Leoni, the leading European provider of cables and cable systems to the automotive sector and other industries, today secured a two-thirds holding in Adaptricity. The ETH spin-off will contribute software-supported consulting services based on expert electro-technical knowledge to the Group. We sat down with CEO Stephan Koch to talk about this deal.
Let’s start with the origins: What made you become an entrepreneur?
I had the idea to start a company at some point during my PhD together with one of my co-founders, Andreas. Our main motivation was to put our power systems research results into practice, mainly concerning the handling of large quantities of renewable energy in the grid. We have been fascinated by electricity from renewables for a long time because the electrification of energy usage along with the decarbonization of electricity production is one of the keys to tackle climate change. I applied for an ETH Zurich Pioneer Fellowship after concluding my PhD while Andreas was still working on his. My other co-founder, Francesco, and I started implementing the first prototype version of our product DPG.sim from scratch. This was fun and very challenging at the same time because there were so many options for designing a suitable software architecture. At the end of the Pioneer Fellowship, we had a first prototype running and we won the first stage of both Venture Kick and Innovate4Climate. And all of a sudden, we had a small company running.
What needs did you fill with Adaptricity, and how were you different than your competitors?
We specialize in simulating electricity distribution grids in a large degree of detail while striving to make the software easy to use for grid planners. The simulations are based on time-series and dynamic models for new influences in the electricity grid, e.g. photovoltaics, batteries, and heat pumps. This facilitates a new approach for planning and operating electricity grids, which reduces the need for necessary grid upgrades to accommodate renewables. In other words, we make the energy transition cheaper for the customer. Our medium-term goal is to establish this approach in the daily business of the majority of grid operators.
You won the final of Venture Kick in 2015: What did the program bring you and Adaptricity?
Venture Kick was a great experience for us because it really got us out of our comfort zone after many years of research work. We were all used to presenting in front of an audience, but not really to pitching a startup. Venture Kick gave us a special motivation to work on the things that we needed to do besides developing the technology. Of course, the money also helped a lot in this phase of being a young company. Especially, the third stage of Venture Kick was a vital contribution to cover our running costs until we could acquire more customer projects and close the deal with LEONI.
You have just joined a big organization, LEONI: What does it mean for the future of Adaptricity, and its collaborators?
The transaction was quite a big step for us. A majority acquisition is a different setup compared to a VC investment where the founders usually keep more than two-thirds of the shares and look for an exit candidate after five years.
What convinced us is LEONI’s strategic shift towards a comprehensive solution provider with an enhanced portfolio including intelligent hardware, software as well as services and consulting components, which extends their value chain far beyond the production of commodity-type hardware into new business models such as ours. This strategy is actively promoted by LEONI’s top management. So we are optimistic that it will be there to stay.
We are planning to support this shift and become an innovation nucleus inside the LEONI group, while still executing on the core of our business plan. Adaptricity will remain a separate Ltd. company for the time being and we will keep the same brand in the market.
This acquisition means a contribution to the Venture Kick fund, which will help the next generation of venture kickers. What is your message to them?
Use your time and money wisely even at the very early stages. From my experience, the hardest trade-off is between approaching many potential customers and spreading the story in the market when you still have a very basic prototype and cannot deliver what you promise yet, versus working furiously on a product that nobody knows about. I think the ideas of lean startup thinking are very valuable for this – testing designs and mock-ups with a bunch of customers before you actually build the product.