From lab to launch
Prof. Thomas Bauernhansl believes recognizing and supporting this motivation is crucial. A mechanical engineer by training, Bauernhansl has been the head of the Fraunhofer Institute for Manufacturing Engineering and Automation IPA in Stuttgart since 2011. His institute is a leader across Europe in producing spinoffs from its research. Bauernhansl’s personal hard work and dedication is one of the reasons. He has been instrumental in driving the strategic establishment of spin-offs at Fraunhofer IPA and has himself supported about 30 spin-offs from lab to launch over the course of his career. The Unipreneurs initiative named him one of 20 outstanding figures in 2023 in recognition of his commitment to spin-offs and entrepreneurship. “In terms of research as well as technology transfer and start-ups, the most important factors in our success are our researchers and their expertise and motivation,” Bauernhansl says.
“Our aim is to unleash this potential and actively open up many paths to personal development for people who want to start a business.” On a concrete level, he adds, “We must take into account the perspectives of potential users and industry investors right from the planning phase of our research. During our research, we also need to adopt an entrepreneurial mindset and ask ourselves questions such as: What real-world problems can we solve, and for which user groups, with our technology as we compete with others? Can we scale our research findings to an industrial level? Are we meeting the rigorous demands of investors? If we can find answers to those questions for a particular technology, then spin-offs or industrial partnerships are logical next steps.”
So, what Germany needs is ideas, and above all, we also need entrepreneurs to nurture those ideas and put them into action. And that, in turn, is only possible in a functioning transfer system. These days, small start-ups are a primary driver of innovation. Ideally, research activity supplies fresh findings and ideas to contribute to this. Established companies provide support in the form of infrastructure, experience, contracts and investment. Policymakers create a motivational operating environment and ensure that the necessary start-up funding is available. This interplay between the research sector, industry and government turns innovations into success stories. Or that is how it should work in theory, anyway.
From gap to opportunity
A look at what happens in the real world reveals that Germany scores fairly low as a place to start a business, as the German Chamber of Commerce and Industry (DIHK) stated in its August 2024 report on the German start-up scene. Obstacles to entrepreneurship include meager domestic consumer demand, stringent regulations, structural deficiencies, an uncertain environment, high costs and a shortage of skilled workers. Lack of collaboration between established industries, small and medium-sized enterprises and innovative start-ups is another impediment.
In the promising deep tech sector, Europe is especially lagging behind the U.S. on aspects such as entrepreneurship, per capita investment in growth, and IPO value. This field encompasses forward-looking technologies with the potential to radically reshape business models or even entire industries. That includes AI and quantum technologies, along with biotechnology, robotics, and new materials. The U.S. spent some 51 billion dollars on these areas in 2022, compared to just 19.7 billion in Europe. However, a recent McKinsey study holds out hope. The study, “European Deep Tech: Opportunities and Discoveries,” shows that the European deep tech sector is growing increasingly relevant and attractive. Europe’s share of global investment in this segment has nearly doubled since 2019, going from 10 percent that year to 19 percent in 2023.
Deep tech attracted nearly half (44 percent) of all tech investment in Europe. That’s an increase of 18 percentage points in four years. “Deep tech represents a unique opportunity for Europe to restore its somewhat faded innovative strength and competitiveness at the global level,” the McKinsey analysts note. “Achieving that will require targeted cooperation among all stakeholders: universities, research institutions, government and private enterprise. With its long history of engineering and outstanding research institutions, Germany in particular must make a crucial contribution to this shift.”
Fraunhofer: a model for tech transfer
One organization bridging the gap between research and industry, with a focus on application as part of its mission, is striving to make just that kind of contribution. Fraunhofer president Prof. Holger Hanselka stresses how important tech transfer is to the organization: “Fraunhofer’s mission and fundamental purpose is to ensure the sustainable transfer of scientific findings to the industrial and business sectors. We have a special focus on three areas. First, industrial contracts are our core business, and they are what makes us unique among all scientific and research institutions in Germany. Second, our licensing business encompasses first-class patent families. And third, our innovative spin-offs are based first and foremost on deep tech and IP with lasting value.”
This means Fraunhofer’s key strength is its close relationship with business and industry: Collaboration with companies on challenges that they cannot resolve on their own is the organization’s most important transfer path. Each of the 76 Fraunhofer institutes operates as a business entity in its own right, independently raising twothirds of its budget from industry and public contracting bodies. In turn, the companies benefit from the researchers’ expertise in the form of collaborative projects, cooperation, or awarding of contracts. Licensing of technologies and patents is another way that knowledge transfer takes place. Fraunhofer has almost 3,000 active license agreements at present. Audio or video codecs developed by Fraunhofer institutes in Berlin and Erlangen are an especially popular example. They are used by millions of people each and every day.
