Real innovation takes place in startups, as is often heard. Yet, many startups are struggling with their funding and access to markets. Why is that? What can be done about it? And what makes startups so important, anyway? A conversation with two innovative tech entrepreneurs, one of whom is also active within 4TU.Impact.
It is the tragedy of innovations: they are – by definition – innovative. In their early stages, they have yet to prove themselves on a large scale. It is precisely at that stage that funding and support are needed to test, further develop and market these innovations. But who dares to invest in completely novel ideas?
This catch-22 has stood in the way of many tech developments. In recent years this has slowly started to change. Government and industry are joining forces to support innovation through incentive programmes such as TTT (see text box). The four Dutch TUs are also increasing their focusing on technology transfer, with programmes such as 4TU.Impact (see text box) and dedicated offices that help identify, support and market promising inventions.
But is that already effective? It is enough? Which bottlenecks are startups facing? Two experts, who each founded a tech start-up, are sharing their impressions. One of them is also leading a 4TU programme that helps bring innovations to the market.
Why are startups so important?
Nico: ‘Startups show a certain determination, a goal, an ambition to really create something new. This rare entrepreneurship should be cherished, because it is the SMEs that are the engine of our economy. We are a knowledge economy. Those startups develop so much knowledge and innovation in such a short space of time – large companies can never match that.’
Eric: ‘The people behind startups are often really passionate. Not necessarily to make money, but to make the world better, more sustainable and more efficient. To come up with good solutions for the ever-increasing problems that we face. You see that drive especially in startups.’
Nico: ‘In addition, many innovations are based on decades of fundamental research. This research does not take place at companies, but at the knowledge institutes. Something like MRI would never have come about without all those years of publicly funded, fundamental research on particle accelerators. It is that deeper understanding of the world that leads to real innovations. And that is not going to come from the big guys.’
Which type of innovations are especially important for the Netherlands?
Eric: ‘I think we shouldn't always try to put everything in a box. Startups are important across the board. You also see this tendency within the government: startups are only supported if they fit into a certain category. For example, my company makes concrete elements containing structures that diffract sound. People say they’re not high-tech, because you can’t plug them in. I strongly disagree. What’s more: there are many brilliant solutions that don't fit that box.’
Nico: ‘The program I lead is called ‘Smart Systems’. That also tends to compartmentalise. But we do have to make choices in policy. There will always be innovations that are left out. But you’re right: just because a category is not popular doesn’t mean that it is irrelevant. That’s why I always advocate open funding categories. We can certainly use more of those.’
Eric: ‘Funding is definitely an issue, yes. But at the same time it’s important to keep thinking like an entrepreneur. If an innovation is good enough, it will eventually make its breakthrough. To a certain extent, an entrepreneur should be self-sufficient. You just have to have a good story, a good product and a good market.’
Nico: ‘High-tech is often about hard science, about tangible things, like sensors. Such innovations require more time, money and expertise to get to the market. So I think it’s okay to make distinctions in this respect: there are major differences in financing needs.’
Which bottlenecks do startups have to deal with?
Eric: ‘Our government has arranged everything perfectly. As soon as you develop something that’s different, you cannot just try it out in practice. Take our noise reduction products. Traffic noise is subject to legal regulations. As innovators we have to comply to those too, but nobody knows how that works for something that’s completely new. How do you fit an innovation into current regulations? That's a swamp you can hardly get through.’
Nico: ‘I see that in the drone world too. Exactly what Eric says. All those aviation regulations... I said to myself once: I’ll pick up and move to America. But everything worked out in the end. For Eric, too.’
Eric: ‘By sheer determination. By lobbying and pushing. By intriguing and annoying people. By making sure you get a chance to prove yourself.’
Can 4TU play a role in this?
Nico: ‘As 4TU, we are strongly in favour of testing grounds: controlled environments where you can safely test inventions in practice, in realistic situations. If a technology has been proven there, it can move to the next stage more easily. So there is a lot to be gained there: in establishing those testing grounds. We’re working hard on that.’
