Shortage of later stage venture capital in Germany: more ... · Blinkist, HelloFresh, Delivery Hero...

34
Shortage of later stage venture capital in Germany: more acute due to Corona crisis MARCH 2020 Photo by Paul Volkmer on Unsplash

Transcript of Shortage of later stage venture capital in Germany: more ... · Blinkist, HelloFresh, Delivery Hero...

Page 1: Shortage of later stage venture capital in Germany: more ... · Blinkist, HelloFresh, Delivery Hero €681M N26 Group €427M N26 Group, OST, Pepo €305M N26 Group, Taxfix, Coya

Shortage of later stage venture capital in Germany: more acute due to Corona crisis

MARCH 2020

Photo by Paul Volkmer on Unsplash

Page 2: Shortage of later stage venture capital in Germany: more ... · Blinkist, HelloFresh, Delivery Hero €681M N26 Group €427M N26 Group, OST, Pepo €305M N26 Group, Taxfix, Coya

Shortage of late stage venture capital in Germany

March 2020 | https://startup-map.berlinPage / 2

How can Germany’s startup ecosystem overcome the Corona Crisis?

▪ The Corona crisis is creating immediate cash flow issues for many startups. In Germany, there are now talks of a startup support plan, potentially similar to France's €4 billion plan which had been announced on 25 March

▪ What’s at stake: in the past years, Germany’s startup ecosystem has created global champions, creating billions in value and tens of thousands of jobs. In addition, a younger and also bigger generation of young startups is just starting to emerge

▪ Going into the crisis, Germany’s startup ecosystem had become increasingly dependent on large foreign venture capital investors. This leaves it particularly vulnerable, potentially, in the current situation

▪ This report assesses the current state of venture capital in Germany, to facilitate current discussions and provide data-driven insights

Page 3: Shortage of later stage venture capital in Germany: more ... · Blinkist, HelloFresh, Delivery Hero €681M N26 Group €427M N26 Group, OST, Pepo €305M N26 Group, Taxfix, Coya

Until the Corona Crisis, there had been a continuous rise of venture capital in Germany. Yet, mid growth stage venture capital has not kept up with the rest of Europe, particularly France.

SECTION 1

Page 4: Shortage of later stage venture capital in Germany: more ... · Blinkist, HelloFresh, Delivery Hero €681M N26 Group €427M N26 Group, OST, Pepo €305M N26 Group, Taxfix, Coya

€ 5.0B € 5.3B

€ 8.2B € 8.3B

€ 12.7B

€ 3.0B€ 2.2B

€ 3.3B

€ 4.6B

€ 6.7B

€ 1.8B€ 2.2B

€ 2.6B

€ 3.5B

€ 4.9B

€ 6.3B

€ 7.5B

€ 9.3B € 9.5B

€ 14.3B

2015 2016 2017 2018 2019 2015 2016 2017 2018 2019 2015 2016 2017 2018 2019 2015 2016 2017 2018 2019

United Kingdom Germany France Rest of Europe

Shortage of late stage venture capital in Germany

March 2020 | https://startup-map.berlinPage / 4

Going into the crisis, Germany has seen a rapid rise in venture capital, in line with the rest of Europe.

Source: Dealroom.co. 1. Excludes buyouts, secondary transactions, debt, lending capital, grants.

2.5x

2.7x

2.3x

2.2x

Venture capital investment (1)

Page 5: Shortage of later stage venture capital in Germany: more ... · Blinkist, HelloFresh, Delivery Hero €681M N26 Group €427M N26 Group, OST, Pepo €305M N26 Group, Taxfix, Coya

Germany has been the #2 ecosystem in Europe by most meaningful measures such as number of unicorns.

Page / 5

Shortage of late stage venture capital in Germany

Cumulative number of unicorns created by year $1 billion valuation is reached

United Kingdom

22 | Israel15 | Netherlands14 | France12 | Sweden

Israel: 4

Rest of Europe: 5

France: 6

Switzerland: 4

UK: 8

Unicorns created in 2019

31 | Germany

10 12

14 16

27

38

46

55

69

77

4 4 5 7

11

17 18 19

29 31

2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

12 | Switzerland

March 2020 | https://startup-map.berlin

Germany: 4

Page 6: Shortage of later stage venture capital in Germany: more ... · Blinkist, HelloFresh, Delivery Hero €681M N26 Group €427M N26 Group, OST, Pepo €305M N26 Group, Taxfix, Coya

Source: Dealroom.co. Excludes buyouts, secondary transactions, debt, ICOs, lending capital, grants.

