DLR wants to foster this spin off topic.
41:22
Lukas Werling
And we said, I mean, we don't care so much about what royalties we pay afterwards, but we want to start now, and please let us start. So this was our main point.
41:33
Ana Koller
Thank you, Lucas, and I'm really sorry to put you like no, it's no problem.
41:38
Lukas Werling
I mean, that's why I'm here.
41:39
Patrik Aspermair
I like, can I refer to this? I find it a bit troubling or bothering even, that I don't know. They do not facilitate it to you that they really want to take everything from you, from the very beginning on because in our negotiation it was more like even from the CFO level, it was like if you win, we win. That's what we need, that's what everybody's looking for. So if there is like we get the IP, yes, but we do not have to pay immediately. We pay like after there's a certain cap of revenue. And this is very important because you do not want to give or split every jury. You get into half and give one half of it to your hosting institution. You need to ramp up in the very first phase. So when you reach a certain level of your product and of your maturity, then you should be basically able to and willing to pay back in a way, but not in the very beginning.
42:47
Patrik Aspermair
This is draining a startup completely dry and I think the most important thing that a startup has is money, nothing else. Like in the very beginning you need.
42:59
Lukas Werling
Yeah, definitely. Patrick the problem is if we signed a contract mean we would be insolvent initially. Don't sign it then don't sign. Yeah, of course we can sign it. But I think this is not so fair at all because we can negotiate, but we negotiate from such a level where we can't even start.
43:22
Patrik Aspermair
But for us it was maybe helpful to tell them, well, you may have the IP, but I don't know if it's in your case the same. But for our IP there was more behind it. There were a lot of, let's say, secrets, trade secrets, like how do you actually make it? And in the negotiation process this was also sort of a leverage where we could tell them, look, you have the IP, you have to pay to keep the IP, the annual fees and so on. Then it was also not for free to even register the patent. We had several rounds with some lawyers and so on. So we told them, well, if you want to have something back from this, then it's even beneficial for you to help us to use the patent. Otherwise it is just another patent in your drawers. And I think it's the same in your host institution.
44:17
Lukas Werling
Yeah, that's exactly I mean the institution itself sees quite clearly that if we don't get successful, they will earn nothing. So our institute is very helpful and our head of institute comes from industry who says, okay, yeah, then start and get successful. I wish you all the best and we'll make everything possible. And of course, also the thing what I forgot, Mark School from Consular, he mentioned also they get like contracts, more than several hundred thousand euros for their institution now at the current state. But nobody from the technology transfer office and the licensing offering realized that at the beginning. And they say always, oh, well, we will give you a lot of cash back because we want to use your laboratories, we want to use your facilities and so on and nobody ever realized it or not realized, but accepted that's not relevant for the license agreement.
45:14
Lukas Werling
But I mean, if we can't start, we can't contract the institute bad, we can't get additional projects with them. So that's always what should be taken into account from the research institutions.
45:31
Patrik Aspermair
But also very important is probably to have a good personal feeling with the ones you have a negotiation with. If there is like a blocking berea and everybody's sitting like this and they basically tell you okay, now tell me what you have, it's probably boring to me then it's maybe the wrong moment and the wrong setting. So having a good feeling and having sort of a nice atmosphere is very important. And here I can say my host institution. It was really like always negotiating on the same level. They never looked down on us in sort of, I don't know, parents kid situation. It was really on the same level and we really felt like appreciated for what we have done so far, what we have generated. And yeah, we could finally make some win situation. I mean, I can tell you more about it in five or ten years, but so far it feels like it.
46:29
Ana Koller
I want to bring Aiko to the conversation as well since he is also doing the negotiations at DLR as of this moment.
46:39
Barbara Diehl
Right?
46:39
Aiko Bernehed
Yeah, I'm the other guy from DLR. Thanks for calling me up.
46:43
Lukas Werling
Hi Lucas.
46:47
Aiko Bernehed
Which is funny because we actually have the same Tto officer so I know exactly the contract that he's got. I actually didn't really want to chime in that much on the conversation here. I was just wondering Baba, how was your experience working with, let's say reticent Tto officers and so on, where basically many of the contracts are for lack of better experience, just written extremely poorly.
