Narrator (00:00:11) - Have you ever wondered what it takes to spin out a company from a university? In this podcast, Robert Bruhl, CEO and co-founder of Fiber Coat, will be discussing his experiences with Sara Allison, senior consultant at Accenture. Robert discusses such themes as negotiation with the university, emphasizing the importance of learning from other startups, and then also some of the challenges and pivots that the company has had to go through during its growth phase. We hope you enjoy this episode and please do let us know if you have any comments or questions. You can contact us at Ideas Pod at Accenture. Enjoy.

Sarah Allison (00:00:49) - Hi, I'm Sara Addison, senior consultant at Accenture, and it gives me great pleasure to introduce Robert Rall to our virtual studio. Lovely to have you here. Thank you for making the time to come and share your experience with with us.

Robert Brüll (00:01:04) - Thank you for having me.

Sarah Allison (00:01:05) - So today we will be exploring your experience of spinning out your company and really interested to hear about how you navigated those early days while you were setting up your company.

Sarah Allison (00:01:18) - So it would be really great if you could introduce yourself. Tell us about your story of what your company does and how your company was first created.

Robert Brüll (00:01:30) - Yeah, So my name is Robert. I'm one of the founders and CEO at Fiber Coat, the company that's making high performance materials affordable. So our mission is to get great materials with great properties into as big as markets as possible so that many people can profit from those materials. Our current beachhead product is in metal fiber that is ten times 10 to 20 times cheaper in a state of the art being used in automotive and construction industry for shielding and heating applications. And as you already mentioned, we are a spinoff from our university in Germany. The development itself for the 2014, when the initial idea was born, and at that time one of my co-founders, Alex, was a student, I was a supervisor, and we managed to first time to code fibers with with this approach. And then we moved through the stages at the university with public funding to get to a certain level of like lab scale that works consistently.

Robert Brüll (00:02:29) - And we achieved this status in 2018. And at that time we were already getting frustrated with how great technology is being handled and then transferred into the industry because a lot of cool research never really got out of university or it took very long for for it to be applied. So we figured let's try it ourselves. And we applied for a big German grant for spinoffs called Exists Grant. And then in 2019 received the grant and we could fund a company in 2020 just before Covid hit Germany. So this was a perfect time to start a company in a sense. We had a lot of time to focus on the company, but we had to pivot because at that time we were coating plastic on glass and chemists. If they can go to the lab, they can supply plastics. So we had to look into something that was easily available even in home office. So we then pivoted to metal fibers. And with the time that Covid gave us, basically without travels and everything, we managed to scale, then this new coating to a one ton per month scale at the beginning of 2021.

Robert Brüll (00:03:44) - And since then we've been scaling and producing the material. By now we have sites in Georgia, Poland, the US, a team of 3037 people working on supplying this. These materials are companies and partners.

Sarah Allison (00:04:01) - Wow, that is amazing. So over over a space of about what? How long do you. Yeah, three years. You scale.

Robert Brüll (00:04:08) - Three. Two months ago.

Sarah Allison (00:04:09) - Yeah. That's amazing. That really is amazing. So obviously that's really fast growth and it sounds like the businesses moving forward, you had to pivot. It's quite exciting. There must have been you know, I don't I can imagine it wasn't completely smooth running the whole way. So so along the way were there what do you think were the sort of main challenges obviously mentioned Covid, What were the main challenges, would you say, along the way?

Robert Brüll (00:04:37) - So I think we had two kinds of type of challenges. One are the induced ones from our technology and our market, because in a materials business they are just the things of usually really hard to scale with high capital investment, very long time to market conservative markets and customers.

Robert Brüll (00:04:55) - So these size of things we are still overcoming. So we still are only at a five ton per month capacity. Where we have customers that were running through pilots talking about 40,000 tons a year in need. So we are still at a very low scale in that regard. But we managed to scale quickly because we piggybacked on existing technology so we didn't have to invest in those things. And then the other type of challenge that we saw is like external things. Covid was not in the business plan, for example. Neither was the crisis with chips and supply. That really meant we had to become very creative in how to procure machine parts, because suddenly the lead times from a month went to 14 months. So yeah, being agile is a very different word if you have to think about a year in advance. And then the whole Ukrainian crisis also hit us hard because the energy price in Germany went up so far that partners had to close their plants. So we had to move our production actually out of Germany to Georgia.

Robert Brüll (00:05:58) - That's the reason why we're in Georgia, mainly as a reaction to the energy crisis in Europe.

Sarah Allison (00:06:05) - So, yeah, Yeah. Thanks. That's really interesting. I guess those are those are two sort of main challenges and thinking about I don't know, it's just it's such a it's really interesting. So thinking about how how were you prepared for this journey, this three year journey that you've just been on thinking about back to when you first started setting up your your company and your new business. Do you feel that your skill set or your mindset have these types of things changed? And yes, yeah.

Robert Brüll (00:06:37) - So so they changed a lot. I mean, we had experienced so of the three founders, two of us were already leading departments of the university with 40 people teams. So we had this kind of experience and we went through some challenges in those areas. But the business thinking entrepreneurship is a very different type of mindset that you have to grow and to understand. Also the being agile and trying to find opportunity and challenge.

Robert Brüll (00:07:08) - We have nothing to fall back on because kind of you have to deal with this now and you have to find a solution, otherwise it won't work out. So there was a lot of mindset change and learning that we did. And this is also one of the key things is listening to all of the support we got. So there is a great support at our university and for startups like just sparring and helping to set up things and understanding the how VCs work, for example, and how fundraising works. But there's also a lot of community around the area that in talking to the founders, to not make the same errors or to learn from other experience where they where they get good solutions is a big thing to get there. So I think we as a team grew not only in person but mainly in the sense of understanding. And if I think about the challenges we're tackling today and comparing that to the beginning of the startup time, it's just I would have never been capable to to do what I'm doing now at those times.

Sarah Allison (00:08:13) - Yeah. Wow. So think about you mentioned earlier when we were just talking before this recording about how you you have a really a really good relationship with your university and you've just mentioned that lots of support that they provided to you in those early fews sort of stages, early stages. Do you and I know obviously the the intellectual property underlying your, your innovation would have belonged. Am I right in, in assuming it belonged to the university in Egypt? Yeah. Yeah, yeah.

Robert Brüll (00:08:50) - Um, so maybe I can, I can elaborate a bit more on how that, that worked there. Um, so the IP was created during research projects and different public funded grants which are part of university. So the IP was also filed, the patents were filed through the university at those times. And when we took the decision to spin out and to found a company, we had customers. I mean, they were the main reason for funding the company because then when revenue starts to come in, you want to have it in the company, not in a in some research grant.

Robert Brüll (00:09:26) - So at that point we needed IP to be able to operate and to have a to to be able to to work and supply our customers at that point. So we started negotiating with the university. And even though I'm not lying that the support and the relationship is great, it was really tough starting those negotiations, mainly because there was a we didn't understand what the university needed. And even though they understood what we need, they they couldn't supply that to us because of the regulations and laws that they have to abide by. So the first offer they made was completely unacceptable. Before us. They were even though they were flexible. So they offered a revenue share, which would be great, to keep our cost low, for example. But we didn't know how big our margins would be. So this was kind of a yeah and an unsatisfying solution. And then it was also option to buy, but at a price that we couldn't afford, which was way too high. And then at one point we got to the area where we then discussed on not how much the AP is worth, but rather the model, how the worth is calculated, because all in our case, all the university needs is to show that it's make it's sold at market, that is market standards that other companies would get the same deal and that there's not an unfair treatment of their own startups.

Robert Brüll (00:10:48) - That's what they need in front of the German government and law to to show. And as soon as we had that fleshed out and we agreed on all those terms and what was acceptable, it was really easy to come to a to final solution and offer. So we stopped negotiating and started working together. Things moved along really, really smoothly. That said, the process took a year. Right? So, okay, sounds sounds very easy, but it took time.

Sarah Allison (00:11:16) - Yeah. Okay. And you know, in retrospect, looking back at that time, do you have anything you wish you'd known prior to that negotiation or prior to set up?