However, France has caught up with Germany by capital invested into rounds up to €50M.

Amount of VC invested by round size

Germany

UK

France

Page / 6

€2-10M rounds €10-50M rounds €50M+ rounds

€ 0.0B

€ 1.0B

€ 2.0B

€ 3.0B

2015 2016 2017 2018 2019€ 0.0B

€ 1.0B

€ 2.0B

€ 3.0B

€ 4.0B

€ 5.0B

2015 2016 2017 2018 2019

€ 0.0B

€ 1.0B

€ 2.0B

€ 3.0B

€ 4.0B

€ 5.0B

€ 6.0B

€ 7.0B

2015 2016 2017 2018 2019

Shortage of late stage venture capital in Germany

Germany

UK

France

Germany

UKFrance

March 2020 | https://startup-map.berlin

Page 7: Shortage of later stage venture capital in Germany: more ... · Blinkist, HelloFresh, Delivery Hero €681M N26 Group €427M N26 Group, OST, Pepo €305M N26 Group, Taxfix, Coya

31% 34%

24% 26%19% 20%

31%25%

18% 14%

45% 46%50%

37%

27%

33%

37%

30%

40%

32% 30%

51%

32%

36%

27%

36%38% 32%

43%

40%

36%29%

45%

35%

49% 49%

18%

43% 46%

59%

19% 18% 20%

33%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

2015 2016 2017 2018 2019 2015 2016 2017 2018 2019 2015 2016 2017 2018 2019

March 2020 | https://startup-map.berlin

Source: Dealroom.co

German venture capital is more dominated by larger rounds than the UK and France.

Shortage of late stage venture capital in Germany

Page / 7

% of amount invested by size

€0-10M

€10-50M

€50M+

United Kingdom Germany France

Page 8: Shortage of later stage venture capital in Germany: more ... · Blinkist, HelloFresh, Delivery Hero €681M N26 Group €427M N26 Group, OST, Pepo €305M N26 Group, Taxfix, Coya

Source: Dealroom.co.1. Startups valued over €250 million but less than €1 billion, excluding acquired and/or public companies.

Number of potential future unicorns: startups valued over €250 million but less than €1 billion.

By number of potential future unicorns (1) France has caught up with Germany while Paris has already overtaken Berlin.

Page / 8

Shortage of late stage venture capital in Germany

98

60

54

16

16

13

11

11

10

10

United Kingdom

Germany

France

Switzerland

Spain

Netherlands

Sweden

Ireland

Denmark

Russia

60

37

27

10

8

8

6

6

6

6

London

Paris

Berlin

Munich

Dublin

Barcelona

Stockholm

Amsterdam

Cambridge

Madrid

March 2020 | https://startup-map.berlin

Page 9: Shortage of later stage venture capital in Germany: more ... · Blinkist, HelloFresh, Delivery Hero €681M N26 Group €427M N26 Group, OST, Pepo €305M N26 Group, Taxfix, Coya

Massive influx of foreign venture capital into German startups: a sign of strength on the one hand. But as a result, share of domestic capital is lowest of any major ecosystem in Europe.

SECTION 2

Page 10: Shortage of later stage venture capital in Germany: more ... · Blinkist, HelloFresh, Delivery Hero €681M N26 Group €427M N26 Group, OST, Pepo €305M N26 Group, Taxfix, Coya

€ 1.2B€ 0.8B € 1.0B € 1.3B

€ 1.7B

€ 1.8B

€ 1.4B

€ 2.3B

€ 3.3B

€ 5.0B

€ 3.0B

€ 2.2B

€ 3.3B

€ 4.6B

€ 6.7B

2015 2016 2017 2018 2019

March 2020 | https://startup-map.berlin

Source: Dealroom.co. Only includes rounds with disclosed Investors.

Much of the increased investment in German startups is driven by foreign (mainly US & Asian) investment which has been growing twice as fast as domestic investment.

