From Invention to Innovation in Europe with SPRIND's Till Moldenhauer

Till Moldenhauer is chief of staff at SPRIND, the German Federal Agency for Disruptive Innovation. He works at the intersection of strategy and operations and helps develop the agency's funding instruments.

What do you do at SPRIND?

I'm the chief of staff at SPRIND. I joined six years ago, right after studying business administration. SPRIND was founded at the beginning of 2020, so I came on board almost at the start, when it was just Rafael Laguna de la Vera, our founding director, and me as the first employee. I started as an intern by chance, simply because I had the time. COVID had stopped the world, and the internship in the United Arab Emirates I had lined up disappeared.Instead, I joined SPRIND and helped build the whole organization.

One of our most relevant  projects in the first years was the SPRIND Freedom Act, which gives us our own legislation. It lets us work in a more agile and free way than other governmental organizations. Today I mostly handle the interface of strategy and operations, and I help develop SPRIND's funding instruments. As an agency, we are not a typical capital provider. We have a much broader toolkit. We can provide grants, run public procurement, and make equity investments. We use whatever pushes a breakthrough to market the fastest.

What was the original idea behind SPRIND?

If you look at the German economy today, it is built on extraordinary breakthroughs. Our automotive industry grew out of inventions made here, our chemical industry was shaped by milestones like the Haber-Bosch process and our strongest pharmaceutical companies are built on scientific breakthroughs as well.. 

Most of these breakthroughs happened during the Gründerzeit, Germany's great founding era. That is when the country's prosperity emerged, and those breakthroughs remain the backbone of our industry today.The challenge is that the world keeps moving. New breakthroughs arrive, and some of the old ones get disrupted. The electric motor is changing the entire automotive industry, and German carmakers are struggling.

Through the telecommunications era and the smartphone era, Europe took part in the invention phase and produced a relevant  share of the inventions. What we did not do was take part in the innovation phase, which is getting those inventions into the market and building the next base of our prosperity. Today, we’re talking about AI, quantum, fusion, and many other emerging technologies with that exact same breakthrough potential. Europe and Germany have world-class research across these fields, but the critical task ahead is translating that science into market-ready products. That is why we founded SPRIND.

The idea is to build an organization comparable to the early U.S. innovation agencies, one that creates breakthrough innovation to secure prosperity for Germany and Europe over the coming decades. We also want to help solve the big challenges the whole world faces in climate, health, and productivity. In six years we have funded about 250 projects. 

As one example: Early on, we helped structure the nuclear fusion industry in Germany, and we now have great startups on both the plasma-driven and the laser-driven side. SPRIND invested when the technical risk was very high and private investors were skeptical. The financial needs were too large for the valuations normal venture capital could offer, so we stepped in with around 90 million Euro to accelerate things. Since then  the private markets are catching on and providing follow-on funding.

What is holding back the innovation phase in Germany?

The issue that gets discussed most is cultural. The story goes that Germany loves a high security standard and does not want to take risks. I am not sure that is still true. My generation is much more willing to take risks and much more open to founding startups. We are about a generation behind, though. The U.S. ecosystem developed 20 to 30 years ago. Germany only re-started venture capital in the mid-2000s, after the dot-com bubble burst. That is the first issue, but it is not the biggest one.

The second issue is that we simply missed some races, and now we have to catch up. When you look at big tech in the U.S., it is amazing what they built and what their balance sheets look like. That free cash flow lets them invest in artificial intelligence, data centers, space, and much more.

Germany’s and Europe's real weakness is execution. It is not about knowing what to do, we have perfect analysis from the problems holding us back. It is about getting it done, and that is where we can learn the most from the U.S. We are for example still struggling across Europe with fragmented markets. In the U.S. you incorporate a Delaware company and operate across the entire country. In Germany you build a German company. If you want to expand to France, you set up a new entity under new regulations, and you lose a lot of time and money to bureaucracy. Therefore, the normal playbook is to go to the U.S. directly, but for Europe   that is not the best option we have. If we fix these regulatory frictions and put budgets into the areas where the next breakthroughs can happen, we can catch up. We missed the first wave, and now we have to win the second one.

Does cross-border collaboration across the EU need to change?

It must change. One reason Europe has not led more breakthroughs is our high level of welfare, which means little pressure to change. For a long time the safe playbook was to earn your master's degree at a good German university, join Siemens or Bosch, and enjoy a good life. That is changing now, and politics seems to feel a sense of urgency.

