Hatching New German Entrepreneurs
June 16, 2005
In 2004, only 26 German companies were provided with a total of 22 million euros ($26.5 million) as investment capital in their earliest phase of development, their so-called "seed-phase." That's in stark contrast to the 388 million euros of seed money invested in 272 young German companies at the peak of the technology boom in the year 2000.
It's a development that angers Hasso Plattner, the founder of SAP, the world's largest enterprise software company.
"We did not create enough new companies which could replace the companies which run into trouble or vanished," he said. "And we had a lot of companies in high-tech, in computer-electronics which didn't make it in the last 20 years. We lost a whole industry, which was not replaced by other start-ups. And this is a problem. In America we can see companies going, but other companies coming. And this is what's missing in Germany."
If Germany wants to keep pace with international competition, the country needs new, young companies, especially in such dynamic growth markets as information technology and telecommunications.
"Their success will then also result in growth in other areas," Plattner said.
A unique center
The scientific patron has appealed for an innovation offensive throughout German society. Addressing 250 guests from industry, science and politics at a resent forum in Potsdam, Plattner presented his own contribution: "HP Ventures", a founders' center for young and promising information technology companies in Potsdam will be unique in Germany.
Here, software-based product ideas can be "hatched" and made ready for marketing under the guidance of some of the world's most experienced consultants. The SAP-founder himself will head the unit, together with Israeli venture capital and incubator specialist Eran Davidson.
They wish to support innovative inventors. Their focus is on graduates from Plattner's own institute as well as first-rate professionals from other leading universities and research institutes from all over Germany. CEO Eran Davidson spelled out the requirements to new entrepreneurs who wish to apply.
First of all, the technology has to be innovative and applied, he said. Secondly, it has to solve painful problems and provide serious improvements. And lastly, it needs to target high-growth markets.
A willingness to accept help
The willingness to accept intensive guidance and business support is a condition for working with "Hasso Plattner Ventures," as is the readiness to accept support in product design and marketing. Technical infrastructure and complete office services will be provided, as well as early introduction to strategic partners and guidance in the relevant markets.
"All these big corporations sitting round here and all over Germany really need startup innovations," Davidson said. "They don't have it internally. They want somebody else to
do it. We will do it for them."
A billion euros needed
To encourage young entrepreneurs, Plattner launched a venture capital fund for his new project. Germany's most successful businessman intends to contribute at least half of the total capital resources of more than 50 million euros.
"But we must reawaken the entrepreneurial spirit in Germany," Plattner said and called for an additional investment of at least one billion euros annually for promoting new companies in Germany.
"That's the money we need to put into startups every single year at least if we want to compete in the long run with the United States, with China and India and the other countries which are coming up now," Plattner said.
Five startup companies a year will be incorporated into Plattner's incubator in Potsdam, where they will remain for two years on average. A maximum of approximately four million euros can be invested in each of the most promising company projects. The kick start investment will be approximately half a million euros against equity in the newly established company.
"Hopefully others see that this is not money lost to invest in start-up companies, that there is potential to make money," he said. "And when you see that seed money in California, in the Silicon Valley alone is $5.2 billion, then we have to do more here. And we have enough people with money. It's not that we have to wait for the government all the time. It could become something of a snowball-system of success."
A snowball system of success "made in Germany": Since many young German companies need more venture capital, Plattner is calling for the other 46 German billionaires to also make a personal investment in the future.