The third route by which research findings make their way into real-world application − which is also the most recent, having been established around 24 years ago − is spin-offs from institutes or existing start-ups, which draw on Fraunhofer technology for a competitive edge. “We believe in the fundamental importance of offering conditions, within the existing legal framework, that are conducive to starting new businesses in the area of transferring intellectual property,” Hanselka notes. About 500 technology spin-offs have been launched since 2000. That makes Fraunhofer a leader among research organizations not affiliated with academia. As for which transfer path is the best one for a given technology, that is ultimately decided by the potential for industrial scaling.
Spin-offs: driving the mediumsized businesses of tomorrow
But technology alone is no guarantee of success. Many innovative technologies fail because they were not developed with the market in mind. Successful execution is crucial. To provide those looking to start a business with comprehensive support from the initial idea to the spin-off, Fraunhofer has implemented coordinated transfer programs and licensing terms that are friendly to start-ups. Fraunhofer Venture’s activities provide extensive support to both spin-offs from the Fraunhofer institutes and collaborative arrangements with external start-ups. As one example, the CoLab tech collaboration program brings deep tech entrepreneurs and established start-ups together with Fraunhofer researchers. The Match platform developed internally at Fraunhofer is used to find the right technology from around the world of Fraunhofer for founders’ product visions.
The partnerships between startups and Fraunhofer gain access to the necessary structures and know-how and to a comprehensive network so they can bring their new ideas and technologies to market. The AHEAD program offers financial and methodological support for Fraunhofer’s own spin-off projects, providing methodological and substantive support to accelerate the start-up path and give new businesses financial breathing room. The three-stage transfer support program is structured to work like a business incubator. Its goal is to validate business models and prepare teams and Fraunhofer technology for the start-up and commercialization phase in less than 24 months. Effective and impactful workshops, coaching, an internal project budget of up to 150,000 euros, and a large partner ecosystem made up of investors and industry players combine to help business ideas mature and get potential entrepreneurs ready to start their business and enter the market. This approach is a success: 96 percent of Fraunhofer start-ups are still active on the market three years after they are first founded. To provide optimal support for development of new business ideas and start-ups, Fraunhofer Venture and the AHEAD program team work with a community that is well versed in deep tech and includes business angels, investors, business schools, and the venture units of other non-university research institutions.
In addition to providing support for the start-up process, Fraunhofer itself can also get involved if the founding team wishes. In this area, Fraunhofer has built an extensive network with early-stage investors, alongside close collaboration with and involvement in the High-Tech Gründerfonds (HTGF), Germany’s leading seed investor – thereby also unlocking opportunities for the Fraunhofer-Gesellschaft to invest in select spin-offs as a co-investor (the portfolio currently includes over 50 technology shareholdings). One vehicle that has proven its value is the Fraunhofer Technology Transfer Fund (FTTF), which Fraunhofer and the European Investment Fund launched in 2019 with a volume of 60 million euros with the goal of investing in spin-offs based on Fraunhofer technologies. The investment phase of the fund concluded in 2023. Work is currently under way on the next stage. Overall, Fraunhofer is monitoring the positive follow-up concepts in the German venture capital scene for deep tech start-ups and welcomes the initiatives put forward by the German federal government in this area (Future Fund).
Long-term ties as success factor
But should Fraunhofer institutes even be trying to help their best and brightest start their own businesses? Launching a business with Fraunhofer is a win for the founding teams, which gain access to infrastructure, expertise and networks, but it is also a gain for the institutes themselves, as Bauernhansl explains: “Start-ups maintain ties with their institute in a variety of ways, including research contracts, license relationships and collaboration. Spin-offs are our way to offer entrepreneurship as a career step within our own ecosystem.” And some founders are also happy to come back to the institute after a successful exit or to start another new business after a period of research. “There are several ways we benefit from this: We exploit, upgrade, and scale technologies that have reached the limits of their research potential for our institute, which helps bring in returns and creates a positive feedback loop with our research findings,” Bauernhansl says. “At the same time, we have the opportunity to bring leading entrepreneurial thinkers to the institute, where they can serve as role models for our researchers and intrapreneurs.” Read on for five examples of how these kinds of role models make an impact through their work, what prompts them to take the plunge and start their own business, and how they plan to work with Fraunhofer for the future of German industry and society.
Fraunhofer-Gesellschaft