Hello everyone and welcome back to our course on commercial open source software startups

and how to spin one off from university.

We're in the home stretch and today I will explain how to take the startup out of the

university.

So it's all about the process of funding and converting intellectual property that the

university may own into a property that the startup owns, how it acquires funding and

so forth.

Details of fundraising, the funding ecosystem will be covered in the next and final lecture.

If you are a master student based startup then it will be easier here than what I'm

describing here.

Here I will focus on the university being in the mix which usually means the startup

is based on doctoral student work.

So key topics are how the public project funding works, where the IP is that you need to acquire,

how to transfer, how to value it and so forth.

So you can acquire significant public funding to get started with a project at university

and even while you are already an incorporated startup.

Public funding has a key benefit over venture capital and that is that public funding is

always a gift.

So the state or whoever gives you that public funding will not ask for equity in return.

It's a bit weird to the economic thinker.

So for example in this course you have learned that you should price your products based

on the value to customers.

So you don't look at your cost, you look at the value that you're generating for customers.

Public funding works exactly the other way around meaning you ask for money to do something

and you ask for your costs to be covered.

Not for the value you're going to create, you ask for your costs to be covered so usually

salaries and so forth.

And that may then be given to you what you ask for as a public grant or public project

funding.

There are also some other variants that are much less common.

University specializes in acquiring or helping acquire public project funding.

Other variants are public loans, there's even some sort of public venture capital but that

works more like traditional venture capital hence you will lose equity.

So if you can get started with public project funding it's certainly in the interest of

the founders as they are not losing any equity.

This public funding comes in two stages.

The first one is in the form of a grant to the university.

For this the startup may not have yet incorporated.

So there is no legal entity, the startup, yet.

Then the only recipient of public grants can be the university even if the purpose is to

spin off a startup.

That can well be a purpose, it's just that you may not yet have found it.

And indeed this is what professors regularly do.

They acquire grants to fund research work, to fund applied research and some like me

even focus on getting spin off funding, startup funding for their research projects.

Once you have incorporated, once there is a startup and maybe you are a founder, you

can still acquire grants from the state for that.

Direct startup funding for example, they are dedicated funds and not too shabby, not too

little to help your startup get going and there will always be, not startup specific,

but there are public funds for what's called pre-competitive research where the state wants