Welcome to startuprad.io your podcast and youtube blog covering the german startup scene with news interviews and live events, hey guys this is joe from startuprad.io and pretty uncommon introduction because This is part two of my interview with Detlef Riesner, co-founder of Kia Gain, first startup to ever list from Germany at Nasdaq in 1996 and now a constituent of Germany's lead index, DAX40. I'm now at the point where I review this content and actually I have to say
it's a little bit long for just one sitting, one piece. That's why we cut this into two pieces. If you haven't heard the other piece, one, please go there and start there. Now enjoy part two. Yeah, I think there are a few more examples who really got trashed during the burst of the dotcom bubble and many came back really strong. For example, Amazon and so on and so forth. Jumping a few years into the future, can you guide us through the decisions you had going becoming a member of DAX?
How did this work? And at the time you were the head of the supervisory board, what were your thoughts about going to become a member of the iconic DAX, Germany's most important stock index? I have to agree and have to admit that was after the time I was chairman of the board. I was at the advisory board, the scientific advisory board, and I stepped back from the chairmanship of the supervisory board because we had a younger, very well-known member of the advisory board.
I think he could take over, yeah, but he will take over only if he offers it to him right now. So that was the situation. And therefore, I think the CEO asked me, why don't you stay a year longer or two years? No, I said, now is a good time that he can take over. Unfortunately, he left two years later because he got the offer from ThyssenKrupp and all these companies, bigger boards. But with sleepless nights, I would say, yeah. Kaya Jin had no sleepless nights, yeah. I see.
But I have to say when, yeah, from the time of the IPO to today, I think the company, I did not check, calculated exactly, must have grown by a factor of five or so. And then, when we came close, then we reached really a time where it was close to DAX, yeah? And DAX, of course, depends how many shares are treated, yeah? Not when you have a family who owns 80% of the shares, you can never go to the DAX because there's no business on the stock market.
But we had a very separated, very divided ownership, and there was a lot of treatment, a lot of dealing with the chairman, with the stocks, and so this came in close to it. And then the DAX was extended from DAX30 to DAX40. Yeah and therefore they had to accept new companies and kaijin was fortunately among the new companies which fit into the scale of dax 40 yeah i see what you're referring to mostly is the so-called free float meaning how many stocks are
traded on a regular basis and not held you say the right word, yeah. Exactly. Reflecting on your journey to become a global leader in molecular diagnostics, would core values and strategy were pivotal in sustaining its growth and innovation? Yeah, yeah. I think there were two tendencies I can say. First, of course, they said, we concentrate our diagnostics on Nucleic Acid Diagnostics.
That means we virus detection, but also genetic diseases, and then particularly later genetic modifications which are responsive to pharmaceuticals or non-responsive. For example, such an oncological medicament like Avastin is good for some people, but bad for other people and cryogen cut then deliver the tests, the genetic tests, to tell these people will suffer from it and these people will have enormous advantages from it.
And so they developed the tests step by step, from the beginning clear tests, for example, viral. Detection, and then to mutations which are close to pharmaceutical applications, but of course then also to veterinary tests and to tests from the Gerichtsmedizin. What's Gerichtsmedizin, and that means extremely sensitive tests, tests made from a hair, yeah, and this collagen could develop.
And we had done on this in my institute many years ago, never knowing that it was going to the court, that it had to be used by the court later, by court medicine, yeah. And those things, very sensitive tests. Gerichtsmedizin was a new thing, Veteran-Medizin, but the main thing is of course human diagnostic, yeah. But then also, for example, latent diseases, diseases you don't see, but you have already in your body. This is particularly pneumonia.
They developed a test for that. So, step by step, new tests. I don't know how many hundred tests they can offer. And that was a critical decision that we had to develop an automat, an instrument, diagnostic instrument. I can remember in the late 19th, after, of course, the IPO, we discussed for months or even two years, should we develop an instrument, then we go again to a new direction? Or is that too risky? Yeah, do we have to invest too much money?
And Kairajan invested a lot of money and it took, I think, several years before they had revenues from the instrument. But then finally, we thought it fits together. We have the kits and we deliver the instruments. But the kits are also running on other instruments, but we can offer both. So and it was yeah from then on that was a new step in growing the company I see we'll be back after a short ad break.
Uh thank you for taking so much time with us we may add to our audience that we're now already more than an hour in our recording session here i would like to talk a little bit about your role as a business angel let me put one day the the diagnostic the expression is forensic diagnostic forensic diagnostics yes diagnostic yeah great um i want to put a little emphasis on your role as a business angel investor now, because we met at the Business Angel Day.
