Portfolio Company Profile: Wolfsburg AG



Public-Private Partnership: Creating the Conditions for Successful Innovation in Europe  
By Kate Opekar, Deputy Editor

"Innovation is the key to sustainable competitive advantage for companies of all sizes in all sectors… taken overall, the companies based in Europe have failed to match the performance of innovative companies based in the USA”.  – Herbert Steinwender, Secretary General, VA Technologie, UNICE

In 1997, the City of Wolfsburg and Volkswagen AG joined together to consider a tough question: how could they revitalize the Wolfsburg region to create the necessary conditions for innovation?

The task was not going to be easy. At the outstart of the initiative, unemployment in the City of Wolfsburg was higher than the national average of about 8%. Medium-sized businesses, always an important driving force behind employment in Germany, were barely represented; some 60% of jobs in Wolfsburg were provided by Volkswagen, the major employer of the region. More tellingly, only half of local jobs were filled by city inhabitants, meaning many people chose to live in surrounding areas rather than in the city itself. Not surprisingly, as a result, retailers in Wolfsburg suffered; each year between €100-€200 million in purchasing power was siphoned off into the surrounding area. And in terms of new business, Wolfsburg was trailing the national average.

After two years of research, Wolfsburg and Volkswagen came to the conclusion that the only way to improve the economic prospects of the region was to improve the social prospects of the region through a joint effort involving the public sector and the private sector: thus in 1999, Wolfsburg AG came to be.

Wolfsburg AG

The vision of Wolfsburg AG is to build the area of Wolfsburg into an economically strong and dynamic region with a high quality of life. The concept capturing this vision is named ‘AutoVision’ and follows the motto ‘Ideas, Incentives, Initiatives’. The long term objective of Wolfsburg AG is to create a self-sustaining cluster (‘ecosystem’) in entrepreneurial initiatives in the area of mobility and other innovative sectors.

 “We wanted to create a ‘virtuous circle’ as a driving force behind the development of an economic cluster”, explained Bill Esler, former Director InnovationsCampus.  “To do this, we took a two pronged approach: while introducing several business infrastructure and economic incentives to attract new companies to the area, we also directed efforts towards creating a city environment that would be attractive enough to retain the talent needed to support businesses in the area.”

Wolfsburg AG consists of four different entities:

1. Supplier Location Services (targeting automobile industry suppliers)
2. ErlebnisWelt (leisure and entertainment services)
3. Personnel Service Agency (professional personnel services)
4. InnovationsCampus 

The InnovationsCampus is a unique model to promote start-up companies systematically and extensively. The model builds on the fact that in order to be able to grow a successful business from a good idea, at least the following three resources are required:

• Product/Technical Know How;
• Management Skills;
• Capital.

InnovationsCampus supports new companies by providing access to these required resources. The companies become part of the extensive ecosystem that is a unique blend of technology, healthcare and entertainment services, as well as the manufacturing corporates and suppliers that are characteristic to the area of Wolfsburg. Companies located at the InnovationsCampus take advantage of the vast talent pool of IT, personnel and business consultants and have open access to investment capital (through AutoVision GmbH, the corporate venture arm of Volkswagen AG as well as through strong relationships with leading Venture Firms in Europe and the US). The basic idea behind the Campus is to bring together innovators, investors and entrepreneurs and to facilitate a continuous exchange between the different parties as part of  a self-sustaining ecosystem. With this system, InnovationsCampus offers new companies the flexible working environment and network that they need to grow throughout Europe and beyond.

Ariadne Capital, a European Venture Capital Group based in London, has been working with Wolfsburg AG to bring in new companies from outside the region - for both investment and location purposes. “The infrastructure support that Wolfsburg AG is able to offer fledging companies is a huge help in getting some of these ideas off the ground”, said Bundeep Singh Rangar, COO of Ariadne Capital. “But I really see the value for start-ups locating here being the ability to identify new business opportunities quickly within the OEMs, and develop the kind of long-term collaborative relationships that are really only possible when you have regular opportunities to meet and discuss new concepts.” Ariadne Capital is helping to increase AutoVision's access to deal flow by creating an online interface with its in-house Knowledge Management System, which provides up-to-date information on hundreds of companies Ariadne Capital meets with throughout Europe.

The Wolfsburg AG project has been a success, attracting some 151 new companies to the area and generating almost 1000 new jobs.  One model of how the private sector is cooperating with government to successfully bring the cluster theory to life.

InnovationsCampus accomplishments:

• 151 new businesses were established (As of November 2002);
• 926 new jobs were created (As of November 2002);
• Innovation Workshops, investor conferences, etc;
• 527 teams participated in four nationwide Business Plan contests;
• Entrepreneurship education together with Free University Berlin