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Sulzer R&D division to spin out innovation

Artist's impression of a fuel cell stack (Hexis)

Many of the incubators that popped up during the stock market bubble have lost significance, however, those attached to scientific and high-tech research organisations are still going strong.

Now Sulzer Innotec has introduced a new incubator to the Swiss market.

Innotec is the name of the former research and development division of the Winterthur based Sulzer Group. It has been around for a good 50 years and recently started to source work from outside the company.

Now more than two thirds of the income for the units comes from non-Sulzer contracts and adds venture activity to its bottom line. The venture or incubator group will capitalise on a stream of technology driven ideas from internal research teams.

Incubator concept

The idea of building a start-up company based on intellectual property at an R&D centre, incubating it to a point of commercialisation, is not new. The Swiss Centre for Microsystems and Microelectronics (CSEM) has been doing it successfully since the late nineties.

But the private incubator business model that emerged at the same time is "incompatible with today's market conditions," according to Michael Palmieri, managing director of MyQube, who spoke to Swiss Venture Update in a recent interview.

Palmieri says that only public or semi-public incubators, such as those mentioned here, are still viable "because of their additional value, typically social, promotional, or supportive to the local economic environment".

Other successful incubators are located at Novartis, Swisscom and any number of smaller high tech firms. Even some of the newer private equity investors that are highly specialized in one or two high tech sectors, such as Equity Partnerships Inc of The e-Firm, both based in Zug, identify themselves more as providers of incubators than as straight providers of capital.

An incubator is a business that takes bright ideas or technologies that are not quite ready for the market and develops them, at the same time building up a core management team so that the whole thing can be spun off, intellectual property and management and all. It also traditionally provides the seed capital.

A track record in commercialising research
In reality, Sulzer Innotec has been incubating new ideas and new technologies for years, spinning off the developments into new units within the company, rather than thrusting them out of the nest into the market.

Investor interest

Sulzer Hexis, the new fuel cell division is one of these spinoffs from Innotec. Walter Looser, head of the Innovation division, says there has been a great deal of outside investor interest in taking Hexis out of Sulzer but the parent company is keen to hold onto it.

Sulzer Metco, Sulzer Biologics and Sulzer Medica, now called Centerpulse, are other examples of groups that were spun off internally.

Sulzer Innotec will support promising project ideas with seed money of between half a million to a million francs. "We have intellectual property and venture projects, which do not fit Sulzer's business units, but have some value for others," explains Looser.

Two projects are being prepared for spinning off in 2003, according to Looser who says the teams will go outside to raise money from venture capitalists at that time. Some more projects are in "the pipeline", he says.

Two-thirds of Sulzer Innotec's turnover comes from external customers, especially industrial manufacturers and OEMs in the energy, transport, chemical, process industry and medical technology sectors, who commission the R&D group to solve engineering problems or perform contract R&D.

Its main expertise lies in materials and surface engineering, fluid technology, biomechanics and medical systems.

by Valerie Thompson

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