47:21
Barbara Diehl
Yeah, well, the experience is that we've learned that through in the first kind of not even one year of the pilot that we are running is the degree of lack of transparency and the degree of kind of lack of just, let's say what Patrick described as an eye level atmosphere and sort of partnership approach to this kind of mindset about saying that when you're successful, we are successful. That is, I would say something that needs a lot of work, I think in the current atmosphere and in the current field, how to change that? I think it's basically one institution at a time. And I think what you have to work on is effectively making it very hard for them to argue against it, to basically saying like okay, look, they are doing it like that.
48:33
Barbara Diehl
All the founders coming out of this institutions are extremely happy and they said that the negotiations are going really well. On the flip side, all the founders that are coming from your institutions, we are only hearing very mixed things about so what is your argument of keeping it the way that you're doing it? Right? There is no magic bullet. I would say you have to really turn it one institution at a time. And I think you have to make it public. You really have to make it public. And I would say if negotiations are really stuck and are really hitting a dead end, you also always have to ask yourself, are you prepared to walk? Are you basically prepared to say, like, look, if you don't give me, let's say, the transparency that I need in order to understand why are you coming to these terms and conditions that you're outlining in your term sheet, I'm not going to negotiate any further and this is going to go nowhere and we both lose.
49:46
Barbara Diehl
Do you want this? So of course, that's sort of a tough piece of advice, but I would say if it's really that stuck at the end and you really don't see any kind of way through, I would say, are you prepared to walk? And are you prepared? Yeah.
50:06
Aiko Bernehed
I actually pulled that card with one of the transfer officers that's assisting us at the office there. And I actually told him it's like, do you really want this startup to fail? And I sort of got him convinced on the Sprint white paper there. So we'll see where that LEDs. Unfortunately, he's not responsible for our contract. So baby steps.
50:31
Barbara Diehl
I'm with you. It's baby steps. It's really turning one institution at a time. And I would know actually, I know the situation in Austria a little bit because with the help of the IP project, and also with the help of Mariana Kulika, who is also here in the room, we have done a lot of international research. And I think what we've seen from Austria is actually quite encouraging. I mean, how they are reworking their processes there in order to make it more equitable, in order to create more of an atmosphere of partnership and eye level conversation I think is quite encouraging, at least from some of the institutions that we see there. And I do think we just have to hold them up and just saying, like, look at how they are rejigging their understanding about how these negotiations go and really give them the publicity, put them forward and saying there is a different way of doing this.
51:32
Aiko Bernehed
Okay, I have a follow up question. So there is a couple of terms in the contract that we're trying to negotiate out now, and we have a couple of discussions coming up. Should we be successful in doing that and then get like an okayish license agreement which we could sign and would also be equitable? Would it still make sense to basically sign that, start the company and still try to push for instance, an IP Four shares model or something like that as a renegotiation? Or is that a poor tactic also to the panel?
52:09
Barbara Diehl
I would look to the investors right now because at the moment you sign, obviously a poor agreement, the risk is always that in case you need to raise further finance, they will look at the agreement and basically say, this is uninvestable for me. So I don't know from the investment side here, let me pull in Andreas.
52:35
Ana Koller
And.
52:38
Georg Püschel
All right, I just need to give myself the pin.
52:45
Barbara Diehl
Mean.
52:45
Georg Püschel
I think it really depends on the contract that you kind of have as a baseline. And I think this is probably kind of becoming easier as you progress with the company and kind of can show the tech transfer office there is actual value in the company. Because I think for them, in the beginning, I feel like the situation oftentimes is, oh, yeah. We can't value the success of the company, so we kind of have to get value out as soon as possible and kind of as you can show them, hey, we've been able to kind of get investors along. They've been valuing our company at X. And this is the route or kind of the trajectory that we're working with. Then I think this kind of becomes a bargaining chip again and you can negotiate around this, but I think from my limited experience, I probably would only touch a decent dish agreement.
53:47
Georg Püschel
If you are fine with kind of changing the status quo. I think if you can live with the status quo, then oftentimes it's probably best to not change it because I think then the Tto or whoever you're negotiating with also doesn't have a good feeling for what share would be appropriate. And then they want to kind of start throwing around like, oh, yeah, 15% of a company would be great. And then us investors are like, hey, this is a real problem because in a couple of rounds you founders don't have any equity left for yourself and kind of the incentivization becomes questionable.
