The German seed fund High-Tech Gründerfonds, founded in 2005, invests in 40 to 50 start-ups each year. Its managing director explains its strategy and the state of venture capital in Germany.
JDN. What are the amounts of funds managed by High-Tech Gründerfonds?
Alex von Frankenberg.
HTGF invests in young high-tech start-ups with great potential at the seed stage. We manage approximately €573.5 million in two funds (€272 million in HTGF I and €301.5 million in HTGF II). Typically, HTGF invests up to €500,000 in seed. After that, we are prepared to invest up to two million euros in total in a start-up in the portfolio.
HTGF invests in all high-tech sectors: automation, photonics, energy and clean technologies, biotechnology, nanotechnology and chemistry, IT, telecommunications, media and e-commerce. We received nearly 1,200 applications in 2013, and we expect to receive 15% more in 2014.
HTGF is a public/private partnership. Our underwriters include the Federal Ministry of Economics and Technology, the KfW banking group, as well as strategic institutional investors such as ALTANA, BASF, B. Braun, Robert Bosch, CEWE, Daimler, Deutsche Post DHL, Deutsche Telekom, Evonik, Lanxess, METRO, Qiagen, RWE Innogy, SAP, Tengelmann and Carl Zeiss.
What is your investment pace, and how many start-ups do you have in your portfolio?
We have 245 companies in our active portfolio. We invest in 40 to 50 start-ups each year.
We have successfully sold CorImmun, a company that develops clinical trials for drugs, 6Wunderkinder, a task organization application, and Plista, a digital advertising optimization solution, with a very good return on investment. In our portfolio, Next Kraftwerke, a renewable energy company, and MisterSpex, an online optician, are showing very good operational results.
Our fund invests almost exclusively in Germany because of its structure and underwriters (public/private partnership). Since the end of 2011, we are allowed to invest outside Germany, so foreign founding teams are welcome. In 2013, we closed five investments abroad: in the US, the UK, Finland and Italy. But so far, we have never invested in France. The market is definitely interesting. Some of the biggest outflows of investment funds in the last ten years in Europe have been in French start-ups.
Thanks to tax incentives, French venture capital funds have better access to capital than German funds. So it seems to me that the French start-up ecosystem is more advanced and better financed than the German ecosystem. This creates very interesting opportunities in France.
It seems that it is indeed rather difficult for German investors to get into the French ecosystem, mainly because the French VC industry is quite strong, but maybe also because of the language barrier.
The German start-up sector has rather recovered from a severe downturn that hit it between 2003 and 2005. Berlin has become a place where many entrepreneurs from all over Europe gather. However, because Germany is decentralized, promising start-ups can be found in many cities and regions of Germany. Our biggest investors, the Federal Ministry of Economics and KFW, are based in Bonn, as are two of our private investors, Deutsche Telekom and DHL. That’s why we’re also here. Bonn is a central city, from where you can reach all major German cities within an hour.
What are the main differences between the French and German ecosystems?
It’s hard to say. What they have in common is that both start-up ecosystems are rapidly catching up with the US and UK leaders.
As long as the stock market remains at record levels, we will see many interesting exits for start-ups. IT security will, of course, be a big trend in the coming years, as will personalized medicine and robotics.
Alex von Frankenberg has
an MBA in Business Administration from the University of Texas at Austin and a PhD from the University of Mannheim. He worked at Deutsche Bank and then at the Siemens accelerator as a manager. He is now managing director of the High-Tech Gründerfonds. 40 people work for HTGF, including 28 portfolio managers and two managing directors.