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The early years are the most important for tech startups. They need to establish themselves in the market, build a reputation and go international as soon as possible. The same applies to companies that are founded by a research institution such as a university.
“On average, it takes academic departments about three years to achieve their first international sales,” says Prof. Dr. Achim Walter of the Kiel Institute for Responsible Innovation (KIRI) at Kiel University. At first glance, it doesn’t sound that long. “But you have to bear in mind that the initial period without reliable customer demand is a big strain for the new company.”
Together with his colleague Dr Monika Sienknecht and partners from Copenhagen Business School and Wilfried Laurier University in Canada, he tracked the development of 163 academic spin-offs over an 18-year observation period. The results of the study have already been published in the journal Theory and practice of entrepreneurship.
Experience from collaborative research projects provides a time advantage
In 2005, the researchers began with initial surveys and evaluation of data on the careers of 487 founders. “Start-up teams whose members have gained experience in cooperation with more than six industrial partners or with more than two international researchers during their stay at a research institution cut the time to the first foreign turnover by more than half,” summarizes the results of Professor Walter learning. Branches with this collaborative experience during the research period thus achieve faster international success.
Most of the departments were founded by PhD students. “They are already gaining valuable skills for the early and successful internationalization of their later spin-offs through research projects if they are co-designed,” says Professor Walter.
“This allows them to achieve a significant acceleration of the internationalization of their business activities. Especially for the sale of innovative products based on the latest research results, it is very important to quickly obtain some kind of ‘proof of concept’ from overseas customers.”
“The results of the survey confirm CAU’s strategy to strengthen measures to support spin-off companies. They show that start-ups from science and academia in particular can make an important contribution to economic growth in Schleswig-Holstein with their above-average development,” says Axel Koch, Head of Transfers at CAU.
Internationalization is extremely important for many startups
ibidi GmbH is one of the investigated spin-offs, which is based in Munich and produces technological solutions for visualizing cell movements. “It was important to us to ship to the US as quickly as possible [after founding in 2001]. In the beginning, it was difficult to sell anything in Germany. As they say, a prophet has no honor in his own country. In addition, customers in Germany are very hesitant and cautious about new products. In the US, people were more curious and wanted to learn from us,” says Dr Valentin Kahl, CEO of ibidi, which now employs almost 110 people and is active in more than 40 countries.
Once established, academic departments are often successful
The study also shows that in this country, academic departments have a good chance of staying in the market with their predominantly research-oriented expertise. 106 of the 163 companies (approximately 65 percent) survived the study period, and ten were taken over by other companies (approximately six percent).
Only 47 left the market (about 29%). International studies also indicate a very high survival rate for academic spin-offs, which can be around 80 percent or more in the first five years. For comparison: the overall survival rate of start-ups in Germany after five years is around 37 percent (Federal Statistical Office: Business Demography according to the Business Register, Wiesbaden 2022).
“These results are really encouraging in terms of career prospects for scientists. They show that a scientific profession offers good conditions for achieving success in this field as well. The fact that this is especially true if the qualification phases have provided the students with their own international and cross-cultural experience is an important aspect for the career counseling services at the Postdoc Center, which we will also consider in the future,” explains Dr. Gesche Braker, director of Postdoc Center at CAU.
One advantage of academic departments is that they are often started with funding and based on the latest technology. In addition, the launch is usually well thought out, ie. not after a difficult start-up situation, but after more than a year of intensive preparation, which included a thorough study of the market situation. At CAU, the Center for Entrepreneurship (ZfE), which is part of the transfer department, advises scholars who want to take this step and head in this direction.
Achim Walter et al., Leveraging the Lab: How Pre-Foundation R&D Collaboration Affects the Internationalization Timing of Academic Spinoffs, Theory and practice of entrepreneurship (2022). DOI: 10.1177/10422587221141678