54:24
Barbara Diehl
But I mean, in the best case sorry, Georg, before you go. But in the best case, you may also find that you develop new IP in the company and that the future success of your company may not actually depend on the original IP that you license from the university. And then that's the best possible situation that you can have. So also look on that side of things, right, so maybe you need some of the IP to get going and maybe of course it's never advisable to sign a contract that you aren't really comfortable with, but also things can go in very unexpected directions on that front.
55:08
Ana Koller
Yeah, go ahead Gerg. Chairman.
55:12
Georg Püschel
Yes. Okay. I just wanted to point out one thing concerning the shares for IP moment, right? So I think all of our investors got a bit shivers on their spine when thinking of really public institution in the cap table. And that is because if the shares for IP are the last thing that you can put on the negotiation table, then you might have in later rounds also not that fluent discussions with that university in your cap table, but you have to talk to them in those moments then, right? Strategically, not a thing I would personally avoid, but maybe someone has a different opinion on that. But I don't feel well with that. If I can avoid it, I could take another strategy for that.
56:07
Barbara Diehl
And it's a very good point.
56:08
Ana Koller
We are actually planning a whole event about clueless about cap tables because we have seen a lot of spin outs having absolutely disgusting and awful cap tables, if you don't mind me saying. There is also one question here that says, is it reasonable for a university to take 20% equity in a startup? Who wants to take that one?
56:36
Barbara Diehl
Go ahead.
56:37
Georg Püschel
No, please, not that's all I can say about this.
56:42
Patrik Aspermair
Yeah, it's actually insane. 20% is insane.
56:46
Georg Püschel
Sorry, Patrick. Just go.
56:48
Patrik Aspermair
I just wanted to add what you just said before. Having them at all in the cap table is never a good thing. Investors would always look at the institution, they're like, okay, so they have a share. They even have an opinion on it. They can even negotiate with us. I don't want a public institution to negotiate with me. So it's actually like a downside of having them inside. So we actually have the institution in our they got shares from us, but they are virtual shares. So whenever, I don't know, I would pay money to myself, I would give them some part of the money so investors never see them being in the pool. In a way that's a possibility.
57:39
Barbara Diehl
Good one.
57:40
Ana Koller
So I actually had some questions about software and spinning out software, but Garrett, since we already dived into questions, I'm just going to continue down that road. So, looking at the mentee, the first question here is, so is obtaining an IP the first step for spinoffs? At what point should this be done? Patrick?
58:07
Patrik Aspermair
Sorry, I think I did not quite get it.
58:10
Barbara Diehl
Maybe rephrase it.
58:13
Ana Koller
I think that the person who has a question meant it more in the direction of, is this the first step that I should take if I want to start a spin off.
58:25
Patrik Aspermair
To have a cap on the money or sorry, I don't know right now what to say about it.
58:34
Georg Püschel
May I answer? Maybe.
58:36
Ana Koller
Yeah, go ahead.
58:37
Georg Püschel
From my point of view, it's not the first thing that you do, because this is now, again, entrepreneurship. Right. So from my experience at the university, you always have more solutions than problems, right? So research institutions create a lot of knowledge and publish it normally or put it in patents, but they don't go to, let's say, really users and end customers. And I would not create or spin out a company of a university without understanding the real problems of the domain I'm going into. Well, this is much more serious than having the right technology. From my point of view, you have to go in there, understand the problem, and then match the technology that you have and then decide what technology to get it out of the university. If you do it the other way around, you might end up with a thing that no one wants.
59:45
Georg Püschel
Because the most serious task of an entrepreneur in the beginning is validation. And that for months and years, right? Validation is the most important thing. You can do validation with just starting a service, with landing pages, with prototypes, with trade fairs that you go to, with just some mocks whatever you do. But the technology is not the right thing to start with. It's always the problem that you target.
01:00:15
Ana Koller
So doing a good research on product market fit, building a plan of what exactly you want to spin out, what technology and what knowledge you want to spin out is then the order of things and then build up your spin out strategy for the IP negotiations. Thank you. The next question we had is how early will investors be willing to put in the money? What are the pros and cons of selling mean? Both of you have different strategies and approaches to this, but Gerg went in very early with investors, if I'm not mistaken. Kindish.
