Last year, thanks to IPOs, financing rounds and sales, about 630 million euros flowed into companies that are part of IZB Martinsried. At almost the same time that these figures were published, the Center for Advanced Regenerative Engineering, which is intended to combine modern stem cell technologies with pharmaceutical research, presented a new Bavarian prestige project. The state is contributing 15 million euros to develop the translation center. So, is everything coming up roses in the Bavarian biotech scene?
Prof. Dr. Horst Domdey in a conversation with VC-Magazin.
For a long time – especially after the emergence of the New Market – biotechnology was considered difficult terrain. How do things look for the industry in Bavaria today?
Biotechnology in the State of Bavaria has established itself very nicely over the years. Because of the unfortunately very small venture capital landscape for biotechnology and life sciences in Bavaria – and in Germany as a whole – most companies include the unusual focus in their business plan of generating sales volume as soon as possible, in order not to rely on those big investments. Some examples are service and technology companies, and equipment developers like ibidi, Nanion Technologies and NanoTemper Technologies. We are very well positioned in these areas. The great potential of new treatment concepts, which lies dormant in universities, for example, is still being underutilized.
Recently, startups have been the focus of great media interest. Does that also affect Bavarian startup figures in the biotech sector?
In my opinion, the increased reporting on startups has not influenced startup activity. We already have a very good atmosphere in the Bavarian biotech startup landscape. Many scientists are convinced of the high quality of their products, and are venturing out to create their own startups – in part with the goal of finalizing their research questions. One interesting development that can be seen over the last few years is that the scientific minds behind new technologies are no longer necessarily joining the company. In fact, that’s often not really necessary, because many researchers are outstanding in their field but have never learned how to sell a product.
Entrepreneurial ideas should feed even more easily into the natural sciences
How are ideas transferred from research to business? What are the challenges?
In Bavaria, the industry is based almost exclusively on the activity of the academic scene. As a result, most of the startups come from the two universities in Munich, from the Max Planck Institutes or the Helmholtz Center. We have hardly had any spinoffs from existing companies – as has been the case with Roche and Novartis in Switzerland – but maybe new business policies will change that a little bit, especially in more mature companies. For university education, it would be really be wonderful if entrepreneurial ideas could be integrated more easily into the natural sciences. Unfortunately, the decision-makers still have reservations about integrating these into the curricula. In my opinion, they are worried that students will be distracted too much from the real objective of professional training. There have been some recent achievements in terms of technology transfers from universities, but the status quo is still not satisfactory. Technology transfer offices as well as patent and licensing agencies are still chronically underfunded.
The IZB Martinsried companies alone collected about 630 million euros in 2015 through IPOs, financing rounds, and sales. What do financing opportunities look like in the industry?
Some of this seemingly high financing volume is a “blank check for the future,” so we shouldn’t get too carried away. Many startups do take place in and around Munich, though, since it is easier to access capital here than in most other regions of Bavaria. When it comes to financing young companies, the High-Tech Gründerfonds (HTGF) also plays an important role in Bavaria. Before the existence of the HTGF, BioM was almost exclusively responsible for seed financing in the biotechnology sector. Now we act more as a co-investor. However, the challenge – as in many other industries – is to raise funds in the 1st financing round after a seed investment. In 1999, there were about 35 venture capital companies in Munich alone that funded the area of life sciences; today there are just a handful of them all over Germany. Thus it is important to find new financing options and to work with the local biotechnology sector even on innovative projects, so they can be put on the market despite the difficult starting situation. We are currently working on setting up a team to develop the concept for a Bavarian life science and biotechnology venture capital fund.
What subsidies are available to counteract the financing shortfall?
For pre-seed financing, there is the GO Bio program, a concept that we originally developed at BioM. We then passed the concept on to the Federal Ministry of Economics and as a result, it became the model for the EXIST funding. In addition to that, Bavaria has the Flügge-Initiative, which offers scientists the chance to take time off from their research and to focus on innovation. Most recently, we created the m4 award as part of the leading-edge cluster program. This award is granted each year to five teams from the areas of biotech and medical technology, and provides them with up to 500,000 euros. A great example of a startup from this award is PreOmics, which grew out of a working group headed by Prof. Matthias Mann from the MPI of Biochemistry.
Prof. Dr. Horst Domdey is the Managing Director of BioM Biotech Cluster Development GmbH and BioM AG, Martinsried. He is also the spokesperson for the “Cluster Biotechnologie Bayern” (Bavarian Biotechnology Cluster) on behalf of the Bavarian State Government, and the spokesperson for the Munich leading-edge cluster “m4 – Personalisierte Medizin und zielgerichtete Therapien” (Personalized Medicine and Targeted Treatments).