Shortage of late stage venture capital in Germany

Page / 10

Domestic and foreign venture capital investment into GermanyFrom InvestmentsCombined round

size since 2015

GetYourGuide, Solaris Bank, Auto 1 Group

€ 970M

GetYourGuide, Omio, SoundCloud

€ 731M

N26 Group, HomeToGo, Blinkist, HelloFresh,

Delivery Hero€ 681M

N26 Group € 427M

N26 Group, OST, Pepo € 305M

N26 Group, Taxfix, Coya € 292M

GetYourGuide, Tourlane, Careship

€ 195M

Auto 1 Group € 180M

Investment from outside Germany is up 2.8x

Domestic investment is up 1.4x

=

=39%

36% 32% 29%25%

61%

64%

68%

71%

75%

Page 11: Shortage of later stage venture capital in Germany: more ... · Blinkist, HelloFresh, Delivery Hero €681M N26 Group €427M N26 Group, OST, Pepo €305M N26 Group, Taxfix, Coya

$3.5B valuation €3B valuation $2.5B valuation $1.7B valuation €1B valuation

Insight PartnersValar Ventures

TencentGIC

SoftbankPrinceville Capital

Goldman Sachs

Accel Partners83North

Goldman SachsCreditEaseMubadala

OMERS Ventures

Greycroft PartnersValar Ventures

March 2020 | https://startup-map.berlin

As a result, foreign investors have built up significant stakes in Berlin’s most promising startups.

Shortage of late stage venture capital in Germany

Page / 11

$1B valuation $1B valuation $700M valuation €500M+ valuation Est. $400M+ valuation

TemasekHill HouseKinnevik

TemasekHeartcore Capital

SoftbankSwisscanto Invest

Prosus/OLXTPG Capital

Goldman SachsIndex Ventures

AtomicoBalderton

Triple PointAstanor

Source: Dealroom.co.

Page 12: Shortage of later stage venture capital in Germany: more ... · Blinkist, HelloFresh, Delivery Hero €681M N26 Group €427M N26 Group, OST, Pepo €305M N26 Group, Taxfix, Coya

Yaron Valler, Managing General PartnerTarget Global

It is a problem first and foremost for the LPswho want to get returns. The ability of “assetallocators” (as opposed to VCs) to producereturns from this asset class is limited as theyare focusing on the wrong parameters, such asprofitability at the expense of growth and thecompany’s future. This also creates a problemfor entrepreneurs as well as the entireecosystem. The issue is working with the rightinvestor for the right point in a company’slifecycle.

Jan Miczaika, Partner HV Ventures

For the startups, not really. Obviously there areadvantages to having local investors, e.g. speedand local knowledge. However a globalperspective can also be helpful. On a moregeneral level Germany needs a strong financialsector to remain competitive in a globalisedworld. Germany is underrepresented inbanking, public and private equities, theexchanges are small and illiquid and IPOs arefew.

Pawel Chudzinski, Partner Point Nine Capital

The advantage of having more German latestage capital would be faster late stage rounds +distributed more broadly. Now it seems thatthere is a lot of small rounds and a bunch ofhuge rounds and the middle would potentiallywork better with more local providers. Also, ifmarkets change, if global investors appetitediminishes, late stage funding availability toGerman startups would be affected negatively.

March 2020 | https://startup-map.berlinPage / 12

Shortage of late stage venture capital in Germany

Does it matter if late stage rounds are gobbled up by US or Asian investors?

Page 13: Shortage of later stage venture capital in Germany: more ... · Blinkist, HelloFresh, Delivery Hero €681M N26 Group €427M N26 Group, OST, Pepo €305M N26 Group, Taxfix, Coya

March 2020 | https://startup-map.berlin

Source: Dealroom.co

For a self-sustaining ecosystem with positive network effects, it helps if German investors stay involved also at later stages.

Shortage of late stage venture capital in Germany

Page / 13

VC backed exits

Current unicorns

Potential future unicorns

Rising stars

View all 33 future unicorns »

View 100 rising stars »

Page 14: Shortage of later stage venture capital in Germany: more ... · Blinkist, HelloFresh, Delivery Hero €681M N26 Group €427M N26 Group, OST, Pepo €305M N26 Group, Taxfix, Coya

44% 45% 47%43%

30%39% 36%

31% 28% 25%

56%64%

69%61% 61%

41%48%

44%40%

34%

11%14% 11% 16%

15%

28%29%

22%24% 30%

16%

13%

13%

13%19%

26%

25%

18%22%

24%

14%

20%

5%8%

10%

9% 13%

19%

8%10%

7%

12%7%

8%4%

2%

2%

3% 4%3%

6%

5%

12% 6%21%

1%4%

8%

14% 8%

4%

4% 1%

3% 3%

3%

6%

10% 8%11%

26%

17%

25% 28%24% 22%

18% 20%25% 27%

17%

8% 9%15% 14%

27%

19%24% 26% 28%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

2015 2016 2017 2018 2019 2015 2016 2017 2018 2019 2015 2016 2017 2018 2019 2015 2016 2017 2018 2019

Source: Dealroom.co estimates.

