Venture Capital and Start-ups in Germany - VC Trends initiative by EY 2014
←
→
Page content transcription
If your browser does not render page correctly, please read the page content below
VC Trends initiative by EY Venture Capital and Start-ups in Germany 2014
Welcome | Venture Capital and Start-ups in Germany
Contents
Growth starts with courage, confidence – and capital
Venture capital is fundamental to the financing of companies at
an early stage and therefore crucial for the growth of start-up
companies with high potential.
Foreword BVK 4
Every forward-looking decision requires more than passion and
entrepreneurial spirit. It also requires courage: Courage to venture
Venture Capital Highlights 6 into unknown territory and to try new ways. But courage without
caution in the assessment of risks and opportunities would not be
1
advisable.
Start-ups 8 EY provides different platforms and insights with regard to the
German start-up and venture capital scene. With our initiatives we
2
add value and initiate discussions.
Funding 18 We are particularly proud to present our recent study – outlining
key market trends and insights. It includes interviews with market
3
experts as well as overviews of investments, M&A deals, top lists
and key players.
M&A Overview 28
We hope the study will be of interest to you. If you would like to
discuss current or future market issues, please do not hesitate to
Expert Essay 36 contact us.
4
Appendix 38
Martin Selter Dr. Thomas Pruever
Partner Senior Manager
Ernst & Young GmbH Ernst & Young GmbH
Venture Capital and Start-ups in Germany | 3
Foreword
The key to innovational change and There is a funding shortfall in Germany European Union. In historical terms,
growth, particularly in the digital market, when it comes to larger capital needs for Scandinavian countries or the UK have
is a dynamic business environment. An accelerating further growth by developing outperformed Germany and achieved
essential determinant for entrepreneurs new markets, expanding the product much higher values in terms of the ratio
in this regard is access to funding, mainly portfolio or increasing the workforce. of venture capital investments to national
provided by early stage and venture Many start-ups encounter difficulties in gross domestic product.
capital investors. The Federal Govern- completing funding rounds with a volume
ment of Germany is aware of this hard of EUR 1 million. A decisive factor behind this situation are
factor and has formulated ideas for policy the more favorable legal frameworks of
measures in the coalition agreement of When it comes to even larger funding the countries mentioned, which can be
the Grand Coalition. Rarely has there tickets of EUR 5 million or higher, few seen as one of the drivers for their out-
been so much talk about venture capital venture capital investors in Germany have standing position among their peers.
and private equity in the political scene at the capabilities to give support on this Investors such as large pension funds
local and national level as at present but scale going forward.
those words need to be backed up by
deeds. It is fact that there is a lack of capital
from international investors for ventures
In the German start-up scene, the number located in Germany. One reason for this
of companies founded has increased once might be linked to the limited incentives
again. Berlin, the capital of Germany, is for investors to provide funding to venture
known as a central hotspot of start-ups capital funds that focus on national start-
in information and communications ups.
technology but other federal states such
as Bavaria, North Rhine-Westphalia and On a global scale, it is becoming clear that
Baden-Wuerttemberg are also character- the venture capital market in Germany
ized by a large number of innovative still has untapped potential that needs to
ventures. Sectors with strong innovation be released: Within the past three years,
dynamics in Germany include not only the EUR 2 billion of venture capital has been
ICT sector, but also the areas of medical invested in young companies in Germany,
technology and biotechnology. In addition, whereas during the same period of time,
spin-offs from higher education often EUR 64 billion were invested in start-ups
generate excellent start-up ideas. originating from the US.
For early-stage ventures, dedicated In comparison with other European
funding programs have been established countries, Germany needs to catch up.
not only by institutional investors but also In absolute figures, the country is among
by venture capitalists and business angels the top 3 European venture capital
aiming at funding innovative business locations, which certainly goes without
ideas. saying for the largest economy in the
4 | Venture Capital and Start-ups in Germany
Ulrike Hinrichs | Executive Member of the BVK Board
(German Private Equity and Venture Capital Association)
and insurance companies may favor Regulation) makes it more difficult for entrepreneurs and to provide venture
investment in other European countries insurance companies to invest in venture capital companies with another exit
first rather than into start-ups founded capital funds and therefore limits the channel. The reestablishment of a new
in Germany. In the current situation we options for investment opportunities. market segment is not the remedy for
lack conditions that are internationally The Federal Government needs to counter existing financing constraints. Rather,
competitive and set incentives for additional restrictions and focus on other an entire package of political measures
investors. political measures to enhance institutional which considers regulatory and tax
start-up funding. requirements for the digital sector and
Regulation can also have a negative start-ups is required in order to secure
impact on investors. The ministerial draft A stock exchange 2.0 for technology- innovation and sustainable growth in our
to modify the German Regulation on the based companies, similar to the one at the economy.
Investment of Restricted Assets of Insur- turn of the millennium, has the potential
ance Undertakings (Investment to open a new way of raising capital for
Venture Capital and Start-ups in Germany | 5
Venture Capital
Worldwide corporates and VC Investment vehicles of National and international VCs
firms target the German market corporates set a new funding shift focus onto the ecosystem
trend
Corporate players and financial Institutional funds with various Landmark ventures, a shift in the
investors from all over the world specializations have been initiated quality of entrepreneurs and the
have increased activities in to provide financial support to a ecosystem have increased the
the German market for digital large number of entrepreneurs. attractiveness of the segment.
ventures.
