IDEA SPIN-OFF CAPITAL

Fraunhofer Venture29.02.2012, STOA-Workshop: „Knowledge Transfer form Public Research Organisations“

Sebastian Surma

Applied research by the Fraunhofer-Societey

More than 80 research institutions, including 60 Fraunhofer institutes

More than 18,000 employees, the majority educated in the natural sciences or engineering

An annual research volume of €1.8 billion, of which €1.5 billion is generated through contract research.

70 percent of this research revenue derives from contracts with industry and from publicly financed research projects.

30 percent is contributed by the German federal government and the Länder governments in the form of institutional financing.

International collaboration through representative offices in Europe, the US, Asia and the Middle East

Financial structure of the Fraunhofer-SocietyAnnual research volume in Million €.

Accelerating innovation by creating regional focuses:Reinforcing strengthsCreating beacons of research

UniversityBasic Research

IndustryR&D for

Products and Services

Fraunhofer

Applied Research

Teamwork

Research Area – Region – Fraunhofer

Fraunhofer innovation clusters

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Fraunhofer Venture

Spin-offSpin-off

Spin-offs as the 3rd technology transfer to the market.

Profits from spin-offs (research contracts, licensing fees, dividends and exits).

Cooperative networks between Fraunhofer and spin-offs.

Promotion of entrepreneurial thinking within Fraunhofer.

Spin-offs as the 3rd technology transfer to the market.

Profits from spin-offs (research contracts, licensing fees, dividends and exits).

Cooperative networks between Fraunhofer and spin-offs.

Promotion of entrepreneurial thinking within Fraunhofer.

contract research for industry

IPR management

Positive - practical approaches & lessons learned

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1. Investor network

2. Internal funding

3. Fraunhofer infrastructure

4. Customer contact

5. Brand name

6. Lean operations

7. Employment options

Positive - practical approaches & lessons learned

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1. Investor network

2. Internal funding

3. Fraunhofer infrastructure

4. Customer contact

5. Brand name

6. Lean operations

7. Employment options

>>> We maintain a very tight network

to VC's, Business Angels and state run

investment offices (Bayernkapital,

TGFS, HTGF). <<<

Positive - practical approaches & lessons learned

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1. Investor network

2. Internal funding

3. Fraunhofer infrastructure

4. Customer contact

5. Brand name

6. Lean operations

7. Employment options

>>> Our internal funding and

supporting programs helps scientists

to become founders and good

managers (FFE & FFM – Fraunhofer

Funds Entrepreneurship, Fraunhofer

Funds Management). <<<

Positive - practical approaches & lessons learned

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1. Investor network

2. Internal funding

3. Fraunhofer infrastructure

4. Customer contact

5. Brand name

6. Lean operations

7. Employment options

>>> We make sure to give scientists

the option to prepare their ventures

as good as possible within the

research institute, before going out on

the market and starting up. <<<

Positive - practical approaches & lessons learned

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1. Investor network

2. Internal funding

3. Fraunhofer infrastructure

4. Customer contact

5. Brand name

6. Lean operations

7. Employment options

>>> We motivate our scientists to

develop their to-be-commercialized

product/service in close cooperation

with prospective customers. By this

way, they keep themselves clear form

the phenomenon of "analysis

paralysis" and at the same time build

up relationships to a prized client

base. <<<

Positive - practical approaches & lessons learned

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1. Investor network

2. Internal funding

3. Fraunhofer infrastructure

4. Customer contact

5. Brand name

6. Lean operations

7. Employment options

>>> Our "Fraunhofer" brand is a very

precious asset, not just in the

scientific world. Every spin-off that

has its roots in one of our Fraunhofer

institutes massively gains credibility

by being connected to our brand

name. <<<

Positive - practical approaches & lessons learned

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1. Investor network

2. Internal funding

3. Fraunhofer infrastructure

4. Customer contact

5. Brand name

6. Lean operations

7. Employment options

>>> We keep a close connection to

our spin off's. They perceive us as

their research backbone. This way

they don't need to build up their own

research division and can keep an

uncompromised market focus. <<<

Positive - practical approaches & lessons learned

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1. Investor network

2. Internal funding

3. Fraunhofer infrastructure

4. Customer contact

5. Brand name

6. Lean operations

7. Employment options

>>> We give our scientists the feeling

that there still is a security string that

keeps them from falling if disaster

strikes (part time work options, "come

back" options, …). <<<

Negative – what we learned that does not work

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1. Incentive system

2. Junior managers

3. Founders team

4. Decision process

5. Investment fund

6. Portfolio size

Negative – what we learned that does not work

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1. Incentive system

2. Junior managers

3. Founders team

4. Decision process

5. Investment fund

6. Portfolio size

>>> It is of decisive importance to

make sure that the research institute

we want to spin a company out of

understands what it gains by a new

venture. It shouldn't perceive a spin-

off just as a loss of good talent and

research revenue. <<<

Negative – what we learned that does not work

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1. Incentive system

2. Junior managers

3. Founders team

4. Decision process

5. Investment fund

6. Portfolio size

>>> We tried to enhance (founder)

teams with junior management

experts, who were supposed to focus

on just a single spin-off project and

eventually become part of that team.

<<<

Negative – what we learned that does not work

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1. Incentive system

2. Junior managers

3. Founders team

4. Decision process

5. Investment fund

6. Portfolio size

>>> If we do not have the right team

(quality-wise) at hand we should not

start a company. Likewise, we should

not start a company with a team that

is to big then necessary. <<<

Negative – what we learned that does not work

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1. Incentive system

2. Junior managers

3. Founders team

4. Decision process

5. Investment fund

6. Portfolio size

>>> The longer it takes us to come to

a decision whether we want to

support a given spin-off project (and

become shareholder) or not , the more

likely it will be that the team and their

(prospective) investors will start

thinking about doing it without

Fraunhofer. <<<

Negative – what we learned that does not work

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1. Incentive system

2. Junior managers

3. Founders team

4. Decision process

5. Investment fund

6. Portfolio size

>>> Sometimes we miss the option to

use our own investment fund in order

to act quickly and independently. <<<

Negative – what we learned that does not work

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1. Incentive system

2. Junior managers

3. Founders team

4. Decision process

5. Investment fund

6. Portfolio size

>>> To manage the rather big

portfolio of companies that

Fraunhofer holds shares of (~90)

consumes a lot of our time. Hence, we

learned that it is important to put

more emphasis on our exit strategies.

<<<

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Annual earnings from spin-offs

Earnings from spin-offsmill. Euro2006 - 2010

Source: Fraunhofer Venture, 2011

Source: Fraunhofer-Gesellschaft, Sigma Datenbank, 2006

1,6

3,6 3,4

6,4

25,326,5

20,2

18,1 18,6

F&E-Erträge

Lizenzeinnahmen

Exits

2006 2007 2008 2009 2010

23,2

18,9

19,3

14,4

14,9

exits

leasing licencing fees

contract research

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Fraunhofer Spin-offs

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Fraunhofer Venture

Contact

Sebastian SurmaSpin-offs and Investments

Fraunhofer VentureHansastrasse 27cD - 80686 MunichTel. +49 89 1205 - 4519Fax +49 89 1205 - 77 - 4519

http://www.fraunhoferventure.de