In Germany, the share of domestic capital has diminished, while the share of foreign capital has increased. The same trend is also visible in the UK.

Shortage of late stage venture capital in Germany

March 2020 | https://startup-map.berlinPage / 14

% of investment by source

United Kingdom Germany France Total Europe

Domestic

Cross-border

Rest of World

Asia

USA and Canada

Page 15: Shortage of later stage venture capital in Germany: more ... · Blinkist, HelloFresh, Delivery Hero €681M N26 Group €427M N26 Group, OST, Pepo €305M N26 Group, Taxfix, Coya

28%

32%

39%

27%

29%

27%

15%

11%

5%

12%

16%

10%

3%

5%

2%

1%

3%

4%

28%

33%

19%

22%

17%

28%

28%

29%

38%

47%

59%

63%

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

Germany

Sweden

Israel

United Kingdom

Netherlands

Europe

France

USA and Canada Asia Rest of World Europe cross-border Domestic

Source: Dealroom.co estimates. Only includes rounds with disclosed Investors.

But what is the “right” proportion of foreign capital? Being attractive to foreign investors is a sign of strength (see Israel and the UK). Meanwhile, France is actively seeking more foreign investors.

Shortage of late stage venture capital in Germany

March 2020 | https://startup-map.berlinPage / 15

% of foreign investment (2018 - 2019) by country and source

For Israel and the UK, the high proportion of foreign investors reflects strong global investor appetite, especially from the USA and Asia (a sign of strength).

France wants to attract more foreign capital, especially from the USA and Asia.

Germany now has the lowest % of domestic capital of any major tech hub

Page 16: Shortage of later stage venture capital in Germany: more ... · Blinkist, HelloFresh, Delivery Hero €681M N26 Group €427M N26 Group, OST, Pepo €305M N26 Group, Taxfix, Coya

€ 0.3B € 0.3B € 0.5B € 0.4B € 0.5B€ 0.3B

€ 0.4B € 0.4B€ 0.6B € 0.6B € 0.6B

€ 0.2B € 0.3B€ 0.6B

€ 0.6B € 0.7B€ 0.8B € 0.8B

€ 0.9B € 0.9B€ 1.1B € 1.1B

€ 1.7B€ 1.8B

€ 1.5B

€ 0.4B

€ 1.4B

€ 2.1B

€ 3.9B

2015 2016 2017 2018 2019 2015 2016 2017 2018 2019 2015 2016 2017 2018 2019

March 2020 | https://startup-map.berlin

Source: Dealroom.co

Larger rounds drive most of the increase in venture capital. And these larger rounds are predominantly funded by foreign investors.

Shortage of late stage venture capital in Germany

Page / 16

▶ Domestic

▶ Cross-border

▶ Rest of World

▶ Asia

▶ USA and Canada

Rounds €0-10M Rounds €10-50M Rounds €50M+

Venture capital investment in Germany by source and size

Page 17: Shortage of later stage venture capital in Germany: more ... · Blinkist, HelloFresh, Delivery Hero €681M N26 Group €427M N26 Group, OST, Pepo €305M N26 Group, Taxfix, Coya

Yaron Valler, Managing General PartnerTarget Global

We see a lack of not only German, but Europeanlate stage capital. Larger rounds are mainlyfinanced by non-European VCs. The realshortage is in mid stage, or Early Growth as wecall it - when we talk about late venture this isthe stage we should refer to. There is amplecapital for super late stage (pre capital markets)which is handled by “asset allocators”.

Jan Miczaika, Partner HV Ventures

There are almost no funds who are able andwilling to invest in later stage deals, especiallyfor an initial investment (follow-ons aresomewhat different). However for everydeal>€10m (or so) we currently see broadinterest from US-based investors, ready to fly inat a moments notice. Once companies reach alate stage there is generally enough appeal toattract international investors. This trend willmove "earlier", with international investorswriting smaller and smaller tickets.

Pawel Chudzinski, Partner Point Nine Capital

There are only few late stage investors inGermany for sure. However, given that the laterstage you go, the more international thefunding landscape becomes, this is not such ahuge problem for the ecosystem - internationallate stage funds are happy to pile in, it seems.But I think that more local late stage funds willbe beneficial to the ecosystem - and it is slowlybut surely happening.

March 2020 | https://startup-map.berlinPage / 17

Shortage of late stage venture capital in Germany

Is there a lack of German late stage capital?

