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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