Idea Workshop Aims to Transform Academia Into Usable Technology
DEBORAH STEINBORN / Dow Jones Newswires 6nov00

BONN -- Andreas Engelke is living the venture capitalist's dream: Every day, dozens of innovative ideas land in his lap.

That's not surprising given his role as head of the Idea Workshop, a two-man team inside the German Research Society that turns good scientific theory into actual, thriving businesses.

In just two years, the workshop has helped hundreds of doctoral students in all disciplines of science -- and turned the logic behind German research funding upside-down. In the next two years, the Idea Workshop aims to become the premier venture-capital venue for German science.

In the past, German students had to rely on professors for advice and clout to obtain research funds. The professors in turn, often took credit for the research findings. Final products rarely made it beyond academic circles. But Mr. Engelke, himself a scientist with a doctorate in a variety of fields, wanted to break the academic mindset by translating academic research into usable technology, rather than losing ideas and talent to countries such as the U.S.

Then he stumbled on a way to beat the system. The German Research Society, or DFG, is a federal agency that spends 2.5 billion marks (1.28 billion euros $1.11 billion) each year to fund about 20,000 scientific research projects. It receives every funding application for research in Germany. While reviewing those applications as a DFG project manager back in 1997, Mr. Engelke detected an untapped niche with huge potential.

Mining for Practical Concepts

"Every week I got countless project and patent applications on my desk," he recalled at the workshop's small offices inside the massive DFG headquarters in Bonn. "But no one looked at them as potential businesses. They just got lost in the shuffle."

Mr. Engelke decided to change that by offering students a sort of incubator for their ideas: advice on developing business plans, access to a wide network of contacts and guidance in finding the right managers for their companies. But like the scientists whom he would later help build companies, he knew he needed help from the business world. So he teamed up with Christoph Herr, an old acquaintance and Deutsche Telekom AG executive who specialized in start-ups.

Mr. Engelke's scientific know-how and Mr. Herr's business savvy helped convince the right people at the DFG to give the idea a try. The agency saw the workshop as a low-cost vehicle for promoting German research and its practical applications. "Neither one of us could have gotten the Idea Workshop off the ground by himself," Mr. Herr says. "But together, we have the right mix."

With exclusive access to DFG research applications, this dynamic duo singles out good ideas with strong commercial potential, then helps the students form businesses. Since autumn 1998, the Idea Workshop has helped turn five ideas from scientists at German universities and research institutes into companies, and many more into patents. Fifty other projects are on their way to being incorporated.

Most ideas are easy to find -- written in black and white on the funding applications themselves. Workshop ideas range from the straightforward (e-commerce software applications) to the complex (biotech platforms that diagnose genetic causes of disease) to the bizarre (modernizing 9th-century Sanskrit philosophical scripts). Roughly half of the projects the workshop has sponsored are related to information technology; another 23% are in biotech. Natural and social sciences and engineering make up the rest.

Nurturing Network

Messrs. Engelke and Herr bring researchers and business people together through a network of more than 30 financial backers, industrial conglomerates, patent attorneys, consultants and venture capitalists -- a mosaic of DFG and German National Science Foundation contacts as well as personal relationships.

Their own skills also come in handy. The bespectacled 42-year-old Mr. Engelke is able to discuss the most complex scientific formulae with ease, while the 38-year-old Mr. Herr, a nattily-dressed fast talker, can schmooze with Germany's top corporate executives as well as negotiate with venture capitalists.

The DFG's 70 project managers do the initial screening. These "idea scouts" -- as the workshop calls them -- hand in three-page summaries of student applications that may have market potential. As an incentive, the workshop pays a modest finders' fee to scouts whose summaries are followed up.

As soon as it hits a promising idea, the workshop sets the wheels in motion. Using data provided by the Gartner Group, Messrs. Engelke and Herr conduct research to determine market demand for a product or business. If the potential is there, they meet the applicants and talk through a business plan. Within weeks, they arrange the first business meetings -- between the scientist and industry specialists, consultants, venture capitalists and attorneys.

Headhunters who specialize in science and high-tech executives search for managers who might fit well with the idea and its inventors. German monthly magazine Manager also puts out feelers as part of an Internet-based alliance with the workshop. Professional managers volunteer their time to a project until the company is formed then decide whether to join the start-up.

