Bank gambles on Oxford spin-offs

Oxford University has clinched a commercial deal to fund its new £60 million chemistry building.

In the arrangement, believed to be the first of its kind, European investment bank Beeston Gregory will put £20 million into the development for a 50 per cent equity stake in any spin-off companies created by the department over the next 15 years. It has also agreed to work with Isis Innovation, the university's subsidiary technology transfer company, in setting up the new spinoff companies.

"The interests of the university and Beeston Gregory are identical," said Graham Richards, chairman of the chemistry department. "The more money Beeston Gregory makes, the more money the university makes. Although we're giving away half the equity, there will be more spin-offs giving more equity than without this arrangement."

About one in four spin-offs are successful and the bank is gambling on two or three big projects over the agreed period. Oxford Molecular and Oxford Asymetry, both spun off from the department, successfully floated on the stock exchange and made millions of pounds for the university in 1994 and 1998 respectively.

Nonetheless, Professor Rich-ards said the university took a bit of persuading. "There will be those who worry that we're getting too close to industry. But Beeston Gregory realises it's better to leave us to do the research - they're not giving us money to do work they'd like to have done."

The deal will leave the department with extra cash that it can spend on new chairs and refurbishing other laboratories. The state-of-the-art chemistry building, due for completion in spring 2003, will house 400 chemists from all branches of the discipline. The government's Joint Infrastructure Fund awarded the project £30 million and the rest of the capital came from grants from the Wolfson Foundation, EP Abraham Trust, Thomas Swan and the Salters Company.

Equity in Oxford spin-offs is usually shared among researchers, investors, management and the university, allocated on a deal-by-deal basis. The university usually gets between a 5 per cent and 30 per cent stake, the inventor a similar amount and the rest of the equity goes to the investor.