Investments
Deal: German Deal: Xing Deal: Dutch Deal: Deal: Deal: Deal: Axel Deal: Scout24
Haufe Verlag buys Austrian Reed Elsevier Deutsche Takeover of Commerce Springer takeover by
acquires professional acquires Post acquires JouleX by US company buys majority US investor
training- network science SaaS-provider technology Otto Group stake in Hellman &
platform Kununu, network optivo company acquires Austrian Friedman,
Semigator EUR 10 million Mendeley, Cisco, French 3SI firm Runtastic EUR 1.5 billion
EUR EUR ecommerce
100 million 107 million assets
Jan 2013 Jan 2013 Apr 2013 Jun 2013 Jul 2013 Sep 2013 Oct 2013 Nov 2013
Q1 Q2 Q3 Q4
1H 2013 2H 2013
Mar 2013 Jun 2013 Jul 2013 Jul 2013
Policy: German chancellor Community: Axel Springer’s Community: Microsoft Community: TechHub,
Angela Merkel sends a Plug & Play accelerator launches its Ventures a provider of workspace
message to the German nominates the first digital Accelerator in Berlin, focusing and services for tech
start-up scene by visiting ventures joining their program on the local start-up scene entrepreneurs, announces
well-known Berlin tech which includes funding, and on promising early stage the launch of a location in
start-ups Research Gate and network contacts and advice entrepreneurs Berlin
Wooga from experts
Ecosystem
6 | Venture Capital and Start-ups in Germany
Highlights in 2013
and 2014
Crowdfunding attracts IPO wave for internet ventures The freelance economy disrupts
interest from a large number to access capital market the established working culture
of people volumes
Internet platforms have been Several start-ups have filed for Entrepreneurial spirit drives
established to raise monetary IPO at the stock exchange to market change which can be seen
contributions from a large pool attract investments with material in the momentum of the national
of private individuals. ticket sizes (volume: > EUR start-up scene.
1 billion).
Deal: erento Deal: Deal: Axel Deal: Permira Deal: Deal: Neiman Deal: Axel Deal: IPO-
purchases Take-over of Springer buys software DeliveryHero Marcus buys Springer listing by
Finnish rental payment firm acquires application announces e-commerce invests e-commerce
community Sofort AG by Israeli classi- firm full take-over platform EUR 20 million platform
iRent.fi Swedish fieds business TeamViewer, of food- Mytheresa. in equity-stake Zalando and
Klarna; Yad2, EUR 1.1 billion delivery com, of US media company
EUR EUR competitor EUR start-up Ozy builder Rocket
110 million 165 million Pizza.de 150 million Internet
(market
capitalizations:
> EUR 1 billion)
Feb 2014 Feb 2014 May 2014 Jul 2014 Sep 2014 Sep 2014 Oct 2014 Oct 2014
Q1 Q2 Q3 Q4
1H 2014 2H 2014
Mar 2014 Jun 2014 Apr/Sep 2014
Community: The annual Community: The Factory Policy: The German government adjusted and released its
CODE_n program became Berlin opens a campus for funding guidelines on tax exemption for investment subsidies
again a central platform for start-u
‐ ps and tech companies (ref. „INVEST – Zuschuss für Wagniskapital“), especially to
innovative and digital business with renowned local residents promote funding by business angels. With INVEST business
ideas at the CeBit exhibition in such as Soundcloud, Zendesk angels receive 20% of their investment refunded if they
Hanover and 6Wunderkinder participate with at least EUR 10,000 in start-ups. This reduces
their risk to trust in ideas and improves the chances of finding
an investor for innovative companies
Venture Capital and Start-ups in Germany | 7
Start-ups | Venture Capital and Start-ups in Germany
A pipeline full of innovative digital ideas
Number of German start-ups funded in the digital sector – 2010 to September 2014
200
9
18
9
16 60
17
150 25
11
22
130
118 114
■ Early stage 100 12
11 3
■ Expansion 24 6
38
■ Seed
50 64
■ Later stage
43
Source: ThomsonReuters 0
* January to September 2014 2010 2011 2012 2013 2014*
The overall attitude towards establis- Overall financing for start-ups in In customer-oriented firms, investors
hed new venture ideas has significantly Germany has reached a high level, usually engage at a later stage after a
improved in Germany, both in terms of particularly in early-stage or expansion product has achieved considerable user
the number of VC firms now active in the periods. Fund managers have put money uptake backed by strong download figures
market and the volumes raised to invest mainly into internet or technology firms or a broad client base. The proof-of-
in digital start-ups. The fact that German and based on the numbers it is evident concept is an important next step to
entrepreneurs are more attractive to that promising ideas are still flowing succeed in the ongoing competition.
investors than ever before can be seen through the innovation pipeline. Some investments are showing increasing
particularly in the velocity of funding mark-ups in valuation during subsequent
engagements – even though 2014 will This accounts for all areas in the digital rounds.
possibly show a decline compared to world. A lot of venture capital firms follow
previous years. Good ideas are not just the math that an investment needs to Investors trust that market leaders will
linked to one location. That is why inter have the potential to become a multi- create disproportionate value and are
national investors are active in the main hundred million Euro business. Obviously, willing to back that trust with large financ
technology hubs where promising ideas finding start-ups that disrupt the structure ing tickets. They have realized that the
emerge, either through offices, office of a market successfully is not easy; it market is going through a once-in-a-life
hours or industry events. depends on market development and time change and digital will be the largest
changing consumer behavior. channel for distribution.
“We perceive mobile payment as one of the major trends in the
start-up scene. Many funds have already invested in fintech and
banks also recognize the opportunity. We expect big online players
to position themselves in this market as well.”
Markus Barnickel
Eventurecat GmbH
Venture Capital and Start-ups in Germany | 9
Venture Capital investments in
start-ups in the digital sector – 2013 until
September 2014 – Top 15 cities in Europe
Helsinki
Stockholm
Moscow
Copenhagen
Dublin
London
Hamburg
Berlin
Amsterdam
Paris Munich
Vienna
Zurich
Barcelona
Madrid
151–200 start-ups
101–150 start-ups
51–100 start-ups
0–50 start-ups
10 | Venture Capital and Start-ups in GermanyVenture capital
investments in start-ups
in the digital sector
in Germany 2010 to
September 2014 –
Top 10 cities
Hamburg
Berlin
Potsdam
Leipzig
Cologne
Aachen
Frankfurt a. M.