Transitioning into business angel, what key factors do you consider when you're evaluating potential biotech startups for investments? I think I evaluate the same qualities as I described for you when we started Cryogen. A good idea and the character of the scientists or of the startup people. That is the main point. Not so much when they promise you how much money they will earn on the market. When they are on the market, everything has changed anyway.
And when they think too early on the market, that means it's not really innovative. So it is your, they think already on the market. So in real innovation is without a market. You have to develop the market. There is no market. Yeah. And that is only always when an investor is asked now, then give me an estimation about your product on the market. I think then my product is not innovative if I can get you that estimation, yeah, because we have to develop the market.
Typically, molecular biology and medicine, it did not exist before. Very little, only in special institutes, yeah. and suddenly there was a market because there was an innovation. Whether it always goes that smoothly or that so well, one cannot say, but that is the idea behind, I have to say. And that's also an idea when I work as a business angel, but what is a business angel? yeah.
Business Angel is somebody who knows a little bit about the start-up scenery and he can tell something, he can give good advice to younger people. Help with some investments, a business angel, but does not give the major investment, the smaller investment, and that is important that the business angel has also commercial interests.
I never would negotiate that, therefore I said in one dinner speech what a business angel, it's a fall, an angel fallen from the heaven because it was kicked out from the heaven because an angel does not allow to have commercial interest, but the business angel has commercial interest and therefore it was kicked out of the heaven. But it's good enough for the earth. It's still working on the earth. That is my definition of a business angel. Now you know. So I know.
Can you share some investments you did as a business angel to show the potential of biotech innovation? Yeah, that is very different. I think as a business angel or as a later investor, I got involved in very different companies. For example, companies which were set up by colleagues of mine, I know best, I know the people, I know the science. That is the best situation. There was also a company I knew that was a very good scientist, but he was a terrible manager.
So he went bankrupt but because the science was so good and another investor and myself we bought from the insolvency the company and said now we have to arrange it very well and the company worked again. And it was sold after four years to an American company, Caterland, I think with a factor of five or six or whatever, but it stayed on the same place in Germany.
And whenever I was involved in selling a company and an exit, I thought it was very important that the company stayed inside, in our case, in North Northam, Australia. And mostly it was bought by American or Indian companies, but they used it to have a step, a foot down in Germany. And therefore the company stayed in Germany because they used the whole business inside Germany and the company stayed there. And that was, I think, and they took all the employees and so on and so on.
I was only once involved in a company in Heidelberg, and they sold the asset and the company was closed down. I had no influence on that, but that can happen. It happens in many cases but only in one case when I was involved it is not what I like to have mm-hmm yeah and you have seen biotech startups in Germany from the mid 1980s to the mid 2020s that is quite some time what what did you learn over time about this this market.
Yeah, what did I learn? What came out from my observations, I have to say, yeah. But I think it is a little bit trivial that it is enormous, diverse. Of course, some companies which are really flourishing, and for example, Biontech, yeah. I followed the story of Biontech. It's bigger than KIAGEN today. Whether it stays that way is another matter, but they really, because the epidemic is over, but the people have such a competence that they will have a very good company also in the future.
Yeah, but otherwise, that was a typical company built on an epidemy, yeah? But they knew from the beginning there was an epidemy, and we have to go with 100% and all our activity, and together with an American company, Pfizer, in that time, that was important. They know how to do it. They knew how to do it. Whereas CureVac in Germany was earlier, but made some mistakes. But that is not my business to judge on that.
And so I followed companies. For example, then EvoTech was more or less an outspin from Kyagen, together with Manfred Eigen from Göttingen. And then developed also very well, but hadn't pushed down last year, which was from a personal problem, but it will recover. And then DiRevo, DiRevo was an outspinner of Evotech. I was in the board of DiRevo. It was sold to Bayer on the other side of the street, I have to say. Taking over 120 employees from the company.
So it was very successful, but there were also companies where we had to realize that, technology did not work as we hoped that it would work. So what have we do? So probably sometimes one has to close down the company and as a stockholder or a stakeholder. We have to say we never let the company go bankrupt. We said then we closed the company, not insolvent, but how do you call it? Liquidate. Liquidate. We had to liquidate the company.
But sometimes we as a stockholder had to pay the debt, to pay the debts. And then we could liquidate. But the founders did not have an insolvency. Yeah, so I think that we've always found important. And therefore, then you build up a reputation, yeah? And if you build up the reputation that you invest in a company and if it doesn't work, then it is insolvent, bankrupt. That is not a good reputation. We said, if it doesn't work, we think that it
has to finish in a good way for the inventors and for the startup people. Yeah. So this is a little bit experience, very different experiences, but we had good exits. We had smaller exits, but still exits. And we had really liquidations, yeah, which went pretty smoothly. And that is important. Yeah. People could do then other things. So, fortunately. The successful exits were mainly successful exits. Yeah. Otherwise, it would not have been much fun. Yeah.