The U.S. is governed out of Washington, with a lot happening at the state level. In Europe it is the other way around. We are mostly governed out of the member states, and most  things are not harmonized at the European level. That means we are dealing with a much more fragmented, complex and bureaucratic market here than they are in the US.

Nevertheless, since I started at SPRIND, a lot has moved in the right direction. There is real urgency now to build a unified European market instead of a fragmented one that is only sometimes harmonized. Now we have to move fast and properly execute the 'EU Inc.' initiative. We need a truly pan-European corporate legal framework that allows founders to operate across all member states under a single regime. Hopefully, this can also serve as the first major step toward a true Capital Markets Union.

Does the rise of deep tech present a unique opportunity for Europe, and Germany specifically?

In Europe we have invested heavily in education, so we still have a great educational system. We have great universities and great research organizations like Helmholtz, Max Planck, and Fraunhofer, and they do amazing work in deep tech. Deep tech also has a different early-stage dynamic. Look back to around 2010, when many of the winners were platform businesses like Dropbox. Dropbox had good technology, but it also won because it had simply the most funding. With a stronger venture capital system, it was easier to lead the market. You simply have the most money to put into marketing and to subsidize your losses, sometimes by giving the product away for free.

That playbook is changing with deep tech. Capital is still essential, but you are mostly building on intellectual property, and that can become your real competitive advantage over the long term. So deep tech is a big opportunity for Europe. We have great education, universities, and research, and we can hopefully bring all of it into the market. That is exactly what we failed to do in the past. We lost the habit of transferring ideas into startups, and most of the work simply stayed at the university. We produced amazing papers, but not the economic value we should have produced.

Looking five years out, will German deep tech founders stay in Europe, or keep turning to the U.S. for capital?

We are seeing founders move to the U.S. and incorporate there directly. That is not the biggest share of startups, though. The European ecosystem has real advantages, Early-stage venture capital in Europe is now fairly healthy. The average round sizes are smaller, but capital efficiency is much higher. Compared with San Francisco, Munich is a low-wage, low-rent, and low-cost location. For a life science team, personnel costs can be two to three times higher in the Boston area than in Germany. And sometimes founders simply do not want to move. They have family and kids here, and they know how the German ecosystem works.

So a lot of the advantages are already in place, and teams are building here in Europe. The real problem is later-stage capital, which is almost entirely missing. Some U.S. investors come in for the big rounds, but more and more startups are deciding whether and when to flip to the U.S., at the latest with an initial public offering. We see a wave of Nasdaq listings because valuations there are simply a bit higher, especially for pre-revenue companies that carry high risk. For a company like SpaceX, but also European candidates such as IQM, the same listing would not be possible on a European exchange.

Underneath all of this is a pension problem. The German pension system is pay-as-you-go. The money I pay today goes straight to today's retirees, so there is no pool of capital working in the background. We do not have the big pension funds that can allocate a share of their assets and supply the venture capital you need at the early stage. A few member states do this better, and Sweden and the Netherlands have funded pension systems. The German government just announced a major update to our system, so hopefully this gets solved soon. So looking five years out I am convinced that deep-tech founders build and scale in Europe.

How do you define deep tech?

There probably are many wrong answers to this one. When I started six years ago, deep tech already existed as a term, even if it didn't have the hype it has today. For SPRIND, deep tech is innovation based on a real technological breakthrough. What we are not doing is the incremental kind, where you use existing technology  to build something slightly better. We get deep into the technology itself.

That is the point of the name. You use a genuine technical breakthrough, and sometimes you combine technologies that have never been combined before. The iPhone is a good example. The technologies already existed, but putting them all into one device was an amazing piece of engineering. Our innovation cycle, from an in-lab prototype to the market, is normally three to seven years and sometimes longer. Many lower-tech innovations need only six, 12, or 18 months. 

This is more complicated in AI because there you can often build much faster than in hardware. In AI, I would say deep tech is anything that delivers a real technological breakthrough. Normal tech is anything that uses existing technology such as  typical large language models to build something that is new in its use case, but not new in any technological sense. To anyone in Europe building such a breakthrough in deep tech: please reach out to SPRIND. We’d love to take a look at your project and see how we can support you.

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