Karlsruhe
Stuttgart
Munich
201–400 start-ups
101–200 start-ups
51–100 start-ups
26–50 start-ups
Source:
0–25 start-ups ThomsonReuters
Venture Capital and Start-ups in Germany | 11Berlin is the most important location The institutions mentioned have become The large number of funding rounds for
for the digital economy in Germany. The central meeting points for the local start- firms based in Berlin is an indicator for
city has developed an entrepreneurial up community. Business angels, high net- the creative potential of the city, with
ecosystem which also affords sufficient worth individuals who provide capital or landmark ventures that attract attention
room for the success of established expertise to other entrepreneurs, are on the international tech scene.
companies and global players. It offers particularly active in the local scene in
digital companies a unique store of supporting young people in developing However, various successful start-ups
resources with a pool of highly qualified their business ideas. The ecosystem is are also coming from other German
and skilled people, great networking vibrant and enables VCs to get involved cities:
opportunities, strong integration in the in market discussion or to make contact
creative sector and a relatively low cost with start-ups at an early stage. • Munich, in the south of Germany, has
level compared to other international a track record with start-up exits, e.g.
hubs. The change in the working environment Scout24 Group, Mytheresa, JouleX.
reveals that Germany is in line with
A couple of years ago, entrepreneurs, global digital development and has the • Hamburg, in the north of Germany, is
design freelancers and programmers momentum to turn innovation potential the place for several mid-cap exits, e.g.
congregated in the bars and cafes in into long-term commercial success. Atlas Interactive, Delasocial, Metrigo,
Berlin Mitte or Berlin Prenzlauer Berg Berlin has managed to build a culture NuBON or Vesseltracker.
which offered both coffee and free wi-fi of entrepreneurial spirit founded not
access. Over the course of time the scene only on the educational sector but also • Dusseldorf, in the west of Germany,
has professionalized, developing co- on the ability to attract global talent. may not look like the typical start-up
working spaces and industry events to This can be seen by the large influx of hub at first glance, but the exit of
discuss business ideas. Most popular are international professionals, e.g. in Sound- Trivago has been a vital sign of the
the Betahaus (co-working space), The cloud and Readmill, both managed by area.
Factory (technology campus), Soho Swedish entrepreneurs. When it comes to
House (Private Member Club) or the investments, Berlin is far ahead of region- • These examples underline the digital
St. Oberholz (meeting point for start-up al competitors in the rest of Germany. expertise which is widespread over the
staff) which provide infrastructure and entire country.
even training courses.
“Berlin’s start-up scene is characterized by its internationality.
There are so many founders who are not German or don’t
even speak German. This makes Berlin unique and extremely
competitive in Europe.”
Gabriel Matuschka
Partech Ventures
12 | Venture Capital and Start-ups in GermanyStart-up revolution across
all business sectors
Top venture trends (sub-sectors and selected references)
# E-commerce and Network and Online and Marketing and IT and other
marketplaces communication mobile services sales services software solutions
1 Fashion Streaming services FinTech Digital analytics Big data
• Second hand • Music streaming • Online payments • User acquisition • Real-time analytics
• High-street & luxury • Video streaming • Cashier systems • Influencer networking • Predictive analytics
• Baby & children‘s wear • eSports broadcasting • Peer-to-peer lending • LBS marketing • Credit scoring
2 Home & living Messenger services Personal investments Social media marketing Data privacy & security
• Design • Social messengers • Micro payments • Second screen TV • VPN services
• Accessories • Event guides • Crowdfunding • Social voting network • Remote access
• Vintage furniture • Mobile dating • Bitcoin platforms • Marketing automation • Data encryption
3 Travel & events Gaming Online education SEO Cloud services
• Booking platforms • Mobile reality games • eLearning • Management tools • Dashboards
• Local travel guides • Virtual reality • Mentored courses • SEO microsites • File hosting
• Event ticketing • Live sports data • Job portals • Enterprise services • Cloud invoicing
4 Food Health & sports Transportation Career development Testing & visualization
• Organic food • Medical directories • Taxi services • Job engine • Crowd usability tests
• Food delivery services • Fitness instructions • Chauffeur services • Social recruiting • App testing services
• Online supermarkets • Health courses • Long-distance bus • Reputation management • Simulation software
services
5 Others Others Others Others Others
• Sharing economy • Online gambling • ID verification • Digital production • 3D printing
• Art auctions • Personal news • Energy management • Multiscreen advertising • SaaS solutions
• Cleaning services • Creative cooperation • Task management • In-game advertising • Speech analysis
Digitalization is shifting into traditional E-commerce remains the central focus • National start-ups have a footprint in
sectors and disrupting businesses, un of German entrepreneurs. Even though fashion. Alongside the flagship Zalando,
restricted by natural borders or language the large amount of capital invested in various other ventures are trying to
barriers. In general, innovation in the this sector is a result of its working capital penetrate the sector. Their business
field of the internet and mobile business requirements, investments are also ideas focus on niche markets such as
complements more traditional tech- significant in regard to business ideas luxury fashion, vintage clothes, second
nologies and challenges business models that relate to fashion, home & living, hand products or children’s fashion.
that have existed for decades. travel & events or food services. One
reason might be that success is fairly • The home & living market niche has
It is crucial to understand how to adapt predictable and – in most cases – is reached a mature stage. It seems
to these changes and to react to the pace directly linked to the marketing budgets that customers have come to accept
of innovation driving the market. A shift available to the entrepreneurs: purchasing design elements, home
in market trends over recent years can accessories or furniture via the
be traced, indicating the high frequency internet which benefits players such
of business opportunities in the digital as WestWing, Home24 or Monoqi.
segment.
Venture Capital and Start-ups in Germany | 13• In the shadow of the established travel One of the fastest-moving areas for • eHealth has increased in popularity, a
platforms Expedia, Trivago and Kayak, new technologies is the entertainment trend reinforced by advanced sensors
several new online travel providers sector (part of the network and commu- in the latest smartwatches. Runtastic,
focus on markets such as cruise tours, nications cluster on page 13) where users an Austrian start-up owned by Axel
outdoor trips or regional leisure are open for innovations and willing to Springer, is a mobile fitness app that
activities. Among them are Berlin-based test new features: combines fitness with mobile applica-
GetYourGuide or GoEuro. tions, social networking and elements
• On a global scale, streaming services of gamification. Other start-ups focus
• Event ticketing has attracted attention, such as Spotify (for music) and Netflix on products such as diabetes monitor
following the success of Eventbrite, a (for movies and TV series) have be- ing, doctor directories, elderly-care ser-
marketplace that allows people to easily come powerful enough to put pressure vices or fertility monitoring. Among
host, promote and discover events. on established competitors in the media them are OneLife, Exelonix, Emperra or
Various entrepreneurs have focused market. German video streaming rivals Arzttermine.de.