I see. And of course, investment should also be some fun. We are now moving a little bit into entrepreneurship and biotech. For all the entrepreneurs and researchers tuning in, what do you think is the biggest challenge when transforming from academia to business? Let us know in the comments or tag somebody who might have an interesting take on this down here.
You see, in Germany, the situation today is officially much more difficult than in our time, because I talked already about the Arbeitnehmer-Effindergesetz. Today, an invention you have in your institute, it belongs to the university. At the university then you have to deal with the university what to do with it and my advice is completely clear it is simple and clear.
That the university gives all the know-how all the patents to the people who haven't started up and the university gets shares in the company that means they do not get money now but they get probably much more money when the company is successful, yeah. And for example, with Skyagen, we were not obliged to do it, but we said, okay, we were not obliged, but we took the know-how from the university. We have to give back to the university, yeah.
And we gave back more than 20 million, the University Düsseldorf, yeah. And the final gift was a research laboratory, which was newly built. And so I think we had our own Arbeitnehmer-Erfinder-Gesetz, but completely free, and it worked much better than the official Arbeitnehmer-Erfinder-Gesetz, and today I'm really fighting for it, that the university or even more critical are the governmental research institutes like Helmholtz, Fraunhofer.
They think they have to earn money when there's a startup to get money from the people who have the startup, even if they don't have money. Instead of saying, okay, we have shares, and if the company gets successful, then we earn the money. I think it's called the Darmstädter model, but we had it in Düsseldorf already, I think, 12 years ago. I think you could call it something like IP for equity. Yeah, IP, yeah, right. You can call it right that way, IP for equity, but that is important.
The equity is equity without voting rights. Because if you have the university, which probably can vote for a company's decision, that is terrible. Equity without voting rights, because the university does not know how to vote there. They might have specialists, but normally not. And that is something we did now with Priya Void, but long discussions with the research center in Jülich, with Düsseldorf, it was much easier.
Normally it's easier with the universities than the governmental research institutes. Also, they are really obliged to support startups, but what they are doing, they hinder it. And I hope they will learn in the near future. They basically have to learn. I had a few questions in this section of the interview, but basically you already went through all the answers that I would have asked from you.
So let's go into another short ad break and then we get on to your decision retiring from active roles. As the head of the supervisory board of Kayagen, how did you ensure a smooth transition of leadership when stepping back from your role? Yeah, I think that is important often because Kayagen is a technology company and I think I've felt always pretty well as a chairman of the board because I knew the technology.
But I did not know all the finances. And when I had a question on the finances, which probably I thought the CEO has another opinion than I feel, then I asked my colleague in the board about that problem, who knew about the finances. Exactly when I had a question about selling, what type of selling have you to support me? There was a guy who was a specialist in selling.
So as a chairman of the supervisory board, you have a lot of obligation and responsibility, and you cannot answer it always by yourself. You have again to work as a team. That is the point, yeah? And if you think you have to answer everything yourself, you make too many mistakes. Of course, I had very close connection to the CEO of the company. We met every week or so, yeah. And before the board meetings, we met very intensively and discussed all the questions.
But that does not mean that I did not depend upon the specialists in the board on special questions. I think bottom line is always ask the specialists if you know them. Yeah, yeah, yeah, yeah. And you have to have a board with specialists.
Even you can ask other people but the specialists have to be in the board because they know the company otherwise i was wondering when you there was a time when you retired from the key again board and you retired from your position at the university um how how did your focus shift since and what interests did you develop how did your life change in that time do you have any recommendations. Yeah, my recommendation is,
Stay active. I said always, of course, I earned a lot of money. Everybody knows that. And I could have stayed in probably in Mallorca and put my belly in the sun. But I said always, I felt so sorry for the sun to look at that, therefore I could not do it. That is the reason. But more seriously, I could put more time and effort in the other companies where I was involved. And for example even in the companies now the successor of my chair.
Dieter Wilbold and they took over the mentality when you have a good idea set up a company and he did very good science in Alzheimer and Alzheimer is now a scientific development from the prions further development for the prions So, we had a lot of scientific contact. And when he started the company, I helped him as much as I can.
I gave him the first money, and I solved the problem with the wrong CEO in the company, and we bought the patents from the research institute that patents have to belong to the company, otherwise you don't get money. So I got very much involved in that, and then I got involved, similar to that, in a diagnostic company for Alzheimer's and other neurodegenerative diseases. And there were other sides. So I really was a little bit...
I was asking, of course, a lot to be with our company. I said, only that I have to learn, only the company that understands the science 100%. I was asked, oh, you see, we have a very good company for cancer. I think I believe that you have a good company for cancer, but I don't understand sufficient from cancer. Therefore, I will not go into your company. And so on. That is my involvement.
