Recap: Accelerating the Frankfurt Startup Ecosystem

On 26. August Hessen’s leading startup and business advocates gathered at TechQuartier to learn about the current state of the area’s ecosystem and future needs for growth. Among the participants were representatives of Hesse Trade and Invest, of the Ministry of Economy, Goethe University, Science Park Kassel and Werte-Stiftung.

From the Startup Genome side, JF Gauthier (in attendance along with his co-founder Marc Penzel and Adam Bregu) presented his company’s research and findings in “Accelerating the Frankfurt Startup Ecosystem into an Engine of Economic Growth.”

The overarching message focused on the need for all the regional factions to work together to grow the current ecosystem. The recommendation is to become ambidextrous – using both “hands” (the first hand is traditional innovation clusters driven by corporations with universities represent, while the second is the startups ecosystems). The two hands need to work together to increase the number of entrepreneurs, and what Genome calls the ‘lab-to-startup performance.’

The Strategy

“Within 20 years, startups will become the largest single sector of the world’s economy and have become the No. 1 engine for job creation.”

According to Mr. Gauthier, Frankfurt’s ecosystem value and startup output is much lower than those of the top 30 global ecosystems. To create a real economic engine, he advises that the region triple the number of startups to 1200 by 2024. Of course, quality of startups is important, but sheer size is also a critical factor.

To reach this goal, Frankfurt must focus on its strengths, which it already is doing by betting on FinTech. But that cannot be the only locomotive. The city and surrounding region now needs to focus on Deep Tech, namely Artificial Intelligence, Blockchain, Life Sciences and Cybersecurity. Building on existing strengths creates the foundation upon which to start building new sub-sectors up.

The final recommendation is too close the success-factor gaps. For the Frankfurt ecosystem, this means helping startups to think globally instead of thinking only about markets, funding and collaborations within Germany. Germans generally stay in Germany. Increasing seed money and all early-stage funding is critical to growth, too. Without support in the early stages, startups die and founders go elsewhere for their next idea.

“About 92% of startups are doomed because of a lack of funding. They have to bootstrap. Many think they have to stay in Germany first because they lack funding,” Mr. Gauthier said about seed funding in the startup ecosystem. “You need to grow. Creating a strong center that supports startups, like TechQuartier.”

The Tactics

Mr. Gauthier shared the example of University of Waterloo in Canada. “Waterloo has high rates of startup creation because of it created an entrepreneurial culture starting with its universities.” Waterloo has a startup creation rate of 947 per million people, while Frankfurt’s rate stands at 67 per million people. Granted, Waterlook is a more mature ecosystem, with the Waterloo University creating startups since 1997, but the metropolitan Frankfurt is rich in higher education resources and should be able to do more.

The first step to building a successful student-to-founder paradigm is to engage PhDs, recent graduates and students and make them entrepreneurs. With more than 17 region universities teaching entrepreneurship, the talent in Frankfurt is potentially large, but students are not being engaged as startup collaborators and founders. Instead, students are being absorbed into the corporate culture and comfort.

“It’s about creating soft clusters, physical clusters and really having this clusters not only be about technology. Create clusters that are not just one university or one large corporation. Start building a cluster that has two or three universities, several large corporations and hundreds of startups. Start a program to create startups and not create technologies. It’s a totally different mindset and different people usually.”

Tactics to engage and welcome new startups includes:

  • Tech Transfer, promoting company formation and funding,
  • Student Competitions, creating of technologies and products,
  • STEM Education Focus, increase and promote diversity,
  • University SSOPs, places for entrepreneurial minds to learn and share,
  • Co-Op Programs, especially in SMEs and startups and
  • Entrepreneurship Curriculum, make it an explicit career path and start educating.

 

Regional Input

A discussion followed the presentation and regional policymakers, educators and startup experts shared their thoughts on the emerging Hessen startup ecosystem.

Dr. Andreas Hackethal, Professor für Finanzen am House of Finance der Frankfurter Goethe Universität: “What is missing is a clear-cut story. The power of a story that unites institutions is something we cannot overestimate. Now what is our story? This is the biggest challenge in my view to come up a story that pulls everyone together.”

Dr. Sebastian Schäfer: “We have a strong industry base, but our challenge here is really how to help industry and help new centers to develop. For that we have to take action. It’s really about getting out of this traditional economy class. We want to secure future welfare. We are at the heart of the financial part of the country, so we could lead the way.”

Dr. Thomas Funke: “We have 17 universities that have so much talent and researchers, but we are missing ways to brings these ideas to market and to startups. To grow the number of startups this the core issue. We need to activate all the students.”

What is the ideal governance architecture for the Frankfurt startup ecosystem? How do we build a world-class governance ecosystem?

The final consensus was that Frankfurt is rich in opportunity and the next step is designing a governance to help build together and engage students and professors to develop entrepreneurs, who in turn will take the leap of entrepreneurship and start their own ventures.