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www.frontline.vc
Startups & Venture Capital in GermanyTech emerges in Europes largest economy
A GLOBAL PERSPECTIVE BROUGHT TO YOU BY:
www.pointnine.vc
2
Many new venture funds have been raised in Germany
1Cash on Hand and Bank Balance, RKET Annual Report, Rocket ECP, Earlybird, Creathor, bmp, Target Partners, Lakestar, Coparion, Crunchbase: Global Founders Capital, Holtzbrinck, HTGF, Cherry Ventures, Dow Jones Venture Source, CBInsights, Estimates may sometimes include realisations, does not include funds HQ’d outside of Germany
Tota
l Fun
ds R
aise
d or
Sim
ilar (€1
,000
s) FUNDS RAISED IN 2016
Funds domiciled in Germany or primarily do business there
0
400
800
1,200
1,600Ro
cket
Inte
rnet
Rock
et R
ICP
Early
Bird
Hol
tzbr
ink
HTG
F
Acto
n
Lake
star
Targ
et P
artn
ers
Proj
ect A
Copa
rion
B-to
-V IBB
Cre
atho
r
Che
rry
Blue
Yar
d
Poin
t Nin
e
Spee
dinv
est
Paua
Capn
amic
4065100110120150180182200225290300
385470
576635
700
1,000
1,504
3
Which has lead to better upstream funding for startups
Seed Series A - B Late StageIncubators
Note: approximation, many investors participate across different stages
0
13
25
38
50
20%24%
35%37%
40%
48%
The highest level of international participation in Europe
4
London
Paris
Berlin
Stockholm
€0b €4.5b €9b €13.5b €18b
$2.3b
$5.8b
$3.7b
$11b
$1.8b
$1.3b
$9.6b
$17b
USD
Total Funds Raised
Total Funds Invested
TOTAL VC FUNDS RAISED VS INVESTED2VC BACKED WITH AN INTERNATIONAL INVESTOR1
1Crunchbase Pro (2013-2016), 2The numbers behind Europe's VC ecosystem [datagraphic] (2006-2016)
As funds globally position themselves to do more German deals
5
FUNDS ADD GERMAN DEAL MAKERS
RECENT TRANSACTIONS IN GERMANY
Series B
Series A
v
77% OF FUNDING ROUNDS IN BERLIN ARE LED BY NON-LOCALS
Berlin needs more VCs!
0
15
30
45
60
13%
29%
57% 60%
17%22%
Berlin Silicon Valley
Local Led rounds
Non-Local Domestic
International Led
Why Berlin Needs More Local VCs a Network Analysis
A boom in investment activity
6Crunchbase Pro, Gil Dibner Slideshare
# OF VC BACKED COMPANIES IN THE PAST 10 YEARS
50
140
230
320
410
500
Q3 2014
Q4 2014
Q1 2015
Q2 2015
Q3 2015
Q4 2015
Q1 2016
Q2 2016
Q3 2016
Q4 2016
QUARTERLY VC FUNDING EX-MEGA (€100m) ROUNDS IN GERMANY
Qua
rter
ly fu
nds r
aise
d ($
1m)
62% CAGR
0 350 700 1050 1400
139
157
165
417
607
1,203
$3.1b
€9b€2b
Is giving birth to the German startup ecosystem!!
7
€3.1b
€100m
€150m
€760m
€82m
$4b
€830m
$190m
€210m
Scout24 €3.2b
€210m
€150m
€100m
€215m
€950m€1b
€272m
€300m
Current or last valuations: Notable exits, companies with €50m+ in funding, other notable. Private market valuation, best estimate based on public data
€420m$700m
$700m
€480m
8
Investors
91See Appendix & FY 2015 Financial Statements and Rocket Internet Financial Statements and Capital Markets Day, 2Crunchbase, 3Rocket ECP, GFC vs. Rocket Internet Capital Partners: Wie passen Rockets Fonds zusammen? ,Rocket Internet Capital Partners fund closes at $1 billion 4
The Samwer brothers control vehicles with billions in combined assets1,2
Rocket participated in 16 out of 20 of Germanys largest funding rounds1
Rocket is largely an emerging markets and eCommerce investor1
Cash €1.5b1
RICP4 €1b
FOUNDED
2007
OFFICES
Berlin, London
FUNDS
2
RAISED
-
# OF INVESTMENTS
75+
EXITS
5+
101Holtzbrinck-Ventures.com, 2Crunchbase, 3Proprietary, 4Holtzbrinck Ventures etabliert 177 Mio. Early-Stage-Fonds mit HarbourVest Partners, 5Holtzbrinck Ventures Closes $331M Fund To Back More Consumer And E-Commerce Startups
Founded in 2000 as part of German publishing house Holtzbrinck
Track record of investment success: 150+ investments1, 16 acquisitions2 and 3 IPOs3
LPs include US based HarbourVest Partners and Georg Von Holtzbrinck4
Strong focus on consumer internet, eCommerce, transactional business models
AUM €635m
Consumer Internet
in EU
Fund VI €285m5
FOUNDED
2000
OFFICES
Munich
FUNDS
6
RAISED
€635
# OF INVESTMENTS
100+
EXITS
25+
111Tech.eu: Most Active Tech Investors In Europe (H1 2015)
SaaS and marketplace focused, Seed and early Series A
Created out of Team Europe, a network of Berlin-based entrepreneurs
One of the most active Tech Investors in EU1 with strong foothold in Berlin
American style VC, with international LPs (US, Israel, EU)
€55m Fund 3
SaaS Marketplaces
€40m Fund 2
FOUNDED
2011
OFFICES
Berlin
FUNDS
3
RAISED
€112
# OF INVESTMENTS
80+
EXITS
10+
121earlybird.com, 2Heilemann Ventures and Earlybird VC Join Forces
Founded in 1997, with €700m invested across 5 funds, invested in over 100 startups1
Earlybird is one of the oldest and most established funds in Germany
Invests €250k-10m across all stages1
Recently merged with Heilemann Ventures2
Technology
Eastern Europe
Healthcare
FOUNDED
1997
OFFICES
Berlin, Munich
FUNDS
3
RAISED
€112
# OF INVESTMENTS
120+
EXITS
25+
13
Who to knowMarc Samwer
Oliver Samwer Alexander Samwer
rocket-internet.com @RocketInternet
Pawel Chudzinski Christoph Janz
pointnine.vc @PointNineCap
Hendrik Brandis Christian Nagel
Fabian Heilemann
earlybird.com @EarlybirdVC
Daniel Glasner Christian Meerman
Filip Dames
cherry.vc @CherryVentures
Ciaran O’Leary Jason Whitemire
berlinvc.com @BlueYard
Uwe Horstmann Dr. Florian Heinemann
project-a.com @ProjectAcom
Jan Beckers
@FinLeap @HitFoxGroup
Klaus Hommels Mark Schmitz Nicolas Brand
lakestar.com
Will Prendergast Thomas Olszewski
frontline.vc @frontline
Corporate Investors
14
Funds Focus Areas
B2C consumer goods, retail and services
Manager of several corporate venture funds
IoT, smart home, digital customer access, big data
Direct-to-consumer or transaction oriented
SevenVentures, Redstone Digital, Vito Ventures, Vowerk
Digital Media & Publishing Tech
Consumer internet, marketplaces, and deep tech
Independent venture fund of Commerzbank
Accelerators
15
Accelerators % Stake Comments
6%
5%
6-8%
4-5%
Investment
€20k+100
€25k
€15k
-
Techstars Berlin, Axel Springer Plug & Play, Berlin Startup Academy, Startupbootcamp Smart Transportation & Energy
- - Diversified
Transportation and energy
Axel Springer
Diversified
Diversified
Negotiable Community focusedNegotiable
What to expect when you close a deal in Germany
16*Most traditional databases do not contain accurate valuation information, Techstars Berlin1
Incubated Companies Angel & Seed Deals
€1-3m €2-6m
Angel Round Seed Round
TractionInception
SaaS Funding Napkin, the mobile-friendly edition , Fundraising Framework for Marketplace Startups in 2016
Expectations can very dramatically
Business with some traction, first customers
Can include companies from accelerator
Typically raising at above market valuations
Management owns 0-70% of equity
Part of the capital raised may go to the incubator
17
Opportunities
18
Strengths
Top class engineering and business universities
Berlin is an attractive place to live for a lot of young
talented people
Easier immigration policies then elsewhere in Europe
Largest EU economy in terms of GDP and
population
Higher capital efficiency as a result of lower salaries and
cost of rent
Optimism surrounding Berlin and the prospects of
the ecosystem
Berlin
19
Population 3.5m
1 Bedroom Flat €500-1,0001
Beer €31
Avg Salary €40,0002
Avg Software Engineer Salary €50,0003
Berlin named most 'fun' city in the world - telegraph.co.uk
1Berlin named most 'fun' city in the world - telegraph.co.uk, 2Salary Survey in Berlin, 3Berlin Software Engineer Average Salary
20
Growing Pains
21
Challenges
1Think We're the Most Entrepreneurial Country In the World? Not So Fast
Difficult to retain top talent with lower salaries vs other
EU cities
Victim of its own success? Rent and cost of living are
increasing
Culture of risk aversion and slower adoption of new
productsEnglish & German are used
Lower levels of entrepreneurship vs rest of
Europe1
Relatively small talent pool of software developers in
some sectors
22
Incubated startups, management equity participation
Incubator 50%
New Investors 30%
Management 20%
A Letter to German Entrepreneurs, Index Ventures
“
”
In some cases, part of the 2nd round of funding is used to pay for services
A startling number of German startups that we have spoken to have ownership structures which put them at a real disadvantage when raising their first venture round. In many cases we have observed, the founders have given away too much equity to their first investors - typically angels and family offices, who have little experience with the fast-growing startups or the venture capital funding model.
‘Incubated’ companies allocate a relatively small equity stake to management teams
EXAMPLE SEED STAGE INCUBATOR CAP TABLE
23
Winning sectors
FinTech
• Credit related and consumer business
• Large market for consumer finance
• Population which travels a great deal
Four sectors where German startups have succeeded
24
eCommerce
• Fashion, auctions, and food delivery
• Largest market for fashion in Europe
• Lean and cost competitive, low margin
Leisure
• E-sports, gaming, travel, and music
• Travel culturally important
• Large number of consumers
AdTech
• Big data, data analytics, data mgmt, SEO
• E-commerce companies as customers
• High small- & mid-cap M&A-activity
25
FinTech
Founder Alexander Graubner-Müller Formerly Groupon, Rocket Internet University of St. Gallen
Founder Valentin Stalf Formerly Paymill, Rocket Internet University of St. Gallen
Pawn LoansPayday
Credit CardsBank Loans
Better credit for customers with
no or poor access to credit
The mobile bank
Linkedin Information, Crunchbase
26
AdTech
FounderAndreas BodczekFormerly Telefonica, Bertelsmann Ludwig-Maximilians Universität
Mobile in-app ad monetisation platform, incl. ad mediation & marketplace.
Founder & CTOMarcus ToberFormerly Ecards, Idealo Internet Technische Fachhochschule Berlin
Acquired for $190m
Linkedin Information, Crunchbase
SEO SaaS platform
27
FounderHakan KoçFormerly Home24, Rocket Internet, Zalando, DailyDeal
FounderDavid SchneiderFormerly Compara Tarifas, Unibicate, Roland Berger San Andrés, Singapore, WHU
Trouble Selling Grandma’s Cars Led to $1 Billion Startup, LinkedIn Information, Crunchbase
eCommerce
Designer shopping online
IPO at €5.3b
valuation
B2B marketplace for used car
dealers
28
Leisure
Alexander LjungFormerly Trustmojo.com, Jung Studios, SF Anytime Stockholm University
Rolf SchroemgensFormerly ciao.com Leipzig Graduate School of Management
Online travel booking Social Music
Samwer brothers
Trivago, auf leisen Sohlen, LinkedIn Information, Crunchbase
Christian Vollmann
Dr. Florian Heinemann
IPO at $4b valuation
Internet Exits
29
€6.5b (at IPO)€5.3b (at IPO)
€100m
€150m
€272m
€82mTrivago $4b
(40%)
TeamViewer €830m
$190m
€210m
2004 Onward: 16 Biggest German Exits So Far, Tech.eu: Scout24, Windeln Successfully Completes IPO, Das denkt die Szene über den 6Wunderkinder-Exit
€3.2b
€210m
€150
€100m
€215m
eCommerce
Gaming
Travel
Enterprise
AdTech
Social
€150m (at IPO) $150m
FinTech
€108m
joulex €108m
€124m
Early stage companies to watch in 2017
30
Data driven publishing house
Bus travel platform
Large scale data analysis Video game coaching
Video sharing network
App retargeting
Home cooking mail service
API based CMS
Bank of banks
OKR
Banking for freelancers
Flying cars
SME Lending
App for your tax returnOffice management software Cloud banking platform
Authors choice
31
Outlook
32
2017 Predictions
Fewer new EU funds will enter the market
Expect larger deals from Rocket after a 6 month lull
Brexit will continue to accelerate ecosystem growth in Germany
Great companies will come from all over Germany!
Seed & Series A valuations will level off
Interest from non-EU VCs in the German ecosystem will
continue to increase
33
2017 Predictions
Large incubators will shift towards VC investing
After 5 years of B2C growth, B2B startups emerge
IPOs of Delivery Hero, Home24, will continue to
fuel the ecosystem
Global VCs will continue to hire Germans to target the
region
Zalando will become Germany’s first “decacorn”
Germany to surpass the UK in total VC funding
34
Twitter Medium
Mathias
Twitter Medium Quora
35
Additional Slides
Rocket participates in 16 out of 20 of the largest rounds since 2012
36
Rocket Participates in 80% of €50+ funding rounds
FY 2015 Financial Statements and Rocket Internet Financial Statements and Capital Markets Day
37
Nine new funds in 2016
DB1 VENTURES
TRUMPF STRATEGIC
Germany’s 11 New VCs launched in 2016
0
225
450
675
900
Q3 2014 Q4 2014 Q1 2015 Q2 2015 Q3 2015 Q4 2015 Q1 2016 Q2 2016 Q3 2016 Q4 2016
180
284
719
437
621
444
892
543 555
487
180
267
389
209
379339 333
388
461 463
29
163118
232279
225
281
355 361
443
74123
89112
140
84
140113
194224
Sweden France Germany UK
Funding Trends (ex-mega rounds)
38Europe & Isreal 2016 VC Year in Review, Gil Dibner
Mill
ions
of E
uro’
s
Online Content:
Rocket Internet Financial Statements Germany’s FinTech Ecosystem: A Wheel in the European Innovation Machine
Venture Capital and Startups in Germany 2015, E&Y 16 Biggest German Exits So Far
Trouble Selling Grandma’s Cars Led to $1 Billion Startup Salary Survey in Berlin & Berlin Software Engineer Average Salary
Berlin named most 'fun' city in the world - telegraph.co.uk A Letter to German Entrprenuers, Index Ventures
Think We're the Most Entrepreneurial Country In the World? Not So Fast Heilemann Ventures and Earlybird VC Join Forces
GP Bullhound 2015 Unicorn Report, GP Bullhound 2016 Unicorn Report Germany’s 11 New VCs launched in 2016
Data Services:
CBInsights Dow Jones Venture Source
Crunchbase LinkedIn
39
Source Links
Slide 2 - Venture funds in Germany Funds domiciled in Germany or that primarily do business there
Does not include corporates, funds without official ‘funds raised’, or non-internet funds Rocket is a publicly traded company with €1.5b of cash and cash equivalents
Slide 3 - Fund participation by stage Notable participants by stage, discretionary selection
Slide 4- International participation Data from Crunchbase Pro
Pitchbook data
Slide 6 - A boom in activity Data from Crunchbase Pro
Gil Dibner Startups and VC in Isreal
Slide 6 - Selection of successful companies Companies with over €30m funds raised
Authors choice
Slides 9-15 - Notable players Discretionary selection of well known investors
Slide 16 - Valuations Estimates based on experience
Slides 24-30 - Successful startups Many startups have multiple co-founders that are not included here
Authors Choice
Slide 28 - Exits Notable internet exits since 2004
Slide 30- Early stage companies to watch Authors choice
40
Methodology
Recommended