All these services are free, so it's no wonder that Mr. Engelke can't recall any potential clients turning the services down.

Tapping Professional Volunteers

Andreas Jenne, 32-year-old founder of Munich biotech start-up NascaCell GmbH, says the Idea Workshop gave him the "tips" he needed to bring his idea to market within just six months. Last November, he and two fellow doctoral students sent an e-mail to the workshop explaining their idea. Things moved almost at warp speed after that.

At their very first meeting with Messrs. Engelke and Herr in Bonn, Mr. Jenne and his partners presented an initial business plan. The workshop, in turn, introduced them to a consultant with Garching Innovation -- an offshoot of the Max Planck Society, which helps create biotech companies from the state-financed research network and also works closely with the workshop.

With additional coaching from both groups, Mr. Jenne presented a more solid business plan in his second workshop meeting early this year. At that time, he was introduced to a manager in the field of medicine, who volunteered as a consultant to NascaCell until the company had been established. Mr. Jenne later obtained a first round of seed funding in March from Munich-based venture capitalist TransConnect -- another workshop contact.

In this case, the volunteer manager chose not to come on board when NascaCell was founded in May but continues as an advisor in exchange for a small stock option in the firm. Messrs. Engelke and Herr are now searching for a full-time manager for NascaCell. In the meantime, Mr. Jenne serves as acting CEO.

No Exit Strategy

To be sure, the Idea Workshop isn't the only group trying to tap German science for good business ideas. German scientists have growing access to venture capital and incubators that specialize in technology and biotechnology. Garching Innovation, for example, has helped launch more than 30 biotech companies over the last decade. And private-public partnerships, such as the one between Siemens AG and Munich Technical University, also seek to turn high-tech innovations into marketable products.

But scientists who have used it say the Idea Workshop is the only group that really combines an understanding of science and business. Messrs. Engleke and Herr are also quick to point out how they differ from traditional venture capitalists who never go into a deal without an exit strategy.

The workshop's services were "one-of a kind," says Tim Eckardt, the 42-year-old co-founder of Xtradyne Technologies AG, a Berlin start-up that offers Internet security solutions for e-commerce. "They helped us with everything _ from coaching on the basics, to advice and contacts on the venture-capital side, to how to set up employee stock-options ... and how to land customer contracts."

Expanding Services

To develop even more projects such as NascaCell and Xtradyne in the future, early next year the workshop will become a legally independent DFG unit that will launch a 100 million mark venture-capital fund. "As a nonprofit organization, the DFG can't make risky investments, but as an incubator we need money to fund our projects," Mr. Engelke said, summing up the main limitation the workshop has struggled with since its inception.

But as a limited-liability company, to be called DFG-Idea Workshop Management GmbH, the workshop will be able to take stakes in any start-up it finances -- and pour any profits back into hiring more staff and expanding its services. It will continue to have exclusive access to DFG applications, but it will also help nonacademic scientific entrepreneurs.

Already, Deutsche Bank AG, DaimlerChrysler AG service arm Debis and the National Science Foundation have each signed on as 16% shareholders in the company; the DFG will hold an additional 16%. Two other German blue-chip companies are also close to taking 16% stakes. Workshop employees -- Messrs. Engelke, Herr and a dozen new colleagues they hope to hire over the next year -- together will hold an additional 4% in the new group.

The large shareholders will each invest an initial 50,000 marks to get the company up and running -- and another 20 million marks each in the workshop's venture-capital fund. State-backed development bank Kreditanstalt fuer Wiederaufbau will also invest 20 million marks in the fund. These investors will get their returns from the fund when its start-ups become profitable.

As the fund develops, Messrs. Engelke and Herr hope their clients and other practicing scientists will contribute another five million marks or so in what they call an "Ideas and More" program for scientists.

Mr. Engelke claims the new structure will make the workshop "the first public-private technology-transfer model in Germany that's profit-oriented."

Indeed, starting next year clients will either have to accept venture-capital funding from the Idea Workshop (in exchange for a share of their company) or give 10% of their start-up up in return for its services -- the going rate for incubators these days, Mr. Herr says.

As for the longer-term? Mr. Herr is already eyeing the vast opportunities in Eastern European science circles. "Like a lot of the companies we help, we're still in the very early phase ... . But we have a business plan to become the VC for science in Europe," he says with a grin.