3 questions to smart minds

Financing opportunities for founders increase

For this 3 questions to V. Junghanns

Salans LLP
Photo: V. Jung­hanns | Salans LLP
25. Octo­ber 2012

After a pause in invest­ment at the begin­ning of the year, German venture finan­ciers inves­ted more heavily again in the second quar­ter of this year. This is the result of the Venture Capi­tal Panel, which is surveyed quar­terly by VDI nach­rich­ten and the Munich-based consul­ting firm FHP Private Equity Consul­tants. — As a result, the rising number of invest­ments was mainly attri­bu­ta­ble to private venture finan­ciers. Berlin once again proved to be a mecca for high-tech foun­ders: More than one in four compa­nies that recei­ved fresh money is based in the capi­tal. Which indus­tries are in trend and who are the play­ers, 3 ques­ti­ons to:

For this 3 ques­ti­ons to Lawyer and part­ner at Salans LLP, Frankfurt

1. Which sectors are tren­ding in the German venture capi­tal industry?

VC invest­ments in recent months have regu­larly focu­sed on start-ups and young compa­nies that offer products for which there are scalable markets — with limi­ted capi­tal invest­ment(capex light). It is important to VC inves­tors that the funded compa­nies have a concrete idea of how to mone­tize their ideas. In this respect, the trend here has not chan­ged. For the life scien­ces sector, for exam­ple, this means: Invest­ments are being made in the medi­cal tech­no­logy sector, but hardly at all in the phar­maceu­ti­cal sector. In the clean­tech sector, compo­nent manu­fac­tu­r­ers find a spon­sor from the VC envi­ron­ment more easily than plant manu­fac­tu­r­ers or process engi­neers. In the Inter­net sector, pure eCom­merce provi­ders have a hard time because markets are not very scalable here if imita­tors can quickly compete with the finan­ced company.

Nevert­hel­ess, it is fair to say that certain indus­tries, espe­ci­ally (again) in the tech­no­logy sector, have recei­ved increased atten­tion in recent months. In addi­tion to the areas of medi­cal tech­no­logy and clean­tech alre­ady mentio­ned, these include, for exam­ple, biotech­no­logy and auto­mo­tive, parti­cu­larly in the area of eMobi­lity and intel­li­gent energy manage­ment. The rene­wa­ble energy sector is enjoy­ing growing inte­rest. In the Inter­net and mobile commu­ni­ca­ti­ons sector, VC funds are curr­ently incre­asingly trying to jump on the band­wagon in the games indus­try. In contrast, VC invest­ments in social networks or in the area of online music distri­bu­tion have been rather restrai­ned recently. IT and soft­ware provi­ders with market-ready products curr­ently have good chan­ces of finding a VC inves­tor, espe­ci­ally in the cloud compu­ting and soft­ware-as-a-service segments.

2. Which inves­tors do you see active as a priority?

In terms of VC funds, in addi­tion to the larger VC funds in Germany, such as Early­bird, High-Tech Grün­der­fonds, Welling­ton Part­ners, one has recently often seen smal­ler funds that have clear indus­try or thema­tic focu­ses. In the mean­time, foreign VC funds are also incre­asingly attrac­ted to Germany again. In some cases, when it comes to further rounds of finan­cing or growth finan­cing, small and medium cap private equity funds (some­thing deme­ter in clean­tech) are looking at compa­nies that are actually looking for a VC investor.

3. Can we observe a change in the inves­tor scene? Who are the ’new’ investors?

In fact, the scene has become more colorful. In the seed and start-up space, a number of family offices, incu­ba­tors and serial inves­tors are now on the move along­side busi­ness angels. For exam­ple, a number of foun­ders from the Inter­net 1.0 era are now acting as inves­tors in the Inter­net 2.0 era. Crowd­fun­ding is another pheno­me­non around which there is real hype. In a reali­stic assess­ment, crowd­fun­ding can substi­tute VC invest­ments in the area of seed finan­cing up to appro­xi­m­ately EUR 100,000. In addi­tion, corpo­rate VCs in parti­cu­lar, such as T‑Venture, Bertels­mann Digi­tal Media Invest­ments and BASF Venture Capi­tal, are curr­ently more active again than they were a few years ago.

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