01:01:03
Georg Püschel
Yes, kindish. Because, as I said, we had already a company in parallel to do our chair work. And basically we talked to a lot of potential end users about what we are creating in parallel. And basically it took two years before we really talked to our first it wasn't it was not that.
01:01:32
Ana Koller
And Patrick, what is your strategy here? You just spun out.
01:01:37
Patrik Aspermair
Exactly. So for us, it's basically public money in the first place. Having some grants also going for some EU grants maybe, which help you out a lot in the initial phase, because you have a burn rate. It's maybe not that high yet because you do not have too many employees. You do not have too many people that you need to pay for. Your product is maybe not at the level yet where it's actually worth a lot. So you want to raise, let's say, the value of your product, and then when it's at a certain level, then you probably should talk and should find the proper investor so you do not give away shares for too little money. But I have to say that, of course, we already started talking to investors, and I think that this is the right strategy. George, you're maybe a bit in a more advanced and more mature level here, but I think talking to investors in a very early stage when you do not need the money yet is a good idea.
01:02:46
Patrik Aspermair
When it's very late, when you say like, oh, damn, two months, three months, we completely running dry with your back to the wall, then you just have to negotiate the deal sign it immediately and just be happy that you got any money, otherwise you die. And I think that's the wrong moment. So talking with them, be honest, tell them, well, I don't need money now. Maybe we talk in one year. This is our technology. And keep them posted. Find them on LinkedIn, talk with them, find them on events, see where they are. And also have a good feeling with investors. I think that's quite important on our previous event.
01:03:29
Georg Püschel
That's not what I meant, of course. Yeah, talking to other people and investors is always a good thing. I just said what I meant is don't go out when you have the technology. Go out when you have the problem that you want to solve.
01:03:45
Barbara Diehl
Right, yeah, exactly. Try to get as much grant funding as you can get in the initial phases because it's nondilutive funding. Only go to investors when you actually need them in order to put your company on a certain growth trajectory. But start to talk to them early. I mean, of course you have to. It's not as if fundraising is a very long and arduous process, and you will have to talk to a lot of people in this initial phase of also getting yourself out there, getting yourself known, getting your company on their radar, getting your technology on their radar, that just takes time. So when you then actually are ready to actually start your first fundraising round, they already know you. I mean, that's the real value in those conversations. And yes, they take time, but you have to do it in parallel, for sure.
01:04:46
Ana Koller
And during our last event, which was exactly clueless about how to structure the first round, we tackled these points on how to build a relationship with investors and how early you should start. Andy, do you want to chime in with any VC perspective here?
01:05:08
Georg Püschel
Now I have to again find how I pin myself. I think in general, I agree, it's not too early to talk to investors ever. Basically, I think with some ideas, it might even better to talk with investors really early when it's still just kind of ideas and nothing an investor could ask for, nothing to prove it. But I think those we leave to decide. But I think in general, just building that relationship makes a lot of sense. I mean, obviously every conversation, even if it's just a casual conversation, and neither side is coming into it, as this has some fundraising context. There's always some fundraising context. We keep thinking about, like, hey, what do I think if I come away from a conversation with someone and I'm like, hey, this really could be a really cool founder, or they're working on something really exciting, then obviously I'm kind of putting this as a note for my next interaction with someone.
01:06:15
Georg Püschel
So I think you still kind of have to kind of show up and kind of be yourself, but kind of try to be a good version of yourself. But I mean, this is kind of, I think, general advice. So I think if you bring yourself to the table or to the conversation and just show why you're excited about this and why this is like, why you're taking that decision to spend basically the next years of your life building this. Then I think this kind of should be convincing also for VC to think about how could I make money with this?
01:06:57
Ana Koller
And where can I chime in to help? Because this is also one huge part of what we try to do. So moving on with the questions, we don't have many left or do we? So there is also like questions how much does it cost to get an IP? I think this is different for different institutions. But Barbara, what's your impression on this?
01:07:27
Barbara Diehl
Well, the question is always like okay, so that's the question when you're starting to obviously put a price tag on things. I would say in the very enlightened cases you should get kind of a figure on how much did actually go into the whole IPR process, right? So for example, how much did it cost to file the patent, how much did the university or the research institution had to upfront in terms of patent attorney cost, et cetera. And I think if they are transparent about that and saying like, okay, this is how much it cost us, this is how much it costs us to also uphold a patent and so on, I would say that's a very reasonable amount to actually somehow get back, because these are not costs that they necessarily have in their budgets. Right? So this is something where I say, yeah, okay, it's fair that they recuperate this kind of expenditure.