Eric: ‘Can 4TU also lobby politicians? We often get stuck in endless discussions and are sent from pillar to post. Purely because the government does not have the right knowledge. It’s great that they’re careful, but they are also risk-averse. That’s right, I’m quite frustrated.’
Nico: ‘This risk aversion is not just found in the government, but in our entire Dutch DNA. That’s not good. We need more flexibility, even if only in allowing exceptions, or trial periods. Yes, we advocate for that at a national level.’
Eric: ‘The sooner a technology can prove itself, the sooner it can start making profits and do without funding.’
Nico: ‘Technologies that take longer to prove themselves are also less interesting for investors. We make it difficult for ourselves, as a country.’
But how can 4TU make a difference in this?
Nico: ‘First of all by informing PhD students that every TU has a valorisation office. And that they can apply for start-up financing - including small amounts. 25,000 euros may not sound like a lot, but it is enough to find out whether something is promising. Which gives access to larger funds. And if you remove that bit of risk, investors are also more likely to participate. And indeed we do lobbying. But the critical question I ask is whether the industry itself is not strong enough to lobby?’
Eric: ‘We are a loner, as a startup from the University of Twente. Lobbying is really difficult for us to arrange. Not all startups have the time - or the expertise - to unite.’
Nico: ‘We can play a role in this. We offer our PhD students a wide range of support and training in the field of entrepreneurship. The University of Twente also has a two-year programme for startups in which we offer them access to accountants and lawyers. Each TU has its own variant. The TTT programme has these elements too: a focus on telling a decent story, making a business plan, a communication strategy, HR…. We give people the tools they need to continue by themselves.’
Which role does the 4TU.Impact Plan play in this?
Nico: ‘We try to include as many elements from that report in our TTT programme as possible. For example access to talent. We ensure that we attract enough good talents, from potential CEOs, CTOs and CFOs to simply amazing technical people and sales talent. For example, we are working on a pool of CEO talent, so that not every startup has to look for one themselves.’
In addition to the TTT-SI program, 4TU is also working on another theme within TTT: optimal (re)use of materials and resources. 4TU hopes to add a third theme soon: medical technology. 4TU is working on a proposal together with a number of Dutch University Medical Centers (UMCs). ‘I really hope that it will become normal to collaborate with other knowledge institutions in terms of valorisation’, Nico notes. ‘That is also one of the goals of TTT: to ensure that this becomes more normal.’
It still sounds quite difficult to turn these collaborations into valorisation…. Are you optimistic about that?
Nico: ‘Despite all my critical remarks, we are still one of the most favourable countries in the world when it comes to our startup climate. These are also luxury problems. It’s just that we have very high ambitions: to make things even better.’
Eric: ‘Yes, I may sound a bit negative at times, but there are wonderful things to note as well. If you come up with something new here, people are immediately very enthusiastic. Everyone wants to participate and you get many opportunities. That is very different in Germany. But we do have a problem with that final step. The Germans are more likely to say: okay, you've proven that it works, so now you can put it into practice. But in that respect, it did help us that we started from a TU, you know. This has generated a lot of publicity and has also removed the first skepticism from the government.’
Nico: ‘We hear that a lot. University start-ups are taken more seriously.’
Eric, do you have any tips for 4TU in this regard?
Eric: ‘Keep lobbying the government to give innovations a chance. And keep training inventors to be entrepreneurs. Also for example in dealing with investors. You shouldn’t just accept all the money that you are offered. You have to look very carefully at the conditions. So that is also my tip for the startups themselves. Find an investor who suits you and who, in addition to money, also provides added value. Keep working from your own holy belief in your innovation. And don’t give up.’
Nico: ‘Indeed. And keep having fun.’ He thinks for a moment, then adds: ‘And be very aware of what you don't know and what you can't do. Don’t be afraid to ask for help. But whatever we do for you, the path will never be easy. That’s also a very nice aspect of pioneering – but you have to be able to handle it.’
Eric: ‘But if it works out, then pioneering is the coolest thing in the world.’