Hennigsdorf-based Fiagon seeks to use Chinese capital to initiate operations in the Middle Kingdom, where there is a high level of interest in innovations “made in Brandenburg”.
When visiting Fiagon, you’d better take along a generous supply of patience and a good sense of direction. Because, while this medical technology company based in Hennigsdorf earns its way with navigation systems, the systems are intended for tricky procedures in the ear, nose, and throat region and operations involving the brain and back. Meanwhile, a small sign with the company’s logo in a window on the second floor is the only way to find one of the 8 office towers where the company’s Neuendorfstraße technology center is located. And you won’t want to go by the company’s official address because it will guide you to the wrong place. Fortunately, the navigation systems manufactured by Fiagon are much more accurate. The company reported sales of about 5 million euros in 2015. Its technology is available in more than 50 countries. Company founder and CEO Timo Krüger only recently closed a deal intended to provide his company with access to one of the biggest markets in the world. The deal, which was brokered by the German seed stage investor High-Tech Gründerfonds, involves an investment of 5 million euros in Fiagon by Donghai Securities, a Chinese investment bank. “We predict that about a third of our sales will come from China within the foreseeable future,” estimates Krüger.
But, according to Krüger, the increase in profits alone is not his main objective. “Of course, I want to earn money, but Fiagon’s objective is not to please Timo Krüger. The challenge involves developing a technology with a lasting impact. It’s about taking responsibility for making navigation a part of medicine that is simply a given,” insists the Prignitz native, who currently employs 35 people in Hennigsdorf.
Krüger compares his technology with a navigation system for a car. “But the difference is, I’m not navigating a car through the streets, but rather a surgical instrument through a patient’s head.” Radiological images of each patient provide the data for the system – the geographical coordinates, so to speak. Surgical instruments equipped with microsensors guide the surgeon through the human body based on radiological and CT data. An exceptional level of precision is required especially for procedures involving the paranasal sinuses. One millimeter in the wrong direction and vital organs, such as the brain, could be damaged, resulting in serious injury at the very least, if not the death of the patient. However, a navigation system that is reliable, as well as affordable, in the hands of surgeons with years of experience in these procedures could decisively minimize the fundamental risk associated with these sorts of operations, according to Krüger. While it is true that medical navigation systems have been around for about 20 years now, the CEO insists that smaller hospitals are unable to afford these computerized 3D systems.
According to Steffen Kammradt, CEO of the Brandenburg Economic Development Board (ZAB), large-scale Chinese investments in innovative companies provide a comparatively new character to economic relations between the German state of Brandenburg and China. “Just 10 years ago, Brandenburg companies were especially focused selling their products in China. But these types of partnerships are now also providing companies with the opportunity to continue to grow.”
From Krüger’s point of view, however, the injection of capital is not the only decisive factor here. He points to the fact that a closer relationship with Donghai on the ground in China will improve his company’s chances to more quickly gain a foothold there. “Medical devices involve extremely complex approval procedures that can take several years to complete. But if you have a partner who is a bit better informed about how the whole process works, it may not take as long,” he believes. In addition, this partnership – with its corresponding contacts among authorities and local companies – also makes it easier to access large hospital chains within China, according to Fiagon’s CEO.
For their part, the Chinese are after the know-how associated with products “made in Germany”. They are especially interested in innovative developments within the energy technology, industry 4.0, and health care sectors. In times of faltering economic growth, companies in China are forced to position themselves more broadly and boost domestic demand using German expertise. “The Chinese have begun to focus more on the domestic market and seek to organize their production based on quality more than quantity,” affirms Jens Ullmann, foreign trade expert at the Potsdam Chamber of Industry and Commerce (IHK). “And this process goes faster if you buy the quality instead of making it yourself.”
The figures also reveal the growing significance of economic relations between Brandenburg and China. Back in 2005, companies were exporting goods valued at just about 63 million euros from Brandenburg to China. By 2010, this number had risen to about 195 million euros. From 2013 to 2014, the total increased by another 18 million euros to 237 million euros. In the interest of full disclosure, it should also be pointed out here that, at a value of 612 million euros, the level of imports from China to Brandenburg is nearly three times higher. The most important products being shipped from China to Brandenburg include electronic devices.
Just last year, Brandenburg’s Premier, Dietmar Woidke (member of the Social Democratic Party of Germany), traveled to China with an economic delegation with the aim of strengthening relations. According to the ZAB, 239 companies based in Brandenburg maintain economic ties with the Middle Kingdom. During the Premier’s trip, the delegation also visited the Chinese solar module manufacturer, Astronergy, a member of the Chint Group. In 2014, Astronergy acquired Conergy, the financially distressed solar tech company based in Frankfurt (Oder), saving 200 jobs. “Chint just about saved the Brandenburg solar technology industry,” exclaims ZAB CEO Kammradt.
Chinese money also saved the long-standing organ manufacturer, Schuke, based in Werder/Havel, Germany. When a Russian and a Ukrainian customer were unable to pay for the organs they ordered two years ago, Schuke found itself forced to fold. A cooperative arrangement with a well-financed Chinese partner ensured new orders for the organ manufacturer and its continued existence. Several Chinese universities now intend to use Schuke organs to train future Chinese organists with assistance from the Werder-based experts.
The rescue operation was arranged by the Shanghai Business Center in Potsdam, an organization founded in 2006 by private investors from China and intended to bring together innovative German companies and Chinese financial backers. “Since our founding, we’ve been able to set up 25 partnerships,” says Zhiqi Fan, authorized representative of the Business Center. The commitment involved in the Schuke case is more of an exception. “Traditional European instruments, such as organs, sound strange to the Chinese. We are only familiar with that music on CDs,” according to Fan. The exotic nature of the instrument may also have attracted investors. In addition, there was a desire to simply “provide a little help”.
However, business with China also has a dark side. Chinese companies have a reputation for avidly copying the innovations of others and selling plagiarized designs as their own. In addition, the Brandenburg Office for the Protection of the Constitution issued a report citing massive economic espionage by the Chinese prior to the Premier’s trip to China last year. According to the report, the People’s Republic plays a key role in such espionage, along with the Russian Federation.
This is not completely baseless, according to IHK expert Ullmann. “This remains a serious problem,” he says. But there has been a change in thinking within China. “Chinese companies have also come to understand the value of seeking protection for their own designs,” says Ullmann.
Fiagon CEO Krüger doesn’t believe that the growing ties with China will have a boomerang effect. “The debate within Germany often takes on a very anxious and isolating tone.” But that makes no sense from his point of view. “My favorite example is the automobile industry. A large number of jobs have been created in Wolfsburg because VW went to China”, says the Brandenburg entrepreneur. “This idea that they could take something away from us is simply too short-sighted. If we can sell a few hundred systems to China, then the systems will be built here in Hennigsdorf.” The higher number of units could in turn enable Fiagon to reduce its production costs, making it a bit more competitive. At any rate, the concerns about piracy and plagiarism are based mainly on a cultural misunderstanding, according to Ullmann. “From the Chinese point of view, imitation is one of the highest forms of veneration.”
When it comes to these sorts of issues, Krüger is also pleased to have Donghai on board. “The Chinese have ten different turns of phrase to say ‘yes’.” Eight of them mean ‘no’. You have to understand that first. It is simply a different culture.” Timo Krüger is looking forward to inaugurating his new subsidiary in China in about a year. He initially plans to hire 5 to 10 employees. They will mainly provide support during surgical procedures involving Fiagon navigation systems, organize trainings, and attend conferences. In searching for suitable personnel, the CEO will also be relying on his new business partners and their know-how when it comes to how things are “made in China”.