on this sub-sector. Among them, Tab like Simfy, Watchever or Sky snap will
ticketbroker or Vamos are targeting face strong competition as the market Services based on online or mobile
this segment. is going through a tough consolidation. platforms have reached significant
market relevance since customers have
• Food delivery services also remain • Gaming and adjacent marketing services understood the product opportunities and
popular. Next to the large firms Delivery remain strong, with flagship firms such added-value in their daily lives. As more
Hero, Lieferando or Foodpanda, smaller as Wooga, Bigpoint.com or GameDuell. users show their willingness to carry out
firms such as HelloFresh or Delinero The focus of Berlin-based game online transactions, entrepreneurs are
are expanding their business model to developer Wooga is on creating regular queuing up to take a bet on the financial
attract new clients. hits such as Jelly Splash, Pearl’s Peril technology sub-sector:
and Diamond Dash. A lot of new
ventures such as AppLift, Flaregames
or Iconicfuture have found their niche
in the market.
“We see a high growth potential in the digital health market, as major
digital players have entered the market and Anglo-American venture
capital funds already invested USD 2.3 billion in the first two quarters
of 2014.”
Guido Hegener
XL Health
14 | Venture Capital and Start-ups in Germany• Digital payment providers such as has given product inspiration. The rapid number of entrepreneurs focusing on
Payleven and SumUp are expanding development of digital technology will big-data technologies, IT security, cloud
their activities into the physical shelves help the global advertising market to services or testing technologies:
of retail stores. Other start-ups such as grow, with national start-ups taking
Kreddible, Kreditech or 9cookies have advantage: • Back-end data analysis is becoming
started to experiment with business more important in the effort to under-
models in the field of funding or credit • Germany is starting to get a reputation stand customers and to drive growth.
scoring. for advertising technology ventures, Big data remains a strong trend and a
particularly those that play in the large group of ventures focuses on this
• Recent quarters have been strong for mobile app space, including Adjust, sub-sector. Decision-makers want to
educational technology and career Madvertise, Ingenious Technologies or have access to real-time results in a
development, with new ventures Sociomantic. The market has recently highly intuitive and responsive manner.
getting up and running. They focus on been influenced by mathematically In that context, companies have adapt-
expert monitoring, online learning or advanced methods of targeting ed the technological expertise to other
vocational tech skills. Among them, customer groups and handling large segments such as e-commerce, marke-
start-ups such as CareerFoundry, amounts of client-related data. ting & sales, finance or health. Some
NeuroNation, qLearning or Lecturio examples are Datameer, G\Predictive,
have started to offer services in this • Search engine and social media data Trufa, RapidMiner, RetentionGrid and
sub-sector. has provided a new playground for SO1.
advertisers to exploit the profile of
Marketing and sales in the digital their client target group and to focus • Data privacy and security have shifted
market have motivated many on customers across the desktop and to become a mainstream issue for
entrepreneurs to start with new ideas. mobile world. Among them are 247 internet users, who have become more
This includes email marketing, SEO, Grad, Adsquare, Crealytics and Kyto. security-conscious. A promising player
mobile advertising, social media in this market is ZenGuard, a consumer
marketing and many types of display The digital scene in Germany has gained security and privacy firm, with over five
advertising. New technology is improving awareness of the IT sub-sector and million downloads of their VPN tool
most areas of internet advertising and other software solutions due to the large ZenMate.
“There are many very strong companies and incubators in Berlin,
that foster the start-up scene in the city. In terms of online marketing
skills, Berlin is probably the global leader.”
Gabriel Matuschka
Partech Ventures
Venture Capital and Start-ups in Germany | 15German ventures have attracted high volumes of funding Top 30 start-ups located in Germany (based on cumulated value) # Target name Location Target profile Founding year Total funding value 1 Delivery Hero Berlin Food delivery service 2011 USD 656.7 million 2 Bigpoint.com Hamburg Online games 2002 USD 460.5 million 3 BestSecret.com Aschheim Shopping community 2007 USD 248.0 million 4 WestWing Munich Home & living retailer 2011 USD 149.1 million 5 SoundCloud Berlin Music streaming 2007 USD 123.3 million 6 Foodpanda Berlin Food delivery service 2012 USD 108.0 million 7 Wimdu Berlin Private accommodation 2011 USD 90.0 million 8 HelloFresh Berlin Food boxes 2011 USD 67.5 million 9 Kreditech Hamburg Big data credit scoring 2012 USD 63.0 million 10 Auctionata Berlin Online auctions 2012 USD 50.0 million 11 GetYourGuide Berlin, Zurich Travel recommendations 2009 USD 45.5 million 12 Internetstores Esslingen Multi-store e-commerce 2007 USD 39.9 million 13 Quandoo Berlin Online reservation platform 2012 USD 39.5 million 14 NumberFour Berlin SaaS services 2009 USD 38.0 million 15 Open-Xchange Nuremberg Communication software 2005 USD 37.8 million 16 Webtrekk Berlin Data intelligence solutions 2003 USD 35.1 million 17 ResearchGate Berlin Academic network 2008 USD 35.0 million 18 Azubu Berlin Media sports company 2011 USD 34.5 million 19 SumUp Berlin Payment system 2011 USD 33.0 million 20 Wooga Berlin Online games 2009 USD 32.2 million 21 GoEuro Berlin Travel search engine 2012 USD 31.0 million 22 MisterSpex Berlin Glasses retailer 2007 USD 29.7 million 23 Auxmoney Dusseldorf Peer-to-peer lending 2007 USD 28.0 million 24 Netbiscuits Kaiserslautern Cloud platform for app development 2000 USD 27.0 million 25 Zimory Berlin Cloud technology 2007 USD 25.5 million 26 6Wunderkinder Berlin Task-Manager application 2010 USD 23.9 million 27 Simfy Cologne Music streaming 2006 USD 23.0 million 28 Onefootball Berlin Football community 2008 USD 20.1 million 29 AppLift Berlin Mobile games marketing 2012 USD 20.0 million 30 Windeln.de Gruenwald Baby products 2010 USD 19.6 million Source: CrunchBase, November 2014 16 | Venture Capital and Start-ups in Germany
Top 30 German start-ups cumulated funding value more than
USD 2,600 million
According to CrunchBase, the business • Established in 2007, Soundcloud has The start-ups outlined here are among
graph that keeps track of funding rounds, raised USD 123 million over its lifetime. the most promising ones, based both on
German start-ups have managed large In 2014, US messenger service Twitter their funding volumes and their maturity
volumes of venture capital along all had the audio-sharing web service on in the start-up cycle. Landmark deals at
funding stages, from the seed phase to its radar for a takeover; however, both multi-billion valuations such as the IPOs
the late stage: companies declined to comment. of Rocket Internet and Zalando or the
takeovers of Scout24 and TeamViewer
• Established in 2011, Delivery Hero has Only a few companies concluded funding have certainly made clear that the digital
received USD 657 million in funding volume deals at a three-digit number. age has arrived in Germany and its
since its foundation. The company is However, this is improving and it seems biggest cities.
among the hot candidates for an exit that access to large-scale venture capital
on a large scale, especially after the has become easier compared to previous
acquisition of local rival pizza.de. years.
• Established in 2011, WestWing has It remains to be seen whether funding
managed to attract USD 149 million tickets will increase to a new stage,
of capital. The shopping club for home comparable with those of peers in the US,
& living is expanding dynamically and Israel or the UK. German start-ups have
has rolled out operations to more than attracted interest on the global level in
a dozen countries in Europe and world- recent years and a large group of them
wide. are ready to exit.
“There are many challenges in Germany, among them
regulatory and financial, which make life difficult for
young companies. Frameworks for start-up activities
are far more developed in other countries.”
Benedikt Kronberger
b-to-v Partners
Venture Capital and Start-ups in Germany | 17Funding | Venture Capital and Start-ups in Germany
Strong funding dynamics
Start-up financing and development cycle
Evolution of business plan and strategy
Idea Early stage Expansion stage Later stage
Funding by Business Angels and Friends, Family, Fools (FFF)
Corporate funding and Venture Capital
M&A and Alliances IPO Mezzanine
Seed Start-up Expansion Public market Exit
• Concept, product • Market launch • Growth and market expansion • IPO
and team • Setting up operations • Product and business development • Disposal
Source: EY and sales • Further innovation • Turnaround
The globalization of entrepreneurship Renowned market experts state that the Following on from the surge of political
has been one of the key trends in recent hotspots mentioned are still in their early interest in entrepreneurship ahead of
years. There is evidence of global days in comparison to the overall set-up last year’s federal election, it is good to
success stories coming out of Germany. in San Francisco or London. Berlin’s most see that political powers appear to be
The country is one of the frontrunners advanced companies such as e-commerce on the right path. For example, German
in the field of digital innovation and giant Zalando, game-developer Wooga or chancellor Angela Merkel was the key
optimized business models. The strong food-delivery platform Delivery Hero are speaker to the digital community at a
network of internet start-ups, small & just four to six years old with massive recent large start-up conference in Berlin
medium sized companies and advanced potential for business development on a and visited local start-ups to point out the
research institutes has contributed to global scale. With respect to the recent importance of the scene for innovation
giving the country an outstanding funding rounds, it is just a matter of time and creativity.
position in a worldwide comparison. until – over the next five years – a group
Ventures with huge potential characterize of German ventures sets new targets Germany’s footprint has increased
the German hubs as new technologies for deal valuation. substantially which has in turn
develop and user expectations shift in attracted international investors to
focus. The enthusiasm about the country as take a closer look at the national start-up
an upcoming hub of entrepreneurial and scene. This trend can be documented for
The largest cities Berlin, Munich, innovational spirit is huge, but the VCs from the US, the UK and Russia as
Cologne, Hamburg and Dusseldorf have ecosystem is still at the very beginning well as Scandinavia. Among them are
solid foundations upon which to build of the transformation process. The blue-chip investors such as Kleiner
a sustainable and transformative fundamentals at micro and macro level Perkins, Highland Capital Partners and
emerging technology ecosystem. are encouraging, particularly considering Union Square Ventures which are
The continuous influx of international that the government has been largely engaged in the top technology firms
entrepreneurs and technology experts absent from the local development, with proven track records of successful
into the urban areas is benefiting this despite state-backed company builder exits. The arrival of new investors has
development at national level and has and investment programs. increased competition and has made it
resulted in the foundation of start-ups more challenging for the experts involved
with team members from all over the to identify business ideas with global
world. relevance.
Venture Capital and Start-ups in Germany | 19It is fair to state that the VC community Since the early 1990s, specialized venture ideas tailored to the requirements
is diverse, characterized by a large investment arms of media holdings of other regions or customer groups.
number of highly specialized national have been among the first investors The best-known portfolio firm has been
and international investors. Among who were active in the national market. Zalando, which was founded in 2008 and
them, Earlybird has been fairly active in The most prominent examples are Axel went through an incredible development
recent years, especially when it comes Springer, Bertelsmann Digital Media phase up to a revenue of EUR 1.8 billion
to late-stage funding. The company Investments, DuMont Venture, DLD in 2013.
manages around USD 1 billion in assets Ventures (Burda), Gruner + Jahr,
for an international investor base. EyeEm, Holtzbrinck Ventures or TheMediaLab In October 2014, Zalando and Rocket
a photo sharing mobile app, and Onefoot- (Madsack, WAZ Group). Their investment Internet carried out two of the largest
ball, a global football community plat- activities initially focused on the digital technology sector IPOs since the 2000
form, are portfolio firms with large user media landscape. Over the course of listing of Deutsche Telekom. In addition,
base. time, these firms have gone through a Rocket Internet has recently started to
transition from media-focused equity establish ventures in emerging market
Another respected investor is the High- holdings to strategic investments in order countries (e.g. Dafiti, Foodpanda,
Tech Gründerfonds, a vehicle backed by to tap into new markets or profit from Lamudi, Lazada) to take advantage
public and private investors that has been shifting business models. of the digital change at local level in
financing young technology companies so far untapped markets.
and supporting their management teams In recent years, Axel Springer has been
with a strong network and entrepreneurial most prominent for the takeovers of In parallel to Rocket Internet, other
expertise. The company has provided classifieds portals yad2 (Israel) and German company builders have extended
funding to more than 250 start-ups from Jobsite (UK) as well as the acquisition their activities including Team Europe,
the digital world as well as other industry of majority stakes in LaCentrale (France, Project-A Ventures, Hanse Ventures or
areas such as biotech or clean technology. 51%) and Immoweb (Belgium). Other the German Startups Group. Their port
The portfolio of the High-Tech Gründer- examples are the investment of Bertels- folios are also full of promising start-ups
fonds includes Trademob, a mobile app mann in the Indian real estate firm including DeliveryHero, a food-delivery
marketing platform and 6Wunderkinder, IndiaProperty.com or the acquisition platform that already operates in about
the company behind Wunderlist and of the Polish advertising firm Sunrise 23 countries.
