Germany is well known for its automotive, engineering and chemical companies. It is home to global giants in all three sectors. But in two rooms in the national capital, Berlin, investors and businesses had an opportunity to discover the rich seam of early-stage start-ups that are coming out of German and European universities. Named Stage Two, the event is Europe's largest early-stage start-up competition and reveals a zeal and aptitude for digital, medtech and greentech that is as healthy as you'll find in California. Are these spin-offs from academia the technology challengers to take on the USA?
Now in its third year, Stage Two was created by Malte Brettel and Dr Stephan Stubner. Both are professors in entrepreneurship at RWTH Aachen University and HHL Leipzig Graduate School of Management, respectively. Speaking to diginomica at the event in October, they both expressed a belief that the world economy is changing and, therefore, Germany and Europe need to foster new businesses. Professor Stubner says of the importance of start-ups:
If you see a problem and it troubles your heart, then you start a company.
Many of the start-ups pitching at Stage Two were tackling the big problems of our time: the climate emergency, energy transition and rising demands for healthcare. They created Stage Two to enable innovators, investors and the business community to come together and see new ideas. Brettel says:
We have built an ecosystem, and the investment levels have risen each year.
Berlin was the natural home for the event, says Brettel:
Berlin is right in the middle between Latvia and Portugal. It has a reputation, and its network of venture capital firms is strong.
The event is named Stage Two as every start-up present has already won stage one, which takes place within the university they herald from. Each university then brings its winners to Stage Two. On offer is €3.8 million in investment and €50,000 in cash prizes. Over 50 start-ups from 40 universities competed for this funding with two-minute pitches to a panel of investors. For 2023, the competition took place on a Thursday, as Stage Two iterated its model to include an investment workshop on Friday. The founding duo explained this is the result of learning that investors and start-ups need to gel their relationship right after the competition. Stuber says:
We are now offering more support as we have taken on feedback.
Events like Stage Two are increasing the professionalism of the university start-up communities. Stubner says:
You see that some of the teams pitch so well that they clearly get some training. There are some universities that are engaged and developing their own entrepreneur ecosystems.
From the outset, Stage Two has looked to connect start-ups to both investors and businesses. Three titans of the German economy back the event, Siemens, Deutsche Telekom and Bertelsmann. Relationships are already flourishing, claims Brettel:
Marvel Fusion is far away from a product, but Siemens is already working with them.
Marvel Fusion is developing laser-powered fusion, which has the potential to create high levels of energy with no carbon emissions and lower levels of nuclear waste. Germany, as well as the USA and the UK, are at the forefront of developing this new energy source, with scientists in the USA recently demonstrating a successful generation of energy. Marvel Fusion was offered the opportunity to build a demonstrator in the USA this July.
Siemens back Stage Two as part of group-wide focus on innovation. Sebastian Dreben R&D Strategy Manager at Siemens, says:
We are part of Stage Two as we really want to push the start-up ecosystem in Germany. The event matches our footprint of collaboration and support for universities.
It's not all altruistic. Siemens has applications that start-ups can use in the development and production of their ideas, and the diversified engineering business has a marketplace where it offers customers access to both its own machinery and technology, but also applications from non-Siemens companies.
For the venture capital firms, Stage Two is a chance to discover innovations to invest in and to learn about which technologies certain universities are at the forefront of. Birthe Ross of TGFS, a tech fund for the Saxony region of Germany, says:
It is interesting to see what comes out of other universities as you have everybody here for comparison.
For Elisabeth Spitz Shanchez of Xdeck an accelerator and VC fund from Cologne, the networking is highly valuable:
Here you can find start ups at an early stage, and it is great to really meet the founders.
Although VCs need a return on their investments, they agree with Stage Two founders Brettel and Stubner that Germany and Europe need a healthy start-up economy. Mark Windeknecht of the World Fund climate tech fund says:
I love that people are passionate about what they do and that means they will find the way to execute their ideas.
Andrea Zitna of Speedinvest agrees:
Passion and domain experience, when the two meet, it is perfect.
And there was plenty of passion and experience on display. Stage Two in 2023 featured digital business models for healthcare and nutrition, artificial intelligence hardware, desalination, detergents that don't use petrochemicals, using data centre heat for homes, and hospital catering management. There were also retail and travel digital businesses, and perhaps concerning, an AI that can alter your voice for its accent and emotion. No security concerns there then! Digital technology was at the heart of every idea presented.
Across Europe, nations are struggling with rising healthcare costs as the population ages, and its heavy industries need to reduce their carbon emissions. At Stage Two, there were ideas and business models to tackle these deep problems.
An academic example
Discussing the creation of Stage Two with its founders, Stubner and Brettel added that the event was not only creating an ecosystem for start-ups, universities and investors, but it is also an example of the new and future role of academia. Brettel explains:
Universities have to go through a transformation. For 500 years, someone stood up in front of people and lectured. We have to change the role of universities; it is about working with people.
He says the COVID-19 pandemic briefly led to some new methods, but many institutions are going back to old ways. Stubner adds:
The challenge lies in this term lecturing. Now, you need to be a curator, moderator and coach.
I want my students to think and interact, but they are not prepared for that, and our school system doesn't prepare people to embrace this way of learning.
CIOs and CTOs need to deliver innovation, yet they face a skills shortage. As their organizations struggle to deal with high inflation and the desperate need to tackle the climate emergency, working with start-ups is one way to find solutions to these challenges. Events such as Stage Two provide a ready-made opportunity to discover, meet, learn, inform and possibly invest in the people and technologies that can reshape a business. There was a diversity of people and ideas and an appetite to work together, whether industrial giant, academic or bright-eyed young entrepreneur.