Why many successful start-ups come from Munich

In the Bavarian capital, two universities have managed to set up a successful startup incubator - although, strictly speaking, that was not the intention.

It is becoming increasingly clear that 2021 was a record year for the German start-up landscape. The volume of investments skyrocketed from 5.2 billion euros to a whopping 17.6 billion euros. The number of unicorns in the Federal Republic also rose from six to 24, according to a study by management consultants EY. It is a development that caused much jubilation in the start-up scene and, in view of the now declining investments, makes one or the other founder look back wistfully who is just about to start a financing round.

But behind these figures there is another very special feature: no fewer than seven unicorns have their origins in the Center for Digital Technology and Management (CDTM) in Munich. It's a proportion too large to be simply coincidence. So what do they do differently there than they do in the rest of the country - and is there such a thing as a magic formula for the unicorn spell?

The CDTM is a joint venture between the Technical University of Munich (TUM) and Ludwig Maximilian University (LMU). And this construction alone is already unique in Germany. A good 360 students apply each semester and also write a letter of motivation. Of these, 60 are shortlisted and undergo a small assessment center in which they have to prove their motivation and skills. In addition to their actual studies, they then take part in various courses to learn, among other things, what it takes to become a good manager and how to set up a company or market a product.

The idea came on the plane

The CDTM was born on a trip. Jörg Eberspächer from TUM and Professor Arnold Picot from LMU traveled to the USA in 1997 to find out what was wrong with German teaching. After a visit to MIT, they realized that the ways of thinking in engineering and economics were too traditional to be able to cope with digitization. What was needed, therefore, was a place where students from different disciplines could learn together, which at the same time provided a platform for companies to find new talent, which conveyed a real campus feeling, and which collaborated with MIT.

Klaus Diepold, Chair of Data Processing at TUM has been involved since 2004. "The program is definitely a project of my heart," he says. In the meantime, TUM provides the premises, while LMU organizes the administration. "There are no lectures at the CDTM; the work is strongly project-oriented," Diepold explains and immediately clarifies: "We're not actually a start-up incubator." So is the unicorn thing just an oversight?

"Engineers alone can't do it, business people alone can't do it, and lawyers alone can't do it either," says Diepold. It always takes diverse teams. "We try to get that across to students as early as possible." Professors, he says, are concerned with selecting students who want more than just a degree. "We're looking for excellent students, even though I don't like the phrase that way because it quickly sounds like an elite education," Diepold says.

That this doesn't have much to do with elitist posturing is something the students get to feel right from the start. They have to organize almost everything themselves. They put the interior together themselves from wood. Marketing, IT and so on - they have to organize all that themselves, including the farewell party. "The professors are the ones who create the framework conditions for the CDTM and support the students as mentors in word and deed," says Diepold.

Only one-third start their own business

According to the professor, about one-third actually decide to start a business in the end, another third go into industry or consulting, and the rest move on to academia. "We want students to work on real problems here and develop solutions, including in collaboration with companies," Diepold describes.

And the magic formula thing? "In my opinion, we need to train the people who really have it in them early on," says Diepold. Those who first get their doctorate in the classical way, he says, are far too stuck in academia - and may not even come up with the idea of starting a company. "That's a big problem that many universities have," Diepold finds. The CDTM is designed to expose them to entrepreneurial mindsets early on.

The numbers certainly back up this approach: more than 240 companies have now been founded by alumni, and they have raised more than 5.4 billion euros in financing. More than 1,000 students have been trained in the 24 years and over 220 projects have been carried out with partner companies.

Can a CDTM also work in other cities?

Sebastian Schuon, co-founder of the proptech Alasco, is one of the graduates who went into the startup world. Back in 2008, he co-founded the start-up Stylight with Benjamin Günther, Anselm Bauer and Max Meier, all also from CDTM, which they sold to ProSiebenSat.1 for 80 million euros. He was also an early business angel at today's unicorn Personio - which, of course, also comes from the ranks of CDTM.

According to Schuon, CDTM's most important asset is its network. "Struggling through the courses together, even organizing a lot of things yourself, that simply welds people together," he says. Schuon was studying electrical engineering at TUM at the time and applied for a place in CDTM on the recommendation of other students. "The core idea of CDTM is to bring the right people together," he describes it. Schuon, like many other alumni, is still very active in the network. He tells a small class himself about how to set up his company in an agile way.

If it were up to Diepold, there would actually be a need for many more CDTMs in Germany. Schuon can imagine that, too, but warns at the same time: "If we increase the size of the courses and take on 100 people in one fell swoop, the CDTM will lose its character. And if we expand it to other universities, the network could also be harder to maintain." There are plans every now and then, especially among the graduates, about how the concept can be transferred, Schuon reveals. No one there has apparently come to a real conclusion yet. "We still have to figure out what exactly our success factors are," Schuon says. At any rate, there are suitable cities with several large universities in Germany.