Rise of Deep Tech and Health Tech Spinoffs in Europe
Executive Summary
In this episode of Startuprad.io, host Jörn “Joe” Menninger and guest Thomas Kösters of DEEP Ecosystems explore the rise of spinoff companies, mainly from academic institutions. They discuss the significant impact of public investment in high-tech and hardware sectors, the challenges of tech transfer, and the role of entities like the EIC accelerator in supporting European spinoffs. The episode also covers the funding landscape, the “valley of death” for deep tech startups, and examples of successful spinoffs like BioNTech, underscoring the importance of building effective knowledge transfer offices within universities to commercialize research.
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University Innovation Challenges: “Do I accept this as a a role of my university? Do I see my university being responsible for tech transfer, or do I feel like we should stay in the scientific space and and I don’t want tech transfer?”
— Thomas Kösters MD at DEEP Ecosystems
Introduction
Welcome back to another compelling episode of Startuprad.io, the podcast dedicated to unraveling the dynamic world of startups and their ecosystems. I’m your host, Jörn “Joe” Menninger, and today we’re diving deep into the universe of academic spin-offs and their increasingly pivotal role in pushing the boundaries of innovation and technology.
In this episode titled “Deep Ecosystem Spinoffs,” we’re thrilled to have an expert in the field, Thomas Kösters, MD at DEEP Ecosystems, to shed light on the fascinating surge of spinoff funding and the evolution of public investments towards high-tech and hardware opportunities. We’ll explore why entities like NVIDIA in the U.S. and ASML in the Netherlands are spearheading growth and how centers such as the EIC accelerator are revolutionizing entrepreneurship in Europe.
With startup ecosystems like “Startup Radio Factories” rising in Germany and other European nations, Thomas unpacks the mechanisms of financial support, intellectual property management, and the crucial role of tech transfer offices. We’ll discuss the implications of universities owning the IP and how European cities strive for equitable funding opportunities. Join us as we delve into the stark realities of the “valley of death” for deep tech startups, the magnitude of academic spin-offs in HealthTech, and the strategies that are setting precedents for commercial success.
We’ll also touch on recent challenges faced by Switzerland and the UK in Horizon funding and the strategic efforts in cities like Paris and Munich to lead in research funding. From the spotlight on Cambridge as an exemplary model to the discussion of tech transfer offices like Cambridge Enterprise, this episode covers the breadth of European innovation.
And finally, a closer look at the journey from research to market, the culture clash with venture capital, and alternative pathways to traditional spin-off approaches. Don’t forget, you can always join the conversation with Thomas and his team at DEEP Ecosystems or navigate the Start of Heat Map to get more insights on this topic.
Stay tuned for an enlightening discussion that bridges the gap between academia, entrepreneurship and the profound impact these factors have on our future. Let’s get started on “Deep Ecosystem Spinoffs.”
The Evolution of Tech Transfer Offices: “Now if you compare the knowledge transfer offices, KTOs as they are called, in this study that we look at here, then you see that 60% of the KTOs in Europe have less than half of the employees as Cambridge Enterprise.”
— Thomas Kösters MD at DEEP Ecosystems
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The Role of Universities in Technological Advancements: “And a lot of universities really see that academic mission as, more important than the commercial mission. … Also, they see the, the academic process, progress, and they see that this technology can help society as something, more important, and they would maybe give it away also as a open license.”
— Thomas Kösters MD at DEEP Ecosystems
About the Pulse of the European Startup Ecosystem
The European startup scene is changing fast. There are new players, old ones fading away, and even more to come in their place- all vying for a piece of this growing pie! To avoid getting left behind, you need regular updates on what’s going on so that our entrepreneurs can stay one step ahead when building or investing in companies here. That’s why we started the “Pulse of the European Startup Ecosystem” which will provide you with quarterly podcasts chronicling different aspects related to startup activity across European Hubs, supported by the data from the specialized analytics company DEEP Ecosystems.
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High Costs and Risks in Deep Tech Startups: “So the initial costs are much higher. And if you are not able to raise these initial costs through grants or investments, then, you have you you will fail right away because you are lacking the technology, you’re lacking the laboratories, the access to, to the materials you might need.”
— Thomas Kösters MD at DEEP Ecosystems
Questions Discussed in the Interview
- How has the emergence of hardware and high-tech opportunities shifted the landscape of spinoff funding in recent years?
- In what ways do HealthTech spin-offs contribute to the global ecosystem, accounting for a significant share of academic spin-offs worldwide?
- With Germany’s adoption of “Startup Radio Factories,” how might this initiative change the dynamics of spinoff support across European universities?
- What role do tech transfer offices play in the commercialization of research and academia’s IP, and how can they be more effective?
- How has the exclusion of Switzerland and the UK from Horizon funding impacted European innovation, and what can be expected as the UK rejoins the funding program?
- What are the main challenges faced by deep tech startups during the “valley of death” phase, and what funding strategies can help them overcome this hurdle?
- Given the transition difficulties from spin-out to commercialization, what innovative approaches can universities and VCs take to mitigate the risks involved?
- How can European startup ecosystems replicate the success of the Cambridge model for tech transfer and commercialization of IP?
- What are the potential advantages and disadvantages of a university owning the inventions of its professors with respect to fostering innovation and entrepreneurship?
- In discussing the growth and support of academic spin-offs in Europe, how do institutions like the EIC accelerator and Horizon Funding change the game for emerging startups?
Innovation and Research Institutions in Europe: “And then followed by the Royal Institute of Technology, JTH, which is in the UK. And I assume that I’m I’m also not an expert, I must apologize. I don’t know exactly how it is set up, but I would assume this is also, one of the overarching national research institutes like we have in in Germany, the Fraunhofer or the Helmholtz or or Leibniz Institute. So Max Planck, maybe that’s very famous internationally. So I would assume that this is a similar setup.”
— Thomas Kösters MD at DEEP Ecosystems
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European Tech Success: “It’s not the European Union in this case, it is Switzerland. So maybe that’s a little bit, disappointing to to, the EU here.”
— Thomas Kösters MD at DEEP Ecosystems
The Guest
Our esteemed guest, Thomas Kösters, MD at DEEP Ecosystems, is a leading figure in European tech startups and innovation. With an extensive background in fostering growth within startup ecosystems, Thomas brings expertise, particularly in academic spin-offs and the transfer of groundbreaking research into commercially viable entities. His role at DEEP Ecosystems, an organization dedicated to examining and enhancing startup ventures across various sectors, places him at the forefront of understanding and shaping the landscape of startup cultures and entrepreneurial success in Europe. Thomas’s proficiency in mapping ecosystem infrastructures makes him an invaluable resource in identifying the next wave of influential tech companies.
DEEP Ecosystems is recognized for their comprehensive analysis and strategic insights into the ever-evolving startup environment, serving as a crucial nexus for knowledge exchange and innovation support. With Thomas at the helm, they conduct in-depth research, create platforms for communication and collaboration, and advocate for policy and investment strategies that benefit burgeoning startups — especially those emerging from academic settings. His work contributes substantially to European momentum in the global tech race, ensuring local entrepreneurs and researchers are well-equipped to turn their scientific breakthroughs into market-ready solutions. Thomas’s perspective on ‘Deep Ecosystem Spinoffs,’ including the role of public investment, tech transfer practices, and the significance of robust academic-industry linkages, underlines the critical factors necessary for sustainable growth and competitiveness in high-tech markets.
Deep Tech’s Rising Significance: “basically all policy debate points into the direction that deep tech really is a solution to many problems, competitiveness of the continent, climate change, these challenges, that are that should and could also be solved technologically, a lot of policy debate is pointing in that direction, and so the hopes are high.”
— Thomas Kösters MD at DEEP Ecosystems
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The Interviewer
This interview was conducted by Jörn “Joe” Menninger, startup scout, founder, and host of Startuprad.io. Reach out to him:
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Automated Transcript
Jörn “Joe” Menninger [00:00:00]:
Hello, and welcome everybody. This is Joe from StartupRadio dot Joe, your StartupRadio podcast YouTube blog and radio station from Germany, Austria, and Switzerland. Today, we’re taking up our European binoculars and looking at the whole European Startupradio landscape in another installation of the European startup house together with Thomas from, Munich. Hey. How are you doing?
Thomas Kösters MD at DEEP Ecosystems [00:00:24]:
Very good. Thank you for having me.
Jörn “Joe” Menninger [00:00:26]:
Totally my pleasure. He just had to go over to his colleagues and tell them to turn off the PlayStation, and we don’t have any background noise. And therefore, I would like to welcome you to the podcast for decision makers and researchers in the European Startupradio landscape. We are, I do believe, the only podcast that really takes a bird’s eye view on a regular basis on European startup scene. Thomas, now that you had something like 10 espressos here, can you give us a little introduction what we will be talking about today?
Thomas Kösters MD at DEEP Ecosystems [00:00:58]:
Yes. Thank you for having me again. We will be diving into a particular topic today. We’re looking at academic spin offs. And especially in Europe, this has been a topic that has been more and more in the focus of debate. Of course, since ever spin offs are a backbone of technological Startupradio, we do see a lot of start ups coming from universities, from, research organizations since the early days already. But, the debate is heating up on this topic we see with the EIC accelerator, with the Horizon Funding, and, the kicks, the EIT kicks that are working in Europe, to support spin offs, as well as on the individual, university landscape, you see that as a lot of effort to bring more spin offs into the market. And, yeah, I think that is reason enough for us to have a look at this phenomenon and see what the scope and, the actual impact of it
Jörn “Joe” Menninger [00:02:03]:
is. Yes. We we may tell our audience that Germany is pretty good in researching. For example, with the German Institute For Artificial Intelligence, We do have one of the largest research institutions for AI in the world. Plus, what many people don’t know, there was a German guy or there is a German guy called Karl Heinz Brandenburg. He invented something you may have heard of. It’s called MP 3 and was developed here in Germany at Fraunhofer Institute, but, actually, they never made a lot of money with it. So, therefore, even the politicians realize, oh, there’s something we need to do.
Jörn “Joe” Menninger [00:02:41]:
We need to have spin off startups where, for example, we had already a lot in terms of physics, stem, and biotechnology here. Can you can you put this little bit into perspective how important this is in the European Startupradio scene?
Thomas Kösters MD at DEEP Ecosystems [00:02:57]:
Mhmm. Yes. And you mentioned already a very interesting example, the MP 3 that came out of Fraunhofer. Fraunhofer actually is one of the strongest, let’s say, research centers that, produces spinouts. I’m actually not so sure that the MP3, was such a commercial failure. I think there is more of a licensing agreement behind it, and there’s some income. But I’m also not an expert. But that’s what I heard, that it’s, maybe a myth that there was no revenue from this at all.
Thomas Kösters MD at DEEP Ecosystems [00:03:29]:
But it’s true that Fraunhofer, is one of the, if not the strongest European, research organization producing spinouts. And, yeah, spinouts have, a huge potential now, so especially if you look at, the, let’s say, the growth over time, the technologically backed companies show, good resilience. They are not like, let’s say, a delivery marketplace, a delivery Startupradio, where maybe you have high investments, in the beginning, but then it dies out. Not technological start ups, they have this, backbone that can give them a life, that lasts longer than the next marketing hype. And, yeah, so spin offs are really a big hope for not only the commercial success and the economic benefit for the region, but also for, making a change in the society, making a change in, let’s say, for example, environmental aspects, climate tech. So also for the better of the world, these spin offs are, an important yeah, an important pillar of, of where we want to take this, in Europe.
Jörn “Joe” Menninger [00:04:46]:
If you’re watching this on YouTube right now, we should, hint at 2 different interviews with it. One of them is a spin off, in terms of physics that enables reproducible nanostructures. And the other one we just did recently, it’s with a biotech entrepreneur. She is regularly a professor at the university, but spun off a biotech StartupRadio where she hopes to help a lot of, patients with, blood cancer, in order to, help to, get more people to transportation and have Joe very mild effects of the transportation and accepting of the full body tissues. That has, for example, 2, like, very deep technology topics that we’ve talked about in the past. Thomas, I’ll hand over to you after some trivia from my side.
Thomas Kösters MD at DEEP Ecosystems [00:05:43]:
Very good. No, no, I mean, it’s exciting always to look at the various companies that are using, like, technology that was developed in research and academia. I mean, one of the most famous ones that we’ve been all witnessing in the past years was BioNTech. No, that was from Mainz, the city of Mainz, and it was spun out of the University of Mainz to professors, also a couple. They did create this, but there’s a whole academic, let’s say, academic slash commercial, ecosystem around the university there, where, a lot of post doctoral and doctoral, scientists are working on, the RNA technology and trying to develop new use cases with it and create new companies with it. So it’s very exciting to look at these different examples and, see how they can potentially change the world, if you will. But, of course, there’s also a higher risk in spinouts than in a, let’s say, in a Internet startup. You see now here my screen.
Thomas Kösters MD at DEEP Ecosystems [00:06:50]:
And so what we want to do today is we want to explore the academic spinoff landscape in in Europe. First of all, what are we talking about? There’s 2 definitions that we just want to quickly look at. There’s the spin offs that are, an independent company created through the sale of a parent company’s business or division shares. So it would be a spin off from a company versus an academic spin off, which would be formed out of, the commercialization of research outcomes, for example, by, giving a patent, to the company or a license to the patent or similar. So we are now focusing on the academic spin offs. Now there’s, of course, a lot of spin offs from the corporate world, but they are usually less important, let’s say, when we speak about Startupradio because they already start with more capital and more market access from day 1. So the academic spin off is what we are interested in. There is some data on it.
Thomas Kösters MD at DEEP Ecosystems [00:07:50]:
It’s it’s not the easiest, I would say, to map out the development of, spin offs in the world. But here there is, there is a source or report by called that’s called Global University Venturing that gives us a global perspective and also breaks it down by, country. So you see here that the US in yellow over the years has been the biggest, contributor to the global spin off market, and you see also a big surge of this in the years 2020, 21, And, in 2022, it still was, above the 2020 level and pre COVID levels.
Jörn “Joe” Menninger [00:08:36]:
Mhmm. The most famous, nonacademic spin off that I could think of was, for example, Expedia, which was, actually founded as a division of Microsoft back in 1996.
Thomas Kösters MD at DEEP Ecosystems [00:08:47]:
Oh, that’s interesting. I didn’t know that. Okay. Very nice. Very nice. This way around, it works also at Microsoft. Microsoft buys a lot of, start up companies, but sometimes there’s also a spin out maybe. I think they also had, like, a a nice spin out, in the gaming sector with, gaming computers.
Thomas Kösters MD at DEEP Ecosystems [00:09:07]:
I think that was also a spin out. I forgot the name now. But, yeah, sometimes that works as well. Great. I I mean, you see also here the importance of, the UK and also Germany popping up quite dominantly in this statistic as it’s I think together with Switzerland, is one of the place that is highlighted here. Not at all at the level of the US, but also these comparisons are always a bit unfair. Now if you compare US to Germany, probably, you should be comparing Europe, the EU versus the US. That would be a bit fairer, but still, even if you compare now and put together the rest of the world with Germany, you would not reach the level of the US, in terms of the investments that spin offs received.
Thomas Kösters MD at DEEP Ecosystems [00:10:03]:
But very interesting, the surge and the increase of spinoff funding, over the last years. As I said, there is a shift. If you remember maybe 10 years ago when someone, It’s it’s a new phenomenon that hardware and high-tech, are now in the eyes of the investors are an opportunity. Has to do with the shift in the public investment as well, I think.
Jörn “Joe” Menninger [00:10:39]:
May maybe it’s also since NVIDIA has shown how important hardware can be to have the right hardware.
Thomas Kösters MD at DEEP Ecosystems [00:10:46]:
Yes. I mean, NVIDIA is really a case where, you can see that, there is a, there’s a margin of innovation that that you can achieve in hardware, and that there’s only a few, companies, that can actually compete in this. Also, you know the story of, ASML in, in the Netherlands that is the chip manufacturer, that produces the, produces the machines for the chip manufacturers. This is like a Joe competitor in its space. Almost no other company can, compete with them, and so the whole world is dependent on on their machines. And it was also a spin out, I as I if I remember correctly. Joe this is a spin out of the TU Eindhoven, or Philips. I’m not sure.
Thomas Kösters MD at DEEP Ecosystems [00:11:34]:
One of those. They’re very closely connected, Philips and, the technical university in Eindhoven. And, yeah, when ASML was founded, it came out of this complex.
Jörn “Joe” Menninger [00:11:47]:
Mhmm. And we are now talking about the academic spin off, what, what, by category? And you you have here a very nice short. Everybody who’s listening to this, go down here in the show notes. There is a link to the show notes, and they will have a link to the report. But HealthTech make up around 77% across the world. Do you have, like, even if not validator, like, rule of thumb, how much this may make up in Europe?
Thomas Kösters MD at DEEP Ecosystems [00:12:17]:
You mean how much funding? Or
Jörn “Joe” Menninger [00:12:20]:
My understanding is what we’re seeing here is just this count of the companies by, by sector. And do you have an idea what the the the business mix would look like if you look straight at EU European Institutions. Would you guesstimate it’s about the same?
Thomas Kösters MD at DEEP Ecosystems [00:12:41]:
Yes. It’s it’s hard to get this data now on on all levels. So we do not have now a breakdown, in the analysis on a European level, but we have here a worldwide. We can assume that this would be similar. What is very, let’s say, striking is the strong health aspect. Health is really a sector in which we see a lot of spin offs, and then you have hardware with 34%, and you have, 23% materials. So this is really, a large part for the disease sectors. And, I mean, you don’t even see any other, other sectors in this analysis.
Thomas Kösters MD at DEEP Ecosystems [00:13:27]:
So it’s quite striking that the spin offs are, operating in, yeah, in, let’s say, classical technology sectors, mostly health and hardware, and, you would not see a spin off, for example, in software. Not because there is no IP behind, no patent behind, so it would not be categorized as a classical spin off where you have the transfer of, of technology inscribed in a patent, for example. Yes. And here we look at Europe and, how the debate has changed. Joe. This is the news mentions of the word spin off or similar words in the European debate. So we we always like to approach topics by their attention and interest. And, you can see that in 2020, 21, 22, it was not so popular or was not so many articles, discussing, spin offs.
Thomas Kösters MD at DEEP Ecosystems [00:14:30]:
But as we saw, it is mainly the health sector, it is mainly the, hardware sector, and that was maybe not the focus of the StartupRadio scene. And it’s only in 2022, this started to change, and there was a drastic increase of attention to the topic. And, you see that coincides also with the revamping of the EIC accelerator, is one of the, entrepreneurship centers based at a university, technical university in Munich, where it’s supporting also spin offs. And this is a model that Germany tries to replicate in 10 more universities, so called Startupradio factories. So these are developments that are now taking shape. And, yeah, basically all policy debate points into the direction that deep tech really is a solution to many problems, competitiveness of the continent, climate change, these challenges, that are that should and could also be solved technologically, a lot of policy debate is pointing in that direction, and so the hopes are high.
Jörn “Joe” Menninger [00:15:47]:
And, of course, everybody would like to learn more, about Otterdamatou, go down here in the show notes. There’s a link to our interview with them.
Thomas Kösters MD at DEEP Ecosystems [00:15:56]:
Very good.
Jörn “Joe” Menninger [00:15:58]:
Very good. Actually, if if we go on to the next slide, I also do have some advertisement. For example, I I just scanned through it. It’s a big, screenshot with a lot of different names. And just scanning through it, I found a c02 Bio Clean where we already had an interview with them, as one of the examples of the spin off. So we also take some examples from there who do have a really interesting, solution to turn, c Joe two into replacements for plastic, for example.
Thomas Kösters MD at DEEP Ecosystems [00:16:31]:
Mhmm. Yes. So this is a screenshot, really just a partial screenshot of the 526 companies that the EIC accelerator has supported. So the EIC fund, if to be correct, now there’s the EIC accelerator as one of the forms, and the EIC fund has several different, possibilities to support, StartupRadio through loans and, investments. And you can see that, they have been active, at least until June 23, where the last, I think this is the last big round that was announced. And, yeah, you see sorted by different funding dates here the portfolio, the EIC fund has invested with the mission to support more spinouts. So I can only assume that all of these are spinouts. I’d haven’t looked through all of them individually, but, since the tech transfer of the EIC accelerator has a focus on tech transfer, most of them probably are spinouts.
Jörn “Joe” Menninger [00:17:37]:
Yes. My understanding is not necessarily every time the complete university is involved with the state, but it’s basically people doing the research, getting out, and really applying it.
Thomas Kösters MD at DEEP Ecosystems [00:17:49]:
Yes. So yes. I mean, spinouts have this, I mean, if it’s a spinout, the university needs to be involved because the university has an owner ship, of the IP, in some sort. Otherwise, it wouldn’t be technically a spin out. So in this, in this regard, you would be having an involvement by the tech transfer office in the startup that would say, okay, we’d license you the patent can be done in exchange for equity. This is a new development, really, as well. Joe if you look at how this was done in Europe over history, it was very different. In most European countries, you would have had a situation where the ownership of IP was directly with the professor, previously, so the university had no say in it.
Thomas Kösters MD at DEEP Ecosystems [00:18:49]:
If a if a professor was developing, a new invention, a new technology, it would be their own, property, and, if they did something with it or not, was their own business. That was changed by a couple of, regulations, that were taken into effect in different all the European countries by now. So in most of them, the, ownership structure of IP, is now with the university. So the university itself owns the, inventions of their professors, like an employee would not own the IP of an invention. They make it work. It’s the same at a university. And this way, the universities really work on tech transfer, and they have opened these tech transfer offices, that support the commercialization of this IP. It has an advantage.
Thomas Kösters MD at DEEP Ecosystems [00:19:50]:
Joe? So, the advantage is that more IP is being commercialized. There’s more attempts, and there’s a wider group of people at the university who could think about commercializing this IP that the university owns. Before, it was really the question if the professor wants it or not, and more often the decision was not. Joe that’s why spin offs really increase if the ownership is at the university level. That’s at least what we see in the cases, where this, was done. In, for example, Cambridge is, I think, the, is the role model for the European universities. They have changed this in the, I think in the 80s, and, since then have seen, like, a a surge of, spinouts of the, Cambridge University.
Jörn “Joe” Menninger [00:20:43]:
Mhmm. I see. And from all the data I’ve been reading, also ETH, Eitkenassociutet, Gerrochule is an Swiss technical university. They are also doing pretty well.
Thomas Kösters MD at DEEP Ecosystems [00:20:58]:
Yes. Yes. We will have a statistic later on where we see that in Europe, ETH, Zurich is, one of the strongest players. So in Switzerland, you have you have a strong university scene, very good universities, and, therefore, also, very, high quality spinouts. I must say, I think in Switzerland, with the ownership, it’s a bit different. I’m not an expert now on on Swiss University Law, but I think in Switzerland actually that would be they still have the old system, if I’m not mistaken, where the professor owns the IP. Okay.
Jörn “Joe” Menninger [00:21:39]:
And let let’s get a little bit to the examples. You brought 2 examples, one of them from Zurich and one of them from Grenoble.
Thomas Kösters MD at DEEP Ecosystems [00:21:47]:
Yes. Yes. So these are just two examples that are, also that show how successful these spinouts can become. Now here from Switzerland, you have Climeworks, which is a direct air capture and storage, technology. They have raised 650,000,000 US dollars in April 2022. So these are really large rounds. Now these are already these mega rounds where we often say in Europe they don’t happen they don’t happen, often enough. That is why companies leave Europe and move to the US, and, and you don’t get these kind of rounds in Europe.
Thomas Kösters MD at DEEP Ecosystems [00:22:28]:
So that proves this wrong. Now we see that spinouts in, Europe can achieve this. It’s not the European Union in this case, it is Switzerland. So maybe that’s a little bit, disappointing to to, the EU here. But, it is at least possible on the continent to raise these kind of amounts for a spinout, and there’s also examples for European based ones. Now think of, think of, Northvolt in Sweden that raises 1,000,000,000 in funding, which is, is not as academic spin out, I think, but, is also a high-tech company. So we do see these kind of rounds happening in Europe and also probably in deep tech you have a bit of a location advantage because once the infrastructure for the technology has been created, be it the laboratories in the health sector, biotech sector, or be it the, the factories, in the energies space, then, you cannot move that easily anymore. So there’s a bit of a lock in effect, and so Deep Tech has a bit of this, yeah, retention effect that, successful, technology, successful StartupRadio, don’t leave to the US necessarily.
Jörn “Joe” Menninger [00:23:52]:
Mhmm. I see. I see. So, basically, you first have to be successful with one one very good Startupradio, and then you basically, build kind of a launch pad for other start ups to take off there as well.
Thomas Kösters MD at DEEP Ecosystems [00:24:07]:
I think that, this is very well possible. No. I think that around these ecosystems that that are based around the technology and the infrastructure that this technology needs, more spinouts can happen. I definitely think that when the ingredients are coming together, you will see repetitive success.
Jörn “Joe” Menninger [00:24:32]:
Let me let me use my fortune teller abilities here and tell, you are advising companies and authorities on something like that, maybe?
Thomas Kösters MD at DEEP Ecosystems [00:24:45]:
So it could be. Yes. So the ecosystem development is one of our one of our core capacities. Now, so we are building ecosystems, we’re supporting players that want to create competitive and continuous success in StartupRadio. And I think that’s that’s really the big challenge now. You can get lucky one time. Now that’s that’s easy, but to make it repeatable and to make sure that more entrepreneurs start something in your ecosystem that’s not easy.
Jörn “Joe” Menninger [00:25:23]:
Well, luck is one time, and if you can do it 5 times, you have a winning system.
Thomas Kösters MD at DEEP Ecosystems [00:25:28]:
Yes. Or even more. Yeah. And, like, one one of the elements that we are highlighting here is, for example,
Jörn “Joe” Menninger [00:25:44]:
Thomas, for for for for every for everybody who doesn’t know Horizon, I I’ve heard of it, admittedly. But can you give our audience, like, a very tiny introduction to the Horizon program and why we’re seeing it here?
Thomas Kösters MD at DEEP Ecosystems [00:25:58]:
Of course. Yes. So the Horizon Europe funding is a program, it’s a research funding program for, from the European Union, for universities and Innovation Actors in Europe to turn research into commercial success. Joe it is a huge program. I think it started with almost 100,000,000,000, in in in funding for over 7 years. So 2021 to 2027. It is, based on a long term strategy. So before Horizon Europe, there was Horizon 2020, which was another 7 year framework where the EU gave, a large amount of research funding into the universities.
Thomas Kösters MD at DEEP Ecosystems [00:26:55]:
Technologies, also in the form of, yeah, patents and licenses that are given out. There’s also basic research being done that will only in the future be commercialized, and so far only stays inside, let’s say, the walls of the universities, but it’s the big funding for research in Europe. And, yeah, so StartupRadio can directly participate in this since Horizon 2020. So it’s also an increasing factor in the startup landscape, and a lot of universities are using this funding to develop ecosystems around their campus for
Jörn “Joe” Menninger [00:27:35]:
more, StartupRadio innovation from this, from the university. What actually surprised me that Paris is leading charge here Europe. Yes. Munich, of course, it is there. Paris would little bit of surprise as well as the next ones, Barcelona, Madrid, and Brussels. We always do have Amsterdam on the screen. We always do have Berlin as big Startupradio hubs there. But Paris, apparently, they’re doing a little bit something different here.
Thomas Kösters MD at DEEP Ecosystems [00:28:05]:
Yes. It’s it this is very, very interesting, and I must say that you you don’t see this analysis often. I think it’s it’s overlooked that there is a competition for research funding as well. Future. Well, positioned, and you need to know how to tap into these resources. And there’s a huge difference between the, between the regions. And with this statistic here, you can see it with a blink of your eye. Now you see that there is cities that receive 1,400,000,000, Paris, and then there are cities that receive, here in the top 10, only 400,000,000.
Thomas Kösters MD at DEEP Ecosystems [00:28:48]:
And then there is, of course, cities that don’t have access to these funds at all today. They might be having only 10,000,000. Now and, since this is funding by Europe for the European constituents, you can it’s fair. It’s fair. So the competition is fair. You can apply and win it. But, apparently, some cities specialize, some actors in these cities. It’s not the city.
Thomas Kösters MD at DEEP Ecosystems [00:29:13]:
It’s not the municipality applying. It is the universities in this, in this place, it is the Startupradio this place, etcetera. But, definitely, you see a regional competition, and, that doesn’t have to be that unbalanced, I would say. I find it shocking, to be honest.
Jörn “Joe” Menninger [00:29:32]:
If I condense this a little bit, that means, there are a handful of actors in each of those cities, usually advisors, consultants who help and specialize in helping to file those, those, applications, and, basically, they are more successful than others.
Thomas Kösters MD at DEEP Ecosystems [00:29:52]:
Yes, you have consultants there, but I think that it’s mainly the institutions that are well positioned to, capture these fundings. Joe universities have, people working there that would write these applications, support Startupradio write these applications, regions, would have, like, support organizations that would support you. It’s not only commercial consultants that would be winning those grants. No. It’s mostly the institutions, that open up these opportunities for their Startupradio, for their researchers. And, yeah, some are doing a better job here, and others are falling behind. And, yeah, since this is, I think, also an objective by the European Union to have this equally spread, I I think this is like a this is a huge problem that it’s not that equal.
Jörn “Joe” Menninger [00:30:46]:
And, you also brought us and analyze us from academic research into practical application where you have a little bit the most successful institutions who are doing this as of the time of the data. I’m I’m not sure when it is, but usually, if you have that kind of aggregation of data, it’s usually 1 or 2 years old. And it appears that ETH Zurich and the Free University and the Technical University of Berlin are very successful there.
Thomas Kösters MD at DEEP Ecosystems [00:31:19]:
Mhmm. I mean, the Swiss universities, if they applied for Verizon funding, it was before Switzerland stepped out of Horizon. At the moment, Switzerland is not part. The UK reentered into it. So this data that we are looking at is the funding that started 2021 until, today. This is pretty, recent. So this funding would be until the end of 2023, probably. And, and you would not see the UK and Switzerland being on top here because they, both were excluded from Horizon Funding, in the last year.
Thomas Kösters MD at DEEP Ecosystems [00:32:02]:
Now UK is back, so I would expect the UK, cities and universities to increase in the ranking again in the traditional, let’s say, data, the historical data from Horizon 2020 when the UK was still part of it, they’ve had top, spots as well. Now they were out. They missed out on this opportunity.
Jörn “Joe” Menninger [00:32:28]:
But there’s also the JTH, Royal Institute of Technology in there. I haven’t heard of them before. Can you elaborate a little bit on them?
Thomas Kösters MD at DEEP Ecosystems [00:32:37]:
Yes. So here you this is not we’re looking at the funding now. This, is now looking at the spin offs, and you see that the, European, institutions that have, the most spin offs. We have, looked at 2 different sources here because getting data is tricky. It’s very tricky. So one source is deal flow. Deal flow is a collaboration between Deal Room and the European Commission, where they track all of the, public funding that went through Horizon and other means into, university based innovations. Might be spin outs or licensed, etcetera.
Thomas Kösters MD at DEEP Ecosystems [00:33:20]:
And, they count, when you look at the institutions there, so they count most of the supported innovations, by an individual, institution in Zurich, and then followed by the Royal Institute of Technology, JTH, which is in the UK. And I assume that I’m I’m also not an expert, I must apologize. I don’t know exactly how it is set up, but I would assume this is also, one of the overarching national research institutes like we have in in Germany, the Fraunhofer or the Helmholtz or or Leibniz Institute. So Max Planck, maybe that’s very famous internationally. So I would assume that this is a similar setup. And, yeah, it’s followed by the Free University of Berlin and the Technical University of Berlin, which I would say, this is an interesting data set, but I assume there is a mismatch, in terms of, different funding sources that might also come from national sources, and where more might be produced, than this graph on the left shows, because this is based on the European funding. On the right side, we, reference a study that Fraunhofer did themselves where they compared European, yeah, national research organizations with the US system, and, they did a, yeah, review of spin offs they could identify, and, they looked at the numbers 2017 to 2019, so probably a smaller, cut. And here you see that especially these, German PROs, they are called here, research organizations.