01:08:31
Barbara Diehl
Beyond that, if they then start doing funny things of saying, oh, this is how much research money went into this and this is how much of the resources of the university went into this, or of the research institutions, that's when it gets a bit hairy because that's when the numbers can very easily spiral out of control. And I would say beware of any kind of inflated numbers, always ask very reasonably and saying like, what is your rationale behind coming up with those numbers? And then each of those numbers then can be negotiated upon and saying is this actually reasonable to put this into the overall amount or not? And it's all about transparency. If they refuse to tell you like, this is how much it's worth and then they tell you and they're not willing to give you any kind of information about how they came up with that number, kind of a bad start, I would say.
01:09:30
Barbara Diehl
But if they were amenable and if they really want to support you, they will give you a rundown of the costs and say like, okay, this is how much it cost us and this. Is our starting point for the negotiation and I think that's a good start. Yeah.
01:09:46
Ana Koller
And then also on top of that, people should be wary of this is a standard practice or everything that we put on this table now is standard and you should not move away from it because everything is negotiable. So, last question for tonight, by the way, for any other questions that popped out and so on, you can send them directly to me at Anna at firstmomentum VC and then we can have an Asynchronous AMA over the next week or so. So the last question is can you create a successful spin off without a team? What stage is it essential to bring on someone with business experience? This is an interesting one.
01:10:36
Patrik Aspermair
Maybe if I can refer to this.
01:10:39
Ana Koller
That would be very nice.
01:10:40
Patrik Aspermair
So we basically spun out with a team of four, three of the technology side, let's say, and the fourth one is from the biz side. But we basically spin out with this. But we have, let's say it's a very difficult decision that we took that the business person is not evolved in the daily business yet. Because in the very initial phase of a deep tech spin out it's very important that you have the creators in a way to pitch, to tell everyone what you have, what do you do, what the technology can actually do and what it's capable of. And you bring your enthusiasm and getting a biz person to your team. This person can never sell it as good as you can. So it's basically the front runners need to be you, the technology guys. And maybe at the later stage, maybe in one years, maybe in one year or two years, it's important to have an experienced biz person really full time employed in your company.
01:11:55
Patrik Aspermair
But until then, probably you need to run it a bit more lean. Do not spend too much money on a biz person. Have them as an advisor at an early stage, but do not have them at full time. I think in our calculation it was way too early to have a biz person already there.
01:12:15
Ana Koller
That's an interesting one. If I can chime in. I know that I'm not supposed to share my opinions here, but still we're all family. The thing is that I would argue actually the opposite. I think that a bizperson would have a thinking process that is necessarily different on how to commercialize research than a research founder might have and then therefore it might be essential to give them the same kind of executive power. So this would have been kind of my thinking, but glad to disagree on this.
01:13:03
Patrik Aspermair
But really, actually, it was basically the idea of this biz person that they could be more like an advisory person and really ramp everything up, but not as a full time employee or full time. Working on this, but giving more or less the advices.
01:13:28
Barbara Diehl
All right.
01:13:29
Patrik Aspermair
But having them on board is very important. Yes. The point of view you get from a biz person is really important. And some advisory person could be even a future investor. It could be someone from another department at your institute. It could be some other person who is not even involved in your business but helps you maybe on some advices.
01:13:59
Ana Koller
Yeah, that also makes sense. With that, any last words? And then we disperse. All right, then. I'll be happy to wrap it up here. I would like to thank to the panel so much for allocating their time and sharing their valuable insights into this topic that is never ending. So with this in mind, we are already planning an actual event that will spun out more than one and a half hours, as this topic deserves. Definitely. So happy to share more details about it as they come. In the meantime, have a good evening and enjoy your summer.
01:14:42
Barbara Diehl
Thank you. Thank you, Anna, for organizing. And maybe by that time we organize that event, we already have a first draft of ours with pocket knife for IP transfer.
01:14:50
Ana Koller
Yay.
01:14:51
Barbara Diehl
We would love to have your input on that. We would love to have your input on that. Okay, thank you.
01:14:56
Patrik Aspermair
Thanks for having us.
01:14:57
Barbara Diehl
Thanks for next your.
