Where is the business — Trends in the Internet industry
14. January 2015
1. What trends and challenges can we look forward to in the Internet sector over the next two years?
The growth and dynamism of the 25-year-old “Internet sector” will be fueled in the future by the digitization of all industries (agriculture, chemicals, banking, insurance, automotive, manufacturing, services, media, retail, etc.). In other words, the Internet is still completely underestimated! This trend or the developments towards “Industry 4.0″ will usher in the 4th industrial revolution. In their studies, BITKOM and the Fraunhofer Institute talk about the introduction of cyber-physical systems for ALL industries in the future. We refer to this 4th industrial revolution as the return to customer behavior changed by digital technologies through the creation of product & service ECO systems. As an example, UBER (passenger transportation booking platform), VW Group and Allianz collaborated to develop an UBER Passat , which includes all insurance, registration, permits, technology and collateral for the future buyer in the purchase price. A one-dimensional “Samwer’s” view of an industry (e‑commerce) that will only exist on the Internet and not in the USA and China cannot survive the needs of the next few years. Cross-industry ECO-SYSTEMS are the future: Here, too, is an example to illustrate the point. Farmers do not buy individual combines, but purchase a package that increases the yield of the fields to be cultivated by x %. This is done through the convergence of online data analysis and data management companies (e.g. Excelate, Google, etc.), satellite-controlled agricultural terminals (e.g. CLAAS), and coordinated seed development (e.g. Monsanto). The effects of Industry 4.0 are also already being felt in the automotive sector. The more than 100 gearshift, rotary, etc. elements on the dashboard of an AUDI A8 as a learning-intensive imposition of the end consumer are (unfortunately belatedly) differentiated by 1–3 integrated touch-screen displays, which also control the entire car and the customer’s needs anticipatorily. Only those who follow this development in a timely, consistent and innovative manner will be able to survive the next 20 years in global competition — NO industry will be spared from this! This development therefore requires new training profiles and training platforms, funders and tax incentive structures for venture capital, and active participation of industrial companies and SMEs (know-how, platform and capital providers) by integrating innovation management throughout the organization.
2. IEG is a specialist in financing consulting. What would an investor ranking in Germany look like? What investors, and on what scale, can be observed in German companies?
IEG significantly manages 2 financing paths — equity financing as well as traditional debt financing for growth companies in the Internet, technology and services sectors. In equity financing, the coming year 2015 will be characterized by a liquid capital supply for early stage and seed financing (EUR 50,000 and EUR 2 million); the same applies to growth financing from EUR 15 million. For companies that have developed a product or service, have their first customers and are producing sales at a loss, this picture is dramatically reversed: in such A or B financing rounds between EUR 2–15 million, high demand meets limited supply. This equity gap or “financing death zone” is a structural problem for which growth companies in Germany and Europe will have to find an innovative solution in the future. We see only half a dozen financial investors left to consider for these companies in Germany. This gap can be partially closed in the future through strategic investments by industrial companies. We help with this. For traditional debt financing (refinancing or acquisition/project financing), we serve our clients as one of the leading German lead arrangers and debt advisors. A very differentiated picture emerges here. The number of financing providers has decreased significantly as many banks have withdrawn from this segment. In some cases, larger savings banks and Volksbanks close this gap for small and medium-sized transactions (EUR 5 — 50 million). The number of debt funds active in Germany (e.g. Ares, EQT), which support acquisitions and growth financing via alternative financing structures (e.g. uni-tranche), is also increasing. Depending on the transaction size, this offer narrows down even further. For transactions above EUR 10 million EBITDA of the borrower, a much higher financing readiness flexibility can be seen than for transactions between EUR 5–10 million and even more so for companies below EUR 5 million EBITDA. Despite these supply-side constraints/changes, high leverage multiples are currently achievable for “solid” transactions, some of which are reminiscent of the times in 2007. “Bad” or “encumbered” transactions, on the other hand, sometimes fail to find a financing partner at all or only work with purely highly collateralized structures.
3. They have been hosting events under the name “Digital Friends” for several years. What is the idea/motivation behind it?
Since 2011, I have been inviting a maximum of 30 visionary entrepreneurs, innovative founders, pioneering corporate leaders, brilliant minds of tomorrow, world-class athletes, young artists and as well as likeable friends to the DIGITAL FRIENDS Dinner Series(http://ieg-banking-blog.com/category/digital-friends-series/) 10 times a year. The Digital Friends Dinner travels around the world every year, with locations in Berlin, London, Munich, New York, San Francisco, Tunis, Shanghai, Istanbul, Mumbai, etc.. It is invitation-only, not sponsorable or advertisable and without representatives of the press. Apart from the common brackets “Friendships for life” as well as “Digitization in the future”, there is no content claim. If you would like to give a keynote, you are welcome to do so on the topic of “My greatest personal or professional failure.” Thus, to this day, we intimately, individually and amicably connect over 1,000 brilliant minds on all continents. As a trend against over-conferencing, bigger-better-higher thinking and commercial networking, the DIGITAL FRIENDS Dinner Series has successfully established itself as a unique format. After sending our invitations we are fully booked within the first hour!