Robert Brüll (00:11:28) - Yeah. So so the project I just mentioned talking about the model and understanding what the limitations of the university are. So what I have to support them in so that they can give me a good deal. This took way too long to understand, which I wouldn't say is anybody's fault. It's just learning in that regard. And even earlier filing the IP. Um, I would have liked to know more about what this means for potential startup and how it would have needed to be phrased or what the strategy would be to not to be a good base IP for a startup.

Robert Brüll (00:12:12) - So it works for us, but we had to file more afterwards and we could have set up a way better if we would have known what the way would have been. So that's kind of the university helped us there. But they have the lens of the researchers and the university, how they would use the IP. So it's not the same type of wording.

Sarah Allison (00:12:35) - That's really interesting. So what helped me to understand what lens should they have been looking through or how could they have expanded their viewpoint?

Robert Brüll (00:12:47) - So. How that was done. We had a cool technology. We understood what it can do and what the properties are. So we basically took all of that and put it into one patent that was then Western claims and so on and fairly broad, but it didn't account for the application that would be possible with it and all the types of pivots that could be done. So it's kind of it was very focused on the on the research findings and didn't have too many like other claims and topics in there that could have been used to broaden the IP afterwards.

Robert Brüll (00:13:28) - So it was a really focused one. But from a startup point of view, and for the investors having a broad protection that then might need to be scaled down or focused later is way stronger. I don't know if that's that makes sense.

Sarah Allison (00:13:42) - Yeah, that makes it makes a lot of sense. Thanks. A really, really clear. Yeah, it's really important point, isn't it? The founding IP is just essential and you did need to pivot because of Covid and the other things that you mentioned. Yeah. So.

Robert Brüll (00:13:56) - So for example, we covered only certain types of polymer coatings. When we pivoted to metal coating, we still had the same technology approach, but it wouldn't be what it would not was not covered by the IP. So we had to file a new which is okay, right? We did it. It's all good. But this could have been covered before. Yes.

Sarah Allison (00:14:15) - And what would be your advice to a founder, budding founder who is engaging in spin out formation or the spin out formation process at their university? And they're sort of in the discussion stage around that negotiation and equity split.

Sarah Allison (00:14:31) - Then the license deal terms.

Robert Brüll (00:14:33) - I think the number one thing is to not start too late. I think any university, it takes time and rather starting early in the discussion and then having a lot of time to to to to to negotiate a position of strength rather than being late and kind of being. Yeah, having, having to accept any deal just to, to, to, to get to the point that you need to be at at the time is, is really important and then really not having so so trying to work on the relationship instead of having an antagonistic negotiation where the other other guys are the bad guys, but rather finding common ground. And you know both entities in university and the startup, they both have a an incentive for this to work out because I mean, if we're honest 90% of the university generates will not be sold anywhere else but rather to the startups that are formed there. So it's kind of it's in the end, it's going to be a win win. Understanding that and working on the relationship to find a common solution instead of working against each other.

Robert Brüll (00:15:41) - So I think it's the number one thing. It's also harder, but in the end, it'll lead to better results, I think.

Sarah Allison (00:15:48) - Thank you. Yeah, No, I agree. Win win is of course going to be beneficial for everyone. Well, we've had a really interesting discussion. Thank you very much for all the insights and information that you've you've divulged today and the thought you've put into those top tips. Just like to say a really big thanks from all of us here at Accenture and our team.

Robert Brüll (00:16:12) - Thank you, too. Thanks for having me. I'm happy to to support where I can. I mean, we learned a lot during our time from these kinds of videos and podcasts and all of that information is out there from other startups that had to run with the same issues. So really happy to have the opportunity to also share some of what we learned. Thanks.

Narrator (00:16:33) - We hope you enjoyed this episode of Bringing Your Ideas to Life and Robert's experiences of spinning out his company and its growth. If you have any questions about this topic or would like to get in touch with us, then please do contact us at Ideas Pod Adult Center.

Narrator (00:16:48) - That's Ideas Pod at CentCom. We'll be back with some more interesting topics very soon. Take care and goodbye for now.