Wunderkit. Other respected investment System by Bauer Digital.
vehicles initiated by national or local Alongside VC firms and incubators, more
governments are the IBB Beteiligungs A key player in the early-stage segment corporate players from Germany are
gesellschaft, the KfW Bankengruppe or is Rocket Internet. The business model taking note of the start-up scene and
Bayern Kapital. focuses on creating versions of successful actively getting involved in fostering
“It’s a uniquely German thing – they innovate in terms of execution. Companies
like Rocket Internet have made it safe for investment bankers and consultants
to take a sabbatical from their jobs at a mid-level and try out start-up life as a
C-level executive, even a co-founder. I don’t see this anywhere else in the world.”
Colette Ballou
Ballou PR
20 | Venture Capital and Start-ups in Germanyventures. Various incubators have Society, the Microsoft Centre or the Berlin to a limited number of business relation-
entered the market or expanded their Innovation Consensus, in combination ships, which they aim to develop. For
local investment activities in the digital with the strong network effect of the eco- example, Team Europe announced a
sector. Such programs focus on early- system, are expected to have positive material modification in their business
stage investments in promising entre- impulses on the local start-up environment. strategy. The company builder for online
preneurs including offering additional ventures intends to downsize its activities
benefits such as free office space, If the scene can meet the expectations and to focus more on existing operations.
professional services or other incentives that are outlined by international
to sign up. press and industry insiders, there are In addition, Lars Hinrichs, founder of
promising quarters ahead of us with business portal Xing, decided to shut
The trend to accelerators has been German ventures gaining importance down his incubator HackFwd. The vehicle
followed by several corporates, e.g. and finding investors. is no longer accepting start-ups for its
Allianz (Allianz Digital Accelerator), Axel program, focusing instead on existing
Springer (Axel Springer Plug and Play), This prediction is already being translated ventures. Epic Companies, an incubator
Deutsche Telekom (hub:raum), Siemens into real-world phenomena if we look at of the media holding ProSiebenSat.1
(Siemens Technology Accelerator) or developments in the current year. The established in 2014, has also been shut
Telefonica (Wayra academy). Berlin- above-mentioned IPOs of Zalando and down. However, the company will continue
based Betahaus, hy! and Hardware Berlin Rocket Internet as well as ongoing market to focus on the digital business via another
have started an accelerator breed rumors relating to several German incubator called Seven Ventures as well
focusing on hardware venture ideas ventures have put the country on the map as exclusive cooperations with incubators
rather than software. of the technology world. This is a strong in the US, Israel and Europe. These
indication of the commercial success examples demonstrate that competition
In 2011, GMPVC German Media Pool of local ideas which focus on business in the local market has increased,
as Germany‘s first media for equity models in the internet and mobile market resulting in certain transitional change
advertising fund was founded. GMPVC segment. with implications for the stakeholders
provides entrepreneurs with the ability involved.
to achieve breakthrough cross-media The landscape for business angels,
campaigns while conserving cash to VCs and institutional investors has
finance their growth. gone through some structural changes.
Several institutional investors have
Privately backed initiatives such as Google adjusted their allocation strategies and
for Entrepreneurs, the Alexander von their overall business positioning, e.g.
Humboldt Institute for Internet and moving from a large portfolio of ventures
“Currently, we are seeing a consolidation in the accelerator market –
a lot of them are just not set up correctly or don’t follow a clear
strategy. Success stories are built if ‘digital feeling’ is a common
sense and the accelerator is fully integrated into the group strategy.”
Benedikt Kronberger
b-to-v Partners
Venture Capital and Start-ups in Germany | 21Material increase in funding volumes
focusing on the digital market
New institutional funds identified from 2013 to June 2014 – alphabetical order
# Investor Name Location Volume Announced
1 Acton Capital Heureka Growth Fund II Munich EUR 150 million January 2014
2 Berlin Technologie Holding – Berlin EUR 50 million February 2014
3 Earlybird Earlybird Digital East Fund Berlin USD 130 million January 2014
4 Earlybird Earlybird Later Stage Fund Berlin EUR 150 million July 2013
5 Eran Davidson Davidson Technology Growth Debt Berlin EUR 100 million January 2014
6 Federal state Berlin Startup Unit Berlin EUR 100 million June 2014
7 Freistaat Bayern Wachstumsfonds Bayern Munich EUR 250 million April 2014
8 Global Founders Fund – Munich EUR 150 million March 2013
9 Index Ventures – Geneva EUR 400 million June 2014
10 Otto Group Project A Ventures Berlin EUR 30 million October 2013
11 Partech Ventures Partech Ventures Seed Fund Berlin EUR 160 million October 2013
12 Point Nine Capital Point Nine Capital II Berlin EUR 40 million February 2013
13 SAP SAP Ventures Fund II Palo Alto USD 650 million October 2013
14 Siemens Industry of the future Fund Munich USD 110 million February 2014
15 UnternehmerTum GmbH UnternehmerTum Garching EUR 25 million August 2013
Source: EY Research
“I see great opportunities for pushing overall fund volumes if venture
capitalists can win the KfW again as a cornerstone investor. Likewise – and
as permitted by the regulatory framework in other countries – I consider
VC funds a good investment alternative for pension funds.”
