Germany and the Biotech Startup Community

In recent years, Germany’s biotech sector has experienced a period of economic growth and stability. This is mirrored in a 2016 record turnover of €3.5bn ($4.1bn), as well as a higher number of employees in German biotech companies, which at 18,000 employees was significantly higher than in 2015 (with 15,000 employees).

Where there were 591 biotech firms in 2015, Germany counted a new total of 623 companies, including 15 new startups in 2016. Of these 623 companies, approximately 81% are small and medium-sized enterprises (SMEs).

What Germany Can Offer to Biotech Startups

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With more than 400 higher education institutions and approximately 1,000 public research organizations, including the Max Planck Society, Helmholtz-, Leibniz-, and the Fraunhofer Associations, Germany is globally known as a central European life sciences hub.

A high level of science education, as well as a tightly woven network of SMEs, global companies (including Big Pharma) and research institutions, attracts thousands of highly educated and knowledgeable people from all over the world. This international workforce contributes greatly to the country’s successful life sciences industry.

Startups in particular benefit greatly from Germany’s flourishing life sciences ecosystem. Not only does the network of strong biotech clusters, research institutions and enterprises make it easy for startups to acquire talents, but they are also supported by a variety of venture capital providers and government funding programmes.

Scattered all around the country, Germany’s numerous incubators and accelerators provide startups with financial support, office or lab- space, and business advice. Some also offer closeness to venture capital, or networking opportunities with institutes, foundations, and industry members.

While incubators work on new business ideas and ventures, accelerators focus on building bonds with existing companies and entrepreneurs. Both base their work on the same fundamental idea: Getting in touch with management teams at a very early stage to participate and develop business models.

Introducing Germany’s Life Sciences Incubators and Accelerators

Well-known incubators and accelerators include Bayer’s CoLaborator, Pfizer’s Flying Health Incubator, Merck Accelerator, as well as smaller regional organizations, such as Life Science Accelerator Baden-Württemberg or Life Science Inkubator GmbH in Bonn.

“Our accelerator is a qualification program that helps startups in the pre-seed or seed phase to further boost and optimize their development,” explains Markus Buehler, Startup Support Manager at Life Science Accelerator Baden-Württemberg.

“The program connects startups with mentors and experts, helps them find suitable partners and supports the development of convincing business plans that can be presented to investors. Accompanying workshops cover business management, presentation training, and principles of business model innovation,” Buehler continues.

As an incubator, Bayer’s CoLaborator focuses on a different kind of startup support: “We provide ready-to-use infrastructures, such as laboratory space, necessary equipment, and additional services, for instance, mass spectroscopy or NMR,” clarifies Dr Joerg Knaeblein, Head of CoLaborator in Berlin. “We help startups to get a foot in the door through mentoring, joint projects or collaboration.”

Biotech Hotspots in Germany

Germany is home to a variety of life sciences incubators and accelerators, which are dispersed across the country. But what is the best place for a startup to move to? Where can it find the perfect mixture of workspace, funding and networking opportunities?

“I think there are quite a few biotech startup hotspots in Germany,” says Elmar Schaefer of the Life Science Inkubator GmbH Bonn. “Of course, Bonn is one of them. Others are Mannheim, Heidelberg, Martinsried, and Berlin.”

He points out the beneficial location of the Life Science Inkubator within the Center of Advanced European Studies and Research (CAESAR) in Bonn, as it is also very close to the universities of Cologne and Düsseldorf. In addition to the available funding by the federal and local governments, the incubator is easily accessible with a well-developed infrastructure.

Other criteria for an area to be labeled a biotech startup hotspot are in close proximity to laboratories, scientists, and research institutions.

“In Heidelberg, for instance, the University and prestigious research institutions, such as the European Molecular Biology Laboratory (EMBL), the German Cancer Research Center (DKFZ), the Center for Molecular Biology (ZMBH) and the Max Planck Institute of Medical Research (MPI) form an exceptionally vibrant life sciences cluster,” agrees Buehler. “Whereas Heidelberg and Tübingen are well-known life science hotspots in Germany, Mannheim is famous for its strong medtech cluster.”

There seems to be a bit of a bias when it comes to labeling the best location for biotech startups. Knaeblein, for example, names Berlin as the number one biotech startup hotspot, “because it has a vibrant biotech scene.” In his opinion, Martinsried in Munich is also worth a mention.

Government Support for Startups

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The German government sees the creation of startups as an essential part of the development and expansion of the German biotech industry. In their position paper from February 2017, the sector association of the German biotech industry, BIO-Deutschland, calls startups the ‘power stations’ for the translation of scientific results into real innovation.

It explains that a significant renewal rate is necessary for the global growth and competitive position of Germany’s biotech industry. This, in turn, makes it more attractive for international investors and industrial partners.

Having recognized the potential of the biotech startup sector, the German government has issued a number of funding and support programmes for startups to participate in. The two main programmes are GO-Bio and EXIST.

GO-Bio is organized by the Federal Ministry of Education and Research, BMBF, which enables young scientists to develop their own innovative research ideas towards an economic utilization. To become eligible for the support program, work groups have to participate in a competition.

Winners will then be qualified for two distinct support steps. Whereas the first phase focuses on the industrial and commercial or clinical application potential of the group’s idea, the second phase is all about the funding. Here, the groups are expected to start a fundraising campaign in collaboration with the GO-Bio program.

Since 2008, the government’s EXIST program is organized by the German Federal Ministry for Economic Affairs and Energy, BMWi. It supports university students and scientists at research institutions, as well as students who have already begun with the creation of a startup.

Comprised of three main schemes, EXIST aims at expanding the entrepreneurial environment of universities and research institutions. EXIST Culture of Entrepreneurship, for instance, works hard to create an entrepreneurial culture and attitude in universities.

The EXIST Business Start-Up Grant is made to support the early stages of scientists, graduates and students startup projects, whereas EXIST Transfer of Research focuses on the financial support of research ideas, proves the feasibility of startups’ technologies and helps them in launching their business.

A Bright Future Ahead?

Over the past few years, governmental support for biotech startups has been continuously increasing. Buehler knows why: “Startups rely on funding from private investors and venture capital companies. Especially biotech startups need large sums of venture capital and currently, they find it overseas or elsewhere in Europe, rather than in Germany. This means that many startups leave the country. A loss for Germany, therefore.”

He explains that as a consequence, the German government is starting to offer tax incentives for German investors. “Another move that we as an accelerator are making, is to get international investors to Germany. We are therefore expanding international networks, focusing on the American Bay Area and Boston, as well as reaching out to investors from China.”

With these strategic moves, the German government and individual incubators and accelerators are hoping to convince the largely risk-averse German VCs to invest into biotech startups after all. As the investment into biotech companies is a long-term and high-risk one, national VCs are often very reluctant to support these startups, forcing them to turn towards foreign investors instead.

Having recognized successful startups as the future of the biotech industry, however, the German government has now vowed to build a proper support network around them. After all, Germany was ranked the number one European biopharma cluster in 2015 and 2016. An image, surely, that the German government does not want to lose.

So What is the Country’s Government Doing to Stay on Top of the Ranking?

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“In future, there will be a closer and earlier direct link between research and development, startups, industry partners and VCs,” explains Schaefer. “The government has recognized that partnering is a fundamental and crucial part for the commercialization of innovations and developments in startups.”

Knaeblein agrees: “There will be more funding beyond seed-funding, for instance, Series A funding. Also, more incubators will be created with an increase in required infrastructure, not just empty lab space.”

With political support rapidly increasing, a tightly woven network of universities, research institutions and enterprises, and a vastness of biotech hotspots, Germany is on the best way to become the perfect place for a young biotech startup to settle and take root.