Actually, I'm now in Tübingen involved in a cancer company, but they could explain that very well to me, and they had funds from the other side. And the funding agency, do you know the Sprint Agency? Yeah it's a it's a governmental agency yeah and sprint is.
Gives a lot of money to the priya void that is a company of my successor will did a billboard and now he's in phase two with alzheimer with a very good compound for alzheimer, and then they said okay we will also uh give money to the tubing company company, but they need a little bit of experience, the strategic experience in a startup. Would you not like to be involved a little bit in that?" And I met with the people and I said, these people are okay, that is interesting to work with them.
Also, it's not really my field, but if the people are good enough, I can trust them.
And so I made the change from chair of Chiagen, chair of biophysics, but I still have my office in the university and I was even in the board of trustees of the university, this were running also so I'm going back from official obligations to more informal interest and obligations in smaller companies and try if the company has an exit fine and I have not replaced every exit with a new company so I will use that.
Let us go into the last section the last three questions your current perspective and future outlook. How do you see the role of artificial intelligence and machine learning in biotech research and development? Yeah, we did that before we knew about the name. We, or better the colleagues with whom I worked, of course. In the 70s, there were the best programs with the best data to calculate the structure of.
In the same way, we used the best programs and a lot of data to calculate the structure of RNA folding and refolding during the biological activity. There was, of course, KI at that time. But in the meantime, the machines got 100 times faster. The data extended by a factor of 100. And then we call it KI. AI, artificial intelligence, yes. So the artificial intelligence was already there. But now it has much more impact because the machines are better.
The data are much extended, and so new relationships can be found by artificial intelligence, which could not be found before because it would have taken years. Therefore, in my mind, artificial intelligence is not something very new. It is a systematic development from earlier intentions. And of course we use it in everything where structure or metabolic pathways and those things, complicated things, have to be described.
They are especially good if it goes really really complex yeah um what are your thoughts on introducing interdisciplinary collaboration in driving innovations. Now yeah i always have to go back to kai agent yeah i am the i was a physicist, My co-workers, one was a chemist, the other one was a microbiologist, and the third one was a biochemist. So, and the four of us, every different field, collaborated and set up gyogen, and we had to complement each other by our knowledge.
As a physicist, I have to go, of course, very often to the biochemist and have to ask him what happens here, what happens there, or to the microbiologist and chemist, yeah. So interdisciplinary collaboration is very important. So I don't know what we would have done without it. It was our experience, yeah. Okay, that's all I can say.
Yes, and the last question, I think you already talked a lot about what you continue to influence the biotech sector what are your current projects or initiatives and what legacy do you hope to leap for future generations of scientists and entrepreneurs, yeah yeah that is of course a question for example the legacy the european legacy for.
Plant molecular was terrible, genetically engineered plants were more or less forbidden in Europe, unfortunately this is now liberated but that is one point that the legacy has to be quite liberal it has to be watched whether their dangers can appear but for example why went, that is my, I did not speak to the people, but this is my suspicion, why went Biontech with research to Britain, yeah, because the legacy is more liberal, the admissions,
the legal authority works faster, and I think the fiscal improvement, the fiscal support is better yeah and these are three points, which Germany it's one we have to work on in Germany that it gets better and that a company has not to go with particular parts of the company to Britain also KIAGEN has a research laboratory in Britain yeah. Completely clear I think, There is still a lot of do and how, we discussed it earlier, IP know-how for shares or IP for shares.
This system is really to be fixed for universities and governmental institutes, and I think the Sprint is working on that, and there is a Darmstädter model who proposed that. This is the right direction, but it is not clear in all heads of these institutes. Yeah. And the heads might be, but in the lower parts of the administration, that is not just to see. And for example, there is one problem, what we call in Germany, the night factor.
You know what the night factor is? Yeah, jealousy factor. Yeah, there are really people who are suspicious, oh, they will earn a lot of money and take this money from our university. That is not the case. They have to work like hell for it. And they will really improve the university when they are successful, the reputation of the university, and give better chances to more younger people.
And therefore, this has to be in the mind of the administration of these people to help and not to ask money from people who don't have the money and this happened in the past that are actually very good closing words we've covered a lot of crown today but i know there's always more to explore what's your biggest takeaway from your from today's conversation share your insights with us let us know keep the discussion going down here in the show notes.
Professor Riesner, thank you very much for taking so much time answering all my questions. It was a pleasure having you as a guest. Thank you very much. I enjoyed also this discussion, I have to say. Yeah, I enjoyed it. Thank you very much. Bye-bye. Music. That's all folks. Find more news, streams, events, and interviews at www.startuprad.io. Remember, sharing is caring. Music.