March 5, 2003 — History has been harsh on the German city of Dresden. Allied firebombing nearly wiped it off the map during World War II. And like the rest of the area that once was East Germany, it has suffered great economic hardship since German reunification.
But the new century is giving Dresden another chance, and small tech is playing no small part in the city’s rise from the ashes.
According to Mayor Ingolf Rossberg, micro and nanotechnology now represent 30 percent of the economy of this city of a half-million people. Around 500 businesses of the nearly 40,000 in Dresden are related to small tech. And all this is having an impact on the jobless rate. It now stands at 14 percent — half of what it was around the time of reunification. This rate still seems high by U.S. standards, but it is much lower than in other cities in the former East Germany.
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Dresden’s focus on the very small actually began long before the fall of the Berlin Wall. As far back as 1986, the German Democratic Republic selected three East German cities to become industrial centers for microelectronics: Jena, Frankfurt an der Oder and Dresden. “We couldn’t buy any Western goods in the East, so we started making our own microelectronics,” Rossberg said.
The other two cities have since dropped the small tech focus but Dresden forged on throughout the economic upheaval of the 1990s, achieving two big coups that attracted other businesses. Dresden convinced manufacturing giant Siemens AG to build its semiconductor plant in the city in 1993. The second heavyweight to choose Dresden for a new plant was microprocessor maker Advanced Micro Devices.
Once those two hung their shingles, the city became a magnet for other like-minded businesses. Biotechnology startup Cenix BioScience GmbH, which uses ribonucleic acid (RNA) to develop new drugs, emerged out of an academic research project in Heidelberg. Christophe Echeverri, the company’s chief executive, moved the firm eastward in 2001 to grow inside Dresden’s high-tech cluster. “We wanted to remain embedded in an elite academic environment,” Echeverri said, “in an environment where medical research labs are nearby and one where you can develop synergies with others.”
The presence of many technology research institutes also generates startup growth. Namos GmbH, which makes “intelligent” nanocoatings, started as a spinout from the University of Technology in Dresden. Nanoparc GmbH, which develops tools for nanostructures, was founded by researchers from the Research Center Rossendorf, a town a few miles from Dresden. Microfluidics company GeSiM mbH also originally grew out of a project at the University of Technology.
Wherever startups sprout, venture capitalists firms arrive to help cultivate them. SIB Innovations, whose first fund was launched in 2000, focuses on technology, life sciences and small tech investments. To respond to growing demand, SIB set up a second $40 million fund last year. “There are five to 10 new small tech startups appearing every year,” said SIB Innovations’ Gregor Kampwerth. Other technology VCs active in Dresden include BC Brandenburg Capital, RBB Management AG and Saechsische Beteiligungsfonds.
City Hall actively tries to draw new small tech companies to Dresden. European Union competition laws prevent governments from directly subsidizing industry, but the city makes ample use of the legal tricks of the trade. According to Birgit Monssen, head of the city’s Economic Development Department, Dresden’s local government makes real estate available to small tech companies, provides attractively priced leases and even invests in the stock of some of these companies. In fact, the city holds $1 million worth of shares in local businesses.
While financial incentives bring companies to Dresden, they may not be enough to keep them there. Cenix is to receive $2 million in incentives over several years, but the company is not sure it will stay after the money dries up. “Coming to Dresden has been a great move for the first phase of growth,” Echeverri said. “But we have had difficulty recruiting senior people to this city.”
Many of the more experienced people Cenix is trying to attract are English-speaking with spouses and families who are reluctant to move to such a German-speaking environment.
Despite this, Dresden’s position as a small tech mecca appears to have some bright days ahead. In 2002, Archer Daniels Midland Co., DuPont and Infineon Technologies AG announced they would build their $250-million joint research and development center for photomask technology in the city.
And once the European Union expands eastward in 2004, letting in 10 countries from Eastern and Central Europe, Dresden will find itself in a unique geographical position. After being on the eastern frontier of the European Union, the city will be smack in the center of the 25-country economic bloc — a market of 450 million people.