Jens Spyrka
bmp media investors
22 | Venture Capital and Start-ups in GermanyOverview of key VCs, accelerators
and incubators in Germany
In recent years, several funds were Valley, has closed a fund to ramp up the investment focus but all together
closed by German VCs that are number of early stage investments in the contribute to the strong dynamics of the
committed to young and dynamic digital market. local start-up scene and the development
European technology companies. Anglo- of the set of ventures. Among them are
Saxon institutional investors in particular Siemens, the diversified industrials smaller vehicles backed by reputated
have become more confident of Europe’s conglomerate, has initiated a fund called business angels and large-sized
potential. The volumes of funds or fund- Industry of the Future Fund, targeting institutional investors with material
of-funds total up to nine-figure amounts, investments in early stage start-up leverage to provide funding.
as can be seen for key players such as companies with technologies that will
Earlybird, Index Ventures, Partech, transform manufacturing. These The overview not only includes market
SAP or Siemens. Each fund has its own examples indicate the different investment players which are located in Germany but
individual strategy, differing in the timing strategies of the VCs. The regional focus also international investors that have
or region of their investments in internet adds another dimension since some of the been particularly active in latest funding
and technology companies. funds are channeled directly into Western rounds or M&A takeovers.
European start-ups whereas other more
Some of the players with large-scale specialized funds focus on geographical The latter is of importance and outlines
assets under management focus on seed areas such CEE, Russia, Turkey or the attractiveness of local ventures for
stage investments with smaller equity Emerging Markets. VCs that operate at a global scale. In fact,
ticket sizes while other go for the late- they have played a key role in supporting
stage deals to finance market expansion. There is a large magnitude of investors ventures throughout the transition from
Earlybird has been broadening its options, and investment vehicles focusing on the expansion stage to the later stage.
focusing on late-stage deals as well as the digital market in Germany. On the Famous examples are the exit of Zalando
ventures in the growing Central and following pages, a brief aggregate of VCs, with major involvement of Swedish
Eastern European region, extending the business angels, accelerators, incubators investment company Kinnevik or the
geographic diversity of the company. and other interest groups are displayed divestment of TeamViewer backed by the
Partech Ventures, a VC firm that operates that have been active throughout the US investors Bessemer Venture Partners
from offices in Paris, Berlin and Silicon last two years. They differ in size and and Insight Venture Partners.
“The lag of venture funding in the range of
EUR 4–15 million can be traced back to a lack of
venture capital funds in Germany with sufficient
fund size to invest these volumes.”
Guido Hegener
XL Health
Venture Capital and Start-ups in Germany | 23Berlin-Potsdam area Munich area Hamburg area
• 500 Start-ups • Acton Capital Partners • Bauer Digital
• Atlantic Internet • Allianz Digital Accelerator • Capnamic Ventures
• Axel Springer Plug and Play • Ananda Ventures • Cinco Capital
• Axel Springer Ventures • ASTUTIA Ventures • Digital Pioneers Germany
• BC Brandenburg Capital • BambooVentures • Fielmann Ventures
• Bergfürst • Bayern Kapital • Gruner + Jahr
• Berlin Hardware Accelerator • Breed Reply • Hanse Ventures
• Berlin Start-up Academy • Cipio Partners • Innovationsstarter Fonds Hamburg
• Berlin Ventures • DLD ventures (Burda Media) • iVentureCapital
• Bertelsmann Digital Media Investments • Ecommerce Alliance • J.C.M.B. Beteiligungs
• Betafabrik • European Founders Fund (EFF) • Neuhaus Partners
• bmp media investors • Fraunhofer Venture • Shortcut Ventures
• b-to-v Partners • General Atlantic • Start 2 Ventures
• BVP Berlin Venture Partners • Global Founders Capital • TheMediaLab (Madsack, WAZ Group)
• Catagonia Capital • Holtzbrinck Ventures • Tivola Ventures
• e.ventures • P7S1 (ProSiebenSat1) • TruVenturo
• Earlybird • Paua Ventures
• ECONA AG • Sevenventures (ProSiebenSat1)
• estag | Capital AG • Siemens VC (Siemens AG) Frankfurt(Main)-Wiesbaden area
• Founders Link • Sixt e-ventures
• German Startups Group • Target Partners • Aurelia Private Equity
• GMPVC German Media Pool • TIBURON Unternehmensaufbau • Creathor Venture
• Grupo Intercom Berlin • Tomorrow Focus AG • HR Alpha Venture Partners
• Hasso Plattner Ventures • UnternehmerTUM • KfW Bankengruppe
• Heilemann Ventures • VentureStars • Main incubator (Commerzbank)
• Hitfox Group • Vodafone Ventures • Omnis Mundi
• hub:raum (Deutsche Telekom AG) • Wayra Academy (Telefonica) • Sirius Venture Partners
• IBB Beteiligungsgesellschaft • Web Holding AG • TEV Global Invest
• K – New Media • Wellington Partners • VCDE Venture Partners
• Lakestar • Xange
• M Cube (Check24-Group)
• M10 Others
• Microsoft Ventures (Microsoft, Cologne/Bonn-Dusseldorf-
HTGF, Seedcamp) Wuppertal area • Blue Fund (Wahlstedt)
• Möller Ventures • Bm-t Beteiligungsmanagement
• Next Station (Deutsche Bahn) • Crossventures (Business Angels) Thüringen (Erfurt)
• Partech Ventures • curtis newton labs • eCAPITAL (Münster)
• Point Nine Capital • Droege Ventures • Grazia Equity (Stuttgart)
• Project A Ventures • DuMont Venture • KIZOO Technology Capital (Karlsruhe)
• Rheingau Founders • DvH Ventures • LBBW Venture Capital (Stuttgart)
• RI Digital Ventures • EnjoyVenture • MGO Digital Ventures (Bamberg)
• Richmond View Ventures • High Tech Gründerfonds • NABRU Ventures (Mettingen)
• Rocket Internet • Iris Capnamic Vent. (Orange, Publicis) • PDV Inter-Media Venture (Augsburg)
• Schober Holding International • Media Ventures (Stroer) • Technologiegründerfonds Sachsen
• Seedcamp Berlin • netSTART Venture • United Internet (Montabaur)
• Siemens Technology Accelerator • RTL interactive (RTL Media Group)
• Sky & Sand • Tengelmann Ventures
• Springstar • T-Ventures (Deutsche Telekom)
• Startupbootcamp Berlin • Venista Ventures
• Team Europe • VHB Ventures (Holtzbrinck Media)
• Vogel Ventures • Vorwerk Ventures
• WestTech Ventures
• XL Health
24 | Venture Capital and Start-ups in GermanyForeign VC funds engaged
