If you as a scientist of the Max Planck Society are interested in founding a company based on a technology you have developed at a Max Planck Institute, then we can provide competent advice and professional support as and when required. Regard us as your sparring partner!
The following sections try to answer the most important questions. If you have any other question or if you need more detailed information please feel free to call us or send us an email.
Our services span the entire founding process and the subsequent set-up phase, ranging from the first evaluation and discussion of your business idea, support in business and finance planning, patent supervision and connection to network partners, through the financing phase and longer-term support, e.g. as a member of the company's supervisory board, and by providing management coaching.
In general, as a scientist of the Max Planck Society, you may become shareholder in a spin-off. You may also become an employee of the new company, but in that case you must resign at the Max Planck Institute. If you want to continue your scientific carrier as an employee of the Max Planck Institute you may advise and support the spin-off as a side employment, subject however to prior authorisation. However as a matter of principle, the acceptance of an executive or managerial position as secondary employment will not be allowed, in order to prevent a conflict of interest.
A business plan is a sketch of your business idea and its planned realisation. It is your most important document, particularly in regard to attracting investors. It should always start with an executive summary to encourage investors to read on. In view of the large number of business plans investors have to read on a daily basis, you should word your executive summary as thrillingly as the blurb of a best seller! In addition, a business plan should be about 30 pages long and should deal with the following topics:
As there are plenty of excellent business plan guides available free of charge on the Internet, it is not necessary to go into further details here. We recommend the following downloads:
As a scientist, you are most likely unfamiliar with business terms such as P&L, amortisation and EBIT. Therefore we can advise you on your financial planning and provide you with sample forms and supporting information for your cost accounting.
Liquidity and P&L planning, planning of personnel costs, investments and amortisation, and a balance sheet, if applicable, are elements of sound financial planning.
Neither the Max Planck Society nor Max Planck Innovation is in the position to invest capital in spinouts. However, the Max Planck Society may act as a technology investor and waive an upfront payment when granting a license to a spinout, in return for shares in the company. This waiver is analogous to a financial investment and the Max Planck Society is therefore requesting typical rights of a co-investor.
In principle, there are two main financing options; equity and debt capital financing. As with real estate financing, 100 per cent debt capital financing is unrealistic. However, equity financing does not necessarily mean that the founders of a company have to finance the company exclusively out of their own pockets. Equity can also be provided by third-party individuals (e. g. business angels) or institutions (e. g. venture capital companies). In return, these investors receive shares in the company.
One of Max Planck Innovation's major tasks is to help founders on securing a financing round, based on our broad network of venture capital companies, banks and business angels established over more than 15 years. We open doors and guide you through the financing negotiations.
Venture capital is provided by venture capital companies (also known as risk capital companies) as equity in return for shares in the company. Venture capital companies usually manage a fund financed by institutional as well as private investors. Fund volumes range from €20m to €250m and even more. Usually this capital is invested in growth-oriented, but risk-prone young companies in return for a shareholding in the company. The size of the equity stake depends on the valuation of the company. Usually, in a seed financing round, investors receive a share of between 15 and 50% in the company.
Example: A limited liability company (GmbH) has been founded with a registered capital of €25,000. An investor values the assets of the GmbH, i.e. the business and product idea, patent and licenses, market outlooks, the personal and professional qualifications of the founders etc., at €2.5m prior to the investment (pre-money). The investor invests €1.5m so that the post-money valuation amounts to €4m. The investor's share in the company then equals the percentage share of the investment in relation to the post-money valuation.
A business angel is a wealthy individual who advises and invests capital in early-stage start-ups. Usually their investments are smaller compared to those of Venture Capitalists (VCs), so that business angel investments usually only cover initial financing requirements – especially in the case of biotechnology companies. As with VCs, business angels receive shares in the company and claim similar rights.
Excellent business angels have long-standing professional and management experience and have successfully started their own companies. To some extent, they are organized in business angel networks to facilitate company contacts. As always in a good partnership, a sound relationship between founders and business angels is an essential pre-requisite for a sustainable collaboration.
A silent partnership belongs to the so-called mezzanine financing instruments and has elements of both equity and loans. Under the terms of a silent partnership, a company is provided with capital for a longer period of usually about 7–12 years. The company has to pay interest and possibly profit-related compensation. So in principle, a silent partnership is similar to a long-term bank loan. However in contrast to a loan, a silent partnership is often subject to a subordination clause, so that, in the event of insolvency, all other creditors are paid preferentially to the silent partner – with an increased risk of a total loss. Hence the subordination clause gives the capital provided by the silent partner the status of equity despite its loan character. One should not overlook, however, that the silent partnership is accounted as a long-term liability, creating outstanding debts and the risk (without subordination clause) of an over-indebtedness on the balance sheet. As this financing instrument is not well known outside Germany, it may cause a problem when a company is in negotiation with foreign investors in later-stage financing rounds. Therefore, it is advantageous to arrange for a clause in the silent partnership agreement to enable it to be transformed into an equity agreement. In the event of a transformation, the holder of the silent partnership abandons his rights in the silent partnership in return for company shares.
As a reaction to the slump in the private equity seed-financing market for high-tech start-ups, the Federal Ministry for Economy together with Deutsche Telekom AG, BASF AG and Siemens AG has created the High-Tech Gründerfonds (HTGF) which started in the late summer of 2005 with a volume of €260m. The fund aims to support technology- and growth-oriented founders and companies existing less than a year with seed financing capital. Together with an accredited coach, start-ups can apply for funding of up to €0.5m with Hightech Gründerfonds Management GmbH. Max Planck Innovation is an accredited coach of HTGF.
For more information see:
Go-Bio is a novel €150m funding instrument of the Federal Ministry for Education and Research. In contrast to HTGF, funding is possible at even earlier stages of a start-up. GO-Bio does not fund the start-up directly but rather the research institution involved, i.e. with the support of the university or another academic research institution, scientists can apply for financial support for biotechnology research projects with a high potential for commercial applications. The funding aims to support team leader scientists in developing applications and commercialisation options to optimally prepare a start-up.
For more information see:
EXIST Transfer of Research is a research program created by the Ministry of Economics and Technology (Bundesministerium für Wirtschaft und Technologie -BMWi) intended especially for research-intensive start-ups coming from non-university research institutions. Founding projects coming from MPG can also apply for funding twice a year during the start-up phase in order to finance three research positions at MPI for a period of 1.5 years. Six months after the funding begins, a further person with business administrative experience can be integrated into project and financed. In addition, funding for equipment and material up to €50 000 can be applied for. The requirement is a co-financing with MPG, currently in the amount of 10% of the funding. It is recommended to establish and early contact with MI in order the secure the 10% guarantee. In particular, proof of concept work should be done with the funding in the start-up phase.
In the following early start-up phase a further €150 000 for developmental work can be applied for. The requirements are co-financing guarantees up to €50 000 by the founders.
More detailed information can be found under the following link: