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From idea to start-up - founding a company in the field of life sciences

by Anke Wilde

Founding a company in the field of life sciences is associated with high initial investments for good equipment and capable minds are required. Scientists who dream of founding a company will find the authorities in Germany to be extremely considerate and generous. Yet the competition for ideas is fierce. On routes and possibilities of founding a company.

From idea to start-up - founding a company in the field of life sciences@ nicolas hansen - iStockphoto.comAn overview of the routes and funding options for launching a start-up in the field of life sciences
According to estimates by the BMBF, it was still relatively easy for innovative start-ups to come by venture capital from private investors in the 1990s. However, according to the ministry, investors now demand much higher standards of technological validation for start-up ideas. Branch representatives describe it in their own words: financially strong investors have become more reluctant to fund research and development. They want to keep their own risk low and only come on board when the prospects of a profit a definitely look good.

Last year, there was a huge decline in venture capital. According to a study conducted by the BMBF, this fell from 321 million euros in 2010 to 72 million euros in 2011. Public funding for industry remained relatively stable - every year, an average of 13 million euros is pumped into funding start-ups and around 30 million euros into research projects conducted by small and medium-sized enterprises.

The BMBF currently has four funding programmes available to start-ups. This includes the biotechnology start-up scheme known as the "Gründungsoffensive Biotechnologie" - GO-Bio for short. In the four selection rounds held since 2006, 34 projects out of a total of 400 applications have been approved. The start-up scheme supports research projects in the pre-start-up phase for up to four years; funding is also available for a further three years after the company has been launched. A new selection round is currently under way whose winner will be announced in November 2012.

Incubation for a start-up project

A further initiative is the "Life Science Inkubator" (LSI). The idea for this originated from the Max Planck Society. It is a public-private partnership within which the BMBF, the science ministry of the state of North Rhine-Westphalia, the NRW. bank, the Sparkasse KölnBonn, the Centre of Advanced European Studies and Research (caesar) in Bonn, and private investors have joined forces. With the Max Planck Society, Fraunhofer Society and Helmholtz Association, the heavyweights in non-university research in Germany are also involved.

Since 2009, the LSI has funded and financed start-up projects in the fields of biotechnology, pharmaceuticals and medical engineering all across Germany. Seven start-up projects have since been accepted. As with the GO-Bio, competition is fierce. In 2011, for instance, just 79 out of a total of around 300 projects were evaluated, i.e. their degree of innovation and the patent situation of the concept was verified, and, moreover, the team and the future company's prospects on the market were scrutinised. Just three were ultimately actually accepted onto the programme.

From idea to start-up - founding a company in the field of life sciences Marion Schink is Head of Communication at the Life Science Inkubator (LSI)

Start-up coaching for inveterate researchers

A comprehensive carefree package has been created for those who overcome this hurdle of breaking out and deciding to start up a business - "a kind of training centre in which the scientists learn how to run a company and how to arouse interest in their research project among investors," explains Marion Schink, Head of Communication at the LSI. Like cell cultures in incubators, the aspiring company founders shall be able to work on their projects under stimulating conditions and remain as free as possible from administrative hurdles. To this end, the team has relocated to Bonn and continues to work on their research project at the caesar research centre as employees of the LSI. The LSI also places the necessary infrastructure at their disposal.

They additionally receive intensive coaching on the subject of leadership skills. "At universities, tasks are delegated too rarely, but this is a pre-requisite for a company's success," says Schink, sharing her experience. The scientists learn how to plan in the long term and set clear aims. This requires a different mindset to the experimenting that takes place at universities and research institutes, where results are not the be all and end all.

Work at the LSI is financed by the federal government and the state of North Rhine-Westphalia with up to two million euros per project. Those accepted onto the programme can look forward to at least one investor for their emerging company. Follow-up financial support by the LSI Pre-Seed-Fonds GmbH also forms part of the programme insofar as it agrees to the transfer of funds following successful incubation. Among the backers are the participating banks, the non-university facilities, and the private investors. By way of return, the backers receive a share in the newly-founded company. This varies depending on the incubation period - 15 per cent basic allowance for the first year plus 0.8 per cent for each additional month. So after three years at the LSI, the backers receive a share of 34.2 per cent.

From idea to start-up - founding a company in the field of life sciences Jörg Fregien is the Managing Director at the LSI, which finances start-up projects from the fields of biotechnology, pharmaceuticals and medical engineering

Pilot project for further incubators

In comparison with other start-up programmes, the LSI gets involved in company development very early on, emphasises LSI Managing Director, Jörg Fregien. At this point, the risk of failure is still extremely high. However, the LSI's entrepreneurial expertise, the in-depth evaluation and project management should ensure that the start-up project does not fail for financial reasons. "Research naturally always entails an element of risk with regards to its success, and this cannot be entirely excluded." Fregien is convinced that a 50 per cent rate of success can be achieved with LSI - in comparison with other start-up programmes, which get involved at a far later stage. To date, the incubator has been doing well in the race: one start-up has already been launched and another is under way.

The LSI is now also to be introduced in other federal states. Negotiations are already under way with the responsible ministries and potential investors. There are plans for a subsidiary in Dresden and another in Göttingen. These will be in the field of photonics and optical technologies though, which is another highly innovative field of technology in Germany. "After all," Fregien says, "the Life Science Incubator model can be transferred to all fields of science".


academics :: December 2012