Thomas Kösters MD at DEEP Ecosystems [00:35:09]:
I think that I forgot what the p maybe, public research organizations, stands for. And you see that, for example, Fraunhofer is the individual research organization that is ranked highest, in, in Germany with 81 spinouts. And I’m not sure, but I think C and RS, is that a French one? I’m not a 100% sure, but I think that could be a French system. And then University of California system, ranks 287 with ranks 1st with 287 spinouts. So you see a bit the the magnitude, and, this would not show on the left now because it is a bit of a different perspective, different data collection. And Joe both are probably to be taken with a grain of salt.
Jörn “Joe” Menninger [00:36:06]:
Mhmm. I see. Plus, you are also talking about death. Well, you also the so called valley of death with us in those, spin offs because they not all survive, and there’s a very tricky phase in there growing up.
Thomas Kösters MD at DEEP Ecosystems [00:36:23]:
Yes. So, I mean, you can imagine how deep tech and, you know, deep tech startups and high-tech from research, they have a even higher risk of failing than the, let’s say, usual Internet startup, SaaS Startupradio you will. So the initial costs are much higher. And if you are not able to raise these initial costs through grants or investments, then, you have you you will fail right away because you are lacking the technology, you’re lacking the laboratories, the access to, to the materials you might need. So there’s a much longer phase and a much more expensive phase of research and development before you can actually go to the market. Now if you create a SaaS Startupradio, basically, you could create the software, within a very short time. And, with the right investment, you just need the personal cost of the developers. You get the, tool up and running.
Thomas Kösters MD at DEEP Ecosystems [00:37:31]:
You get first customers, first income, and then you grow through iterations and improve the product as you go. Maybe you work with discounts in the beginning. Now you make it, but you go to the market, and there’s money coming in also from revenue. While on the research and development side, you don’t have that option. Now you have not this avenue of going out with a smaller version of your product, basically, a less ready technology is is more difficult to to bring to the market. So you need to be able to finalize the research and development and bring it, to the market once it’s ready. And for this long period, you need the funding, and, you will not get the funding all at once. You will have to repeatedly go for fundraising as well.
Thomas Kösters MD at DEEP Ecosystems [00:38:20]:
And, that’s why, also midway, you can fail. You might have achieved half of your progress, and then you don’t find any follow on funding because you transition maybe from grants towards venture capital and that doesn’t work out. There can be many, many issues, that, that can prevent you from succeeding.
Jörn “Joe” Menninger [00:38:44]:
Mhmm. Mhmm. I see. And especially the phase where you spin out before you really achieve commercialization, before you really could sell your product, That’s the very important part because then it is too commercial for the university and too risky for the VCs. How do the StartupRadio usually fund themselves during that time saving from the entrepreneur?
Thomas Kösters MD at DEEP Ecosystems [00:39:07]:
I think that is, again, an avenue that’s not so available now. So because the costs are too high, you cannot, go through a route of family, friends, and fools. Now it’s too expensive to fund it yourself. So you’re really stuck with these, let’s say, institutional, players. Now you need to convince most of the time in the beginning, you will apply for commercialization grants. So I think that is in Europe, at least, very well established at the at this point. You can win, different funding, schemes now from the local to national, even European level, and then you will be able to develop your, solution, in the r and d phase. Of course, you need to win that, but I think that’s that’s an established way to to try that.
Thomas Kösters MD at DEEP Ecosystems [00:39:59]:
After that, you have to transition to the real market, if you will. Now Joe you develop something in r and d and then you transfer it to, commercially oriented VCs might be tricky. Because if you have not adopted their mindset beforehand, you might have a bit of a culture shock. Now you come as a researcher with a great new technology, you’re thinking about how to perfectionize it, and then you are confronted with the market realities that a VC has, top of their mind. There’s a culture clash. You might not be a fit, and that, might lead to you not raising any, VC funding.
Jörn “Joe” Menninger [00:40:40]:
Mhmm. I see. So that that’s basically the part where you could, where you could really, really screw up your Startupradio. Out of curiosity, I’m I’m sure you don’t have the data there yet. What do the founders do who try to spin off their Startupradio then fail? Are they going back to academia?
Thomas Kösters MD at DEEP Ecosystems [00:41:03]:
That’s a very good question. Yeah. I think there is a there there is a big group of, researchers, PhDs, postdocs that try out this route. Now there is, it’s also attractive because once you’ve been a commercialization grant for a couple of years, you will usually have, an income. Now you will usually have, your stable income that’s maybe even a bit better than your salary as a PhD candidate. So it’s an attractive route to take and to spend a couple of years in. And once you try to go into the commercial side of things, you feel like maybe I’m not so entrepreneurial after all. I don’t like a situation in where, where I don’t have any salary.
Thomas Kösters MD at DEEP Ecosystems [00:41:51]:
And then you realize that you are not really an entrepreneur, and you give up and you go back into, academic life or or work for a company, to earn a salary. So I do think we are we’re seeing a lot of these kind of, behaviors. It’s also normal. That’s also what you need to to create. Now you need to create that appetite, that volume, not to have in the end. Also, those that are the the, hidden gems, the pearls inside, know that our entrepreneurial that really get, the taste of it and want to grow a business and want to take the risk of starting a company. Yeah. Those those are the ones that you actually want Joe as a society, but you will have a lot of them that are, let’s say, just, you know, testing the waters, playing around, learning about the opportunity, and maybe realizing it’s not for them.
Thomas Kösters MD at DEEP Ecosystems [00:42:47]:
Now I just wanted to say those that are entrepreneurs, I would say after you tried once, probably, you would be looking for another opportunity, either joining another StartupRadio or trying again with something else, I feel that once the buck got you, you you probably want to continue.
Jörn “Joe” Menninger [00:43:06]:
Mhmm. I see. So since there’s a valley of death, there’s an opportunity to fail. Is spin off always the best option?
Thomas Kösters MD at DEEP Ecosystems [00:43:16]:
Yes. That’s a good question as well. So it’s not the only option. Joe commercialization of of tech trend, of of technology can take different forms. So the tech transfer offices have traditionally different, services under their portfolio. So they can if you’re a researcher, you have an invention, and you go to your university’s tech transfer office, they would explain you different options and would say, yes. If you want to commercialize this, you can go for licensing. You can go for, maybe just, yeah, selling it as a consultancy, as knowledge transfer.
Thomas Kösters MD at DEEP Ecosystems [00:44:00]:
Communication could be also something, that that you go for just trying to, yeah, let the world know that this is there, this technology is is there, and that people can build something new based on it. Joe there’s different options of bringing technology out there in the world. And a lot of universities really see that academic mission as, more important than the commercial mission. Joe, while they own the IP, not every university feels an obligation to earn money with the IP. Also also, they they see the, the academic process, progress, and they see that this technology can help society as something, more important, and they would maybe give it away also as a open license. They might give it away as partnerships that the university can do. So that that’s to be kept in mind. No? Universities are not commercial entities that try to maximize profit.
Thomas Kösters MD at DEEP Ecosystems [00:45:08]:
However, when you are interested in commercial side of things, then you can, definitely think about the spin out. There is also the possibility to collaborate with venture studios, work with corporates that want to create something new and can incorporate these technologies from universities in their spinouts that they create inside the corporate or even just a new product that’s developed inside the corporate. So there’s different definitely, a lot of possibilities for the university and the researcher to see their technology being taken up and, going outside of, let’s say, the lab, and going to the real world. Doesn’t always have to be, a start up.
Jörn “Joe” Menninger [00:45:51]:
You also brought some examples for the real world, in terms of how many people are actually employed by some of those spin offs. Once again, the example of Cambridge because I do believe that’s very well published.
Thomas Kösters MD at DEEP Ecosystems [00:46:07]:
Yes. Yes. So Cambridge is really like a, like a case study that you can refer to when you look at tech transfer, because in continental Europe, or close to continental Europe, The UK was the first ones to change the laws of the IP ownership, and they have established the, tech transfer office that’s called Cambridge Enterprise. Yeah, and basically now they have, 100 employees, roundabout, of which 24 are commercialization. Now you see already here commercialization, is is a part of the activity, and, yeah, not everything is, focused on the commercial uptake. And if you compare so Cambridge is one of the best, let’s say. Now that they have the highest numbers of spinouts, they have, the most successful spinouts as well. Now if you compare the knowledge transfer offices, KTOs as they are called, in this study that we look at here, then you see that 60% of the KTOs in Europe have less than half of the employees as Cambridge Enterprise.
Thomas Kösters MD at DEEP Ecosystems [00:47:23]:
So it’s there’s really a gap. Joe so most of the KTOs have, only half of the employees, and, the median is 5 to 10 Median number of employees in the, tech transfer offices is 5 to 10. Now Joe we definitely see, there is a there’s a gap, not just by how well equipped tech transfer officers are. And then they can, of course, not support as many, spinouts and as many processes as they can in Cambridge. Question is a bit how serious we take, tech transfer. Now if we if we say we have a team with 5 people at a university, is that do we take it serious? Do we really think that’s that’s something that the university is, is actively pursuing?
Jörn “Joe” Menninger [00:48:18]:
Yeah. So I was wondering if if it makes sense to have at first, do everything with a small team of people and have 1 or 2 successful spin offs that then will lead you to get more people into this, department or likely as Cambridge did it slowly grow over time and get more people with norm more knowledge. Not really sure if it would help a university to just hire a 100 employees and say you’re now going to do spin offs.
Thomas Kösters MD at DEEP Ecosystems [00:48:51]:
Yeah. Well, I you you probably need to, hire the people that can build up such a, entrepreneurship center or or KTO, effectively. Joe it’s not that these are unknown concepts or processes. It’s it’s really a bit the speed of the, adoption to this concept. Do I accept this as a a role of my university? Do I see my university being responsible for tech transfer, or do I feel like we should stay in the scientific space and and I don’t want tech transfer? And I guess often this conflict that is a real conflict in the universities remains unresolved, and you get these, sorry for my French, half assed, approaches where you have, like, a small tech transfer team that is not equipped and, is not ready to really support, spin outs, but are doing something and probably very nice people with a lot of passion and, and personal effort, but they cannot change the realities of the infrastructure and the realities of, the university if they are not supported in the right with the right strategy.
Jörn “Joe” Menninger [00:50:09]:
I see. And for because we are we had to do a restart for several reasons, and we have a few pieces that we need to cut out. So we’re recording for almost 45 minutes. It I actually, a little bit. We are actually a little bit over our original heating schedule. Do you have any final closing words where people can learn more, and reach out to you guys?
Thomas Kösters MD at DEEP Ecosystems [00:50:36]:
Yes. We’ve made it to the last slide, actually. So, yeah, I would say if you’re interested in the topic, connect with us via, deepecosystems.com or the start of heat map where you see our publications. And, yeah, so feel free to to reach out. We are talking a lot about spinouts and, the development of the university based ecosystems in Europe. So definitely join the conversation and connect with us.
Jörn “Joe” Menninger [00:51:06]:
Mhmm. Great. Thomas, looking forward to do the next recording with you. Thank thank you very much, and see you soon.
Thomas Kösters MD at DEEP Ecosystems [00:51:13]:
Thank you so much.
Jörn “Joe” Menninger [00:51:16]:
Bye bye.
