3 questions to smart minds
Photo: H. Brandis | Earlybird Venture Capital

German venture capital performs

For this 3 questions to H. Brandis

Early­bird Venture Capital
Photo: H. Bran­dis | Early­bird Venture Capital
2. Febru­ary 2011

German venture capi­tal firms’ returns appear to be signi­fi­cantly higher than those of their U.S. coun­ter­parts. Recent evalua­tions (495 VC invest­ments in Germany, 6940 venture invest­ments in the USA) illus­trate the poten­tial of German venture capi­tal. VC industry.

For this 3 ques­ti­ons to Mana­ging Part­ner of Early­bird Venture Capi­tal, Munich; Board member EVCA and Chair­man of the EVCA VC Plat­form Council

1. The most recent evalua­tions of the perfor­mance of German venture capi­tal firms showed that German VC firms gene­ra­ted a gross profit of 11.4 percent in the period from 1998 to 2010. In contrast, Ameri­can compa­nies achieved

“After the burs­t­ing of the Inter­net bubble in 2000, the German VC indus­try, unlike that in the USA, conso­li­da­ted stron­gly. In the period up to 2009, the number of active VC funds in Germany decreased by more than three quar­ters. After the VC funds from 2000 were widely disin­ves­ted from 2004/2005, this led to very low entry valua­tions accor­ding to the prin­ci­ple of supply and demand.”

2. How do you assess the growth oppor­tu­ni­ties for the venture capi­tal indus­try in Germany in the future?

“As soon as the port­fo­lios of the venture capi­tal funds laun­ched from 2005/2006 onwards have been sold to a larger extent and the presu­ma­bly very good returns of these fund gene­ra­ti­ons have thus been reflec­ted in the inves­tors’ accounts, signi­fi­cantly more capi­tal will again flow into German VC funds and thus enable growth. Until then, howe­ver, it is still a few years away, in which our indus­try will have excel­lent invest­ment oppor­tu­ni­ties but rather fewer growth oppor­tu­ni­ties in the form of larger funds.”

3. What advice do you give to young compa­nies seeking financing?

“The rela­tively dried-up VC market unfort­u­na­tely offers few alter­na­ti­ves for young compa­nies in terms of poten­tial capi­tal provi­ders. The more capi­tal is needed, the more diffi­cult it beco­mes. Ther­e­fore, I advise young compa­nies to put a strong focus on capi­tal effi­ci­ency. Since finan­cing remains diffi­cult even in follow-up rounds, I also advise paying atten­tion to the repu­ta­tion and networ­king of the investor(s) to ensure that they not only make a signi­fi­cant capi­tal contri­bu­tion them­sel­ves when putting toge­ther further finan­cing rounds, but can also bring other capi­tal provi­ders to the table.”

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