in German start-ups 2014
Five German epicenter (selection of major players)
as the bases of key
• Accel Partners (US)
investors, accelerators • Access Industries (US)
and incubators • Advent Venture Partners (UK)
• Atlas Venture (US)
• Atomico (US)
• Balderton Capital (UK)
• Bessemer Venture Partners (US)
• Bright Capital Digital (RU)
• Chernin Group (US)
• Creandum (SE)
• CSVJ Ventures Holding (CH)
• DN Capital (UK)
• Doughty Hanson & Co (UK)
• DST Global (RU)
• Excellion Investment (LU)
• Fidelity Growth Partners Europe (UK)
• First Love Capital (AT)
• Grey Corporate Investments AG (CH)
• Highland Capital Partners (US)
• HOWZAT Partners (UK)
• i5invest (AT)
• Index Ventures (UK)
• Insight Venture Partners (US)
• J.P. Morgan Digital Growth Fund (US)
• Kennet Partners (UK)
• Kinnevik (SE)
• Kite Ventures (RU)
• Kleiner Perkins Caufiled & Byers (US)
• Kreos Capital (UK)
• Logan Capital AG (CH)
• Macquarie Group (Australia)
• Mangrove Capital Partners (LU)
• Mosaic Ventures (UK)
• Mountain Partners AG (CH)
• Nokia Growth Partners (FI)
• Omnes Capital (FR)
• Passion Capital (UK)
• Phenomen Ventures (RU)
• PROfounders Capital (UK)
• Redalpine Venture Partners AG (CH)
• Redpoint Ventures (US)
• RTA Ventures (PL)
• Runa Capital (RU)
• ru-Net (RU)
• Schlegel & Friends (UK)
• Sequoia Capital (US)
• Seventure Partners (FR)
• Spark Capital (US)
• Summit Partners (US)
• Sunstone Capital (DK)
• Taishan Invest AG (CH)
• Tenaya Capital (US)
• Time Equity Partners (FR)
• Union Square Ventures (US)
• VM Digital (AT)
• XAnge (FR)
Venture Capital and Start-ups in Germany | 25Interviews
1
of developing concepts is linked to net- ups with a digital focus, with Berlin as the
working opportunities and the facilitation center of the national start-up scene.
of interaction.
At Betahaus, our team has experienced
In a co-working space, you will find all various highly successful start-ups that
kinds of people, from graphic designers, originated from young professionals, such
Christoph Fahle programmers, photographers, architects as Coffee Circle, Ezeep, GoEuro, LUUV,
and NGOs to journalists or bloggers. Somewhere, Protonet or Orderbird. All of
CEO and Co-founder of Betahaus
them are still at the first stages of strong
Germany’s largest co-working space
This forms a creative scene with potential success curves as can be seen in the level
for innovative and disruptive thoughts. of funding rounds that they have raised
That is unique compared to the historical recently. In some of these cases, the
What is the basic concept and the story model of interaction most people are initial contact between entrepreneurs
behind the Betahaus? familiar with. and investors was made in dedicated
The Betahaus, located in the center of pitch-sessions in our house. These
Berlin, is one of the largest co-working How has the concept of co-working ventures are perfect references for the
institutions in Europe and definitely the evolved over the last five years? added-value of co-working, particularly in
hotspot for start-ups and freelancers in Since we launched the Betahaus idea, the early-stage period before approaching
the German capital. Co-working is a style there has been an evolution of co-working investors.
of work that involves a collaborative spaces. Initially, like-minded talented
environment, often linked to jointly-used people and start-ups used our institution What are the latest projects the
office space. These type of areas were to work or to develop innovative business Betahaus team has been working on?
initially established as an alternative to models. Over recent years, we have seen One of our latest in-house projects is the
working in cafes or to isolation in home larger companies looking at this as office development of the Betahaus hardware
offices. Over time, an entire ecosystem space provision or the opportunity to accelerator program, to help innovative
has been developed, including areas for partner with digital ventures. This is hardware start-ups get off the ground and
art exhibitions, networking events, work- a very promising development: Since to present their concepts and prototypes.
shops, investor meetings and so much the concept of a collaborative working With this, we aim for a platform where
more. The strong demand for co-working environment was established, it has entrepreneurs can present ideas for
services can be seen in our institution. attracted huge attention from institutional physical prototypes, as another layer to
The Betahaus started in 2009 with about and corporate partners. Every week we the entire digital sector. Nowadays, most
40 members in 400 sqm and by this year, host around 50 events, to connect peers of the start-ups focus on software but
we have extended our space up to 2,500 and support their personal and entre- there are also powerful aspects behind
sqm and over 350 members on three preneurial development. For example, we hardware ventures which can be seen in
stories. established the event Betapitch to form the latest technology trends such as 3D-
a community to bring entrepreneurs printing or wearable technologies. This
Which aspects made the co-working together with business angels and VCs topic is complex but there are a couple of
idea so attractive on a worldwide scale? that we trust. Another popular initiative is unique business models that have strong
The success of the co-working model was our weekly Betabreakfast, where every- potential for the mass market. In our
initially seen in large urban hubs such as one can join to learn about a certain topic building in Berlin, we also host Open
Barcelona, Berlin, London, New York or and connect with other like-minded Design City, a collaboration space where
San Francisco but it is spreading rapidly people. new products and relationships can be
all over the world. People who are looking formed. In the coming year, we even plan
for a flexible working space most often How do you see the development of the to organize a tour through 10 cities in
have their initial contact point in co- start-up scene in Berlin? Europe where entrepreneurs from other
working spaces due to a range of benefits. In my opinion, we are still at the early countries will have the chance to pitch to
Entrepreneurs have all the tools they need development stage in Germany for start- the hardware accelerator program and
to share ideas. However, an essential part promote their ideas to a larger audience.
26 | Venture Capital and Start-ups in GermanyYou can also read
