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Facing the Big Data Revolution: A German Start-Up Perspective

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German start-up perspective given at the Transatlantic Dialogue Initiative's Big Data & CyberSecurity conference in Ottawa, Ontario, Feb 22. 2018.

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Facing the Big Data Revolution: A German Start-Up Perspective

  1. 1. Facing the Big Data Revolution: A German Start-Up Perspective
  2. 2. Access to Start-Up Funding • While strong funding mechanisms for established businesses are in place, startups are another matter: • Expectation that the company is already financially viable in most cases • New KfW (State-owned development bank) subsidiary aimed to ramp up mid-2018, aims to provide equity-free startup funding of €2 billion over the next 10 years. • Funding gaps are being (partially) filled by industry accelerators • However, these often put the owner at a disadvantage: • Sizeable equity stakes for marginal investment (reflective of risk tolerance) • Ranging from 1% to 20% equity stakes • Often include work-product and IP catch-alls (fine for a company that wishes to insert their offering directly into the parent organization's value chain and avoid going to market directly, but largely problematic for companies trying to build up their balance sheet/valuation for subsequent investment). • Strong angel and VC networks, depending on the stage of organizational development. 02.03.2018 Page 2
  3. 3. Setting up a new Company • 2008 amendment of GmbHG introduced a 1,-EUR limited liability company (mini- GmbH/UG), aimed specifically at entrepreneurs who were put off by the 25k EUR minimum share capital requirement. • Up until Brexit, many German startups were using UK limited companies to work around both the personal liability risks and share capital requirements – many are now regretting this decision. 02.03.2018 Page 3
  4. 4. Insolvency/Bankruptcy in Germany • Insolvency/Bankruptcy laws improving, but still a significant deterrent for Entrepreneurs. • In case of failure: • Personal Liability for Managing Directors in many cases • Under previous Bankruptcy law of 1877: No debt relief • Under Insolvency Statute of 1999: discharge of residual debt possible after 6 years • Under 2014 amendment: discharge possible after 3 years if at least 35% repaid • Effectively blackballed from large industry – difficult to re-integrate • More than 90% of tech start-ups fail • Some other Entrepreneurs that went bankrupt: • Walt Disney, Henry Ford, P.T. Barnum • US Presidents (including but not limited to): • Thomas Jefferson • Abraham Lincoln (forced to repay his creditors over a period of 17 years, horse seized) • Donald Trump 02.03.2018 Page 4
  5. 5. How has Adaptant Evolved? • Founded on the basis of providing user-centric technologies in response to emerging legislation (e.g. GDPR). • Split policy/technology focus - policy shaping technology, technology shaping policy • Providing technical products & solutions, but also working with companies on transformation strategies (moving beyond compliance), responsible and ethical data use. • Novel innovation model – balancing between and aligning R&D/productization/standards & policy. • Research activities: • Commercial needs influencing research directions • Research providing technology transfer and product diversification opportunities (low-risk exploration of new application scenarios). • Business development in reverse – started at EU-level and now expanding regionally/nationally. • Multi-sided Business Model – connecting B2C and B2B • Acquired know-how and competence converted into service offerings. 02.03.2018 Page 5
  6. 6. Adaptant’s Approach to Innovation 02.03.2018 Page 6 Products & Solutions R&D Public & Regulatory Affairs Adaptant’s Approach - three distinct areas of activity working together, proactive (regulation as an innovation enabler) The Adaptant Innovation Advantage: Putting Regulation to Work R&D Public & Regulatory Affairs Technology Roadmapping & Thought Leadership Technological innovation outpacing and shaping policy. Public & Regulatory Affairs R&D Regulatory Pull Demand for new technological means to reflect changes in policy. Products & Solutions Public & Regulatory Affairs Application Push Need for policy or regulation to reflect ways in which products and solutions are used, without impeding innovation. From To Mechanism Explanation R&D Products & Solutions Technology Push New technology drives new product development Products & Solutions R&D Market Pull Demand for new product/solution to address market need Public & Regulatory Affairs Products & Solutions Compliance & Enablement Demand for new products/solutions to operationalise change in policy. Products & Solutions R&D Public & Regulatory Affairs Typical company – top- down compliance, reactive (regulation as an innovation barrier).
  7. 7. Adaptant’s GDPR-driven Expansion Strategy • Other countries pursuing GDPR alignment: • Japan’s (as of May 30, 2017) “Act on Protection of Personal Information” / 個人情報の保護に関する法律。 • First country outside of the EU to be whitelisted for GDPR essential equivalency / adequacy. • Canada – Previously enjoyed adequacy status under its Personal Information Protection and Electronic Documents Act (PIPEDA) with Directive 95/46/EC, reform in progress for GDPR alignment. • Brazil “Bill of Law on Data Protection - Bill 5276/2016” currently under review – seeking alignment with the GDPR (will introduce data protection and privacy rights for the first time). • Malaysia’s (as of November, 2013) Personal Data Protection Act (PDPA) and Personal Data Protection Standards (as of December 23, 2015). 3/2/2018 Page 7 Evolving Countries •Already privacy-conscious, technology-savvy •Seeking GDPR equivalency •Access to Digital Single Market Emerging Countries •New rights, little legacy •Openness to learn and try new things •Need awareness raising 1. Ecosystem building 2. Requirements engineering 3. Platform Positioning / Diversification 1. Joint ventures 2. Awareness raising 3. Services Positioning / Diversification
  8. 8. Issues for Canada • If Canada wishes to participate in the Digital Single Market, it must get organizations of all sizes handling data responsibly and in line with the provisions of the GDPR (or equivalent, whether as an opt-in measure or otherwise), opt-out provisions or exceptions for company size aren't doing small organizations any favours (most want to sell up to larger industry, meaning the risk and fines scale up, too). 02.03.2018 Page 8
  9. 9. Issues for Germany • Better support for innovative startups • Patent filing subsidies for micro-SMEs to encourage early-stage IP development (as per the USPTO – 90% reduction of fees for first 4 patents). • Low-cost instrument for registering ideas at an early stage of IP development (as per Benelux BOIP – 36 EUR per idea) – a cost-effective method for establishing prior art in future IP scenarios. • Guidelines for “predatory” behaviour by industry accelerators (equity stakes, IP ownership). • Development funding / R&D grants for disruptive but high-risk organizations (incl. pre-revenue): • Risks can be hedged in other ways than financial viability assessment: • Backing / underwriting by an established industry partner (as per H2020 FTI) • As part of a project consortium that is able to carry on independent of partner insolvency. • Acceptance that startups can and will fail, without stigmatizing one-off Entrepreneurs: • Entrepreneurs that have failed previously have a higher chance of success in subsequent startups (20%) than first time entrepreneurs (18%), compared with those that have had successful exits (30%). • Stigmatization is not only a significant loss of potential, but also fails to address the issue it attempts to solve in the first place: • First timers carry more risk than those who have tried and failed and aim to try again. • People will take their skills and knowledge gained and bring this to another country instead – contributing to a growing skills gap and loss of IP potential. 02.03.2018 Page 9
  10. 10. Thank You! Contact info@adaptant.io If you require more information

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