3 questions to smart minds

Where is the business — Trends in the Internet industry

For this 3 questions to Stefan C. Heilmann

IEG Germany
Photo: S. C. Heil­mann | IEG
14. Janu­ary 2015

The Inter­net is deve­lo­ping at breakneck speed, as are the tech­no­lo­gies requi­red for it. Which tech­no­lo­gies and sectors are setting new trends, in which areas the U.S. is ahead of us, and where the ‘jour­ney’ is headed in the next 1–2 years is explai­ned by a leading invest­ment banking advi­sor focu­sing on mid-sized tran­sac­tions in the Inter­net, Tech­no­logy, Services, Utili­ties industries.

For this 3 ques­ti­ons to Mana­ging Direc­tor IEG Germany Berlin, Global Head of IEG Inter­net and Tech­no­logy Desk

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( 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!

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