In April, we par­tic­i­pated in a trip to Japan with a Thürin­gen del­e­ga­tion and were able to inter­act with the startup com­mu­ni­ties in Osaka and Tokyo, which were impres­sive.  In the last 5–10 years the Japan­ese startup ecosys­tem has exploded in size and greatly improved in qual­ity, as work­ing for a Japan­ese con­glo­morate is no longer seen as the only esteemed career path.  In Japan, as in many parts of the globe, it has become en vogue to found a startup.

This trip to Japan crys­tal­ized our view that the pro­lif­er­a­tion of star­tups (often very sim­i­lar star­tups) around the world has been expo­nen­tial in the last years, notwith­stand­ing the pan­demic and geopo­lit­i­cal wars and con­flicts.  Infor­ma­tion and, even more impor­tantly, ideas are tra­vers­ing the globe at light speed with very lit­tle fric­tion.  This extremely rapid and easy access to new ideas, no mat­ter where they emerge in the world, cre­ates tremen­dous value for human­ity and is spur­ing inno­va­tion on an unprece­dented level.  While this devel­op­ment is awe-inspir­ing, it also means that any idea that can be eas­ily repli­cated will be repli­cated.  Impor­tantly, for star­tups and investors it dra­mat­i­cally increases the pre­mium on inno­va­tions that are truly dif­fi­cult to copy or emulate.

While there can be many forms of pro­tec­tion from this far-reach­ing global com­pe­ti­tion, such as juri­sidic­tional laws (GDPR, for exam­ple) or the need for some prox­im­ity to your cus­tomers, many inno­v­a­tive busi­nesses have eas­ily trans­portable or replic­a­ble inno­va­tions.  For exam­ple, we view many AI-appli­ca­tion-based busi­ness mod­els as being highly-inno­v­a­tive but also sucep­ti­ble to repli­ca­tion or hav­ing their prod­uct become a tool/feature in the large tech plat­forms´ offerings.

In Thürin­gen, we pre­domi­nently have star­tups that pos­sess truly ground­break­ing inno­va­tions that are patentable and pro­tectable to a large degree.  Of course, hav­ing a pro­tected inno­va­tion is just the first step in build­ing a sus­tain­ably suc­cess­ful busi­ness.  How­ever, hav­ing this pro­tectable foun­da­tion gives bm|t the con­fi­dence to invest cap­i­tal and other resources to build the busi­ness, or to fur­ther develop the inno­va­tion to the point where an attrac­tive acquis­tion is likely.

Thürin­gen star­tups often have a hard­ware (phys­i­cal product/technology) base or com­po­nent to their inno­va­tions. And while it is true that the hard­ware seg­ment of the startup world often gets neglected by clas­sic VC investors because “hard­ware is hard”, over the long-term, hard­ware often offers some valu­able pro­tec­tion.  Thus in the longer run, these hard­ware-based mod­els are often not as “hard” as hav­ing a busi­ness that is vul­ner­a­ble to quick mar­ket entry of well-financed com­peti­tors from any­where in the world, as many purely soft­ware-based busi­ness mod­els are.

Essen­tially, for both star­tups and investors, inter­est­ing inno­va­tions them­selves are no longer enough. Inno­va­tions must also be pro­tectable and extremely hard to repli­cate in order to make a startup attrac­tive for invest­ment.  We are for­tu­nate to be invest­ing in Thürin­gen – an inno­va­tion ecosys­tem, which offers mean­ing­ful and pro­tectable inno­va­tions.  Our role as a com­mit­ted investor is to assist Thürin­gen star­tups in trans­form­ing these impres­sive inno­va­tions into valu­able, sus­tain­ably suc­cess­ful companies.

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