Page 18: Shortage of later stage venture capital in Germany: more ... · Blinkist, HelloFresh, Delivery Hero €681M N26 Group €427M N26 Group, OST, Pepo €305M N26 Group, Taxfix, Coya

44%47%

55%

44%50%

29%

40%35% 37%

34%

43%

8%14% 15% 15%

25%14%

19%

25%

26%

39%

29%

26%

31%

25%

24%

53%

21% 17%

32%

23%

24%

15%20%

12%

8%12%

5%

9%

8%

5%

31%

4%

11%

3%

3% 2% 1%

2%

4%

6%

2%

9%

4%

12%

29%

9%

8%12%

8% 9% 10%

23%16%

28%21% 24%

28%

36%

21%

35% 33%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

2015 2016 2017 2018 2019 2015 2016 2017 2018 2019 2015 2016 2017 2018 2019

March 2020 | https://startup-map.berlin

Source: Dealroom.co

German venture capital investors are involved in only 15% of these larger rounds.

Shortage of late stage venture capital in Germany

Page / 18

Domestic

Cross-border

Rest of World

Asia

USA and Canada

€0-10M €10-50M €50M+

% of investment by source and size

Page 19: Shortage of later stage venture capital in Germany: more ... · Blinkist, HelloFresh, Delivery Hero €681M N26 Group €427M N26 Group, OST, Pepo €305M N26 Group, Taxfix, Coya

Germany’s venture capital industry is best-in-class in Europe, in early stage investing. More larger German funds are gradually starting to emerge, who can also support later stage investing.

SECTION 3

Page 20: Shortage of later stage venture capital in Germany: more ... · Blinkist, HelloFresh, Delivery Hero €681M N26 Group €427M N26 Group, OST, Pepo €305M N26 Group, Taxfix, Coya

Source: Dealroom.co Europe’s Most Prominent Venture Capital Investors.

German early stage VC firms dominate Europe’s league tables, along with the UK.

Shortage of late stage venture capital in Germany

March 2020 | https://startup-map.berlinPage / 20

Seed stage investors

Investor Home baseEuropean $1B+

exitsCurrent European

unicornsFuture Unicorns

#1 Index Ventures London 14 7 14

#2 Accel Partners London 8 11 22

#3 HV Holtzbrinck Ventures Munich 6 3 9

#4 Northzone Stockholm 6 2 7

#5 Balderton Capital London 4 3 13

#6 Idinvest Partners Paris 3 4 10

#7 LakestarBerlin, Zurich,

London3 4 9

#8 Target Global Berlin 1 4 8

#9 Atomico London 3 2 7

#10 Battery Ventures Boston 0 5 3

#11 TEV Ventures Essen 2 3 2

#12 Creandum Stockholm 2 2 7

#13 Dawn Capital London 2 2 7

#14 Scottish Equity Partners London 4 0 2

#15 83North London 3 1 2

Investor Home baseEuropean $1B+

exitsCurrent European

unicornsFuture Unicorns

#1 Global Founders Capital Berlin 8 3 7

#2 LocalGlobe London 1 3 9

#3 Seedcamp London 0 4 3

#4 Point Nine Capital Berlin 2 1 5

#5 Hoxton Ventures London 0 3 3

#6 Agoranov Paris 1 2 3

#7 Cherry Ventures Berlin 0 2 3

#8 Atlantic Labs Berlin 0 2 2

#9 Caixa Capital Risc Barcelona 0 2 1

#10 Venrex London 1 1 1

#11 Entrée Capital London 0 2 0

#12 Sound Ventures Los Angeles 0 2 0

#13 Antai Venture Builder Barcelona 0 2 0

#14 Bonsai Venture Capital Madrid 0 2 0

#15 Kima Ventures Paris 0 1 12

Series A stage investors

Page 21: Shortage of later stage venture capital in Germany: more ... · Blinkist, HelloFresh, Delivery Hero €681M N26 Group €427M N26 Group, OST, Pepo €305M N26 Group, Taxfix, Coya

Investor Latest fund Notable domestic German investments Notable investments outside Germany

Rocket Internet / Global Founders CapitalBerlin based Seed fund

€ 900M | Jan 2019

LakestarZurich & Berlin based Series A fund

$ 700M | Sep 2019

HTGFBerlin & Bonn based Seed fund

€ 320M | Jul 2018

HV Holtzbrinck VenturesMunich & Berlin based Seed/Series A fund

€ 306M | Jan 2018

Project A VenturesBerlin based based Seed/Series A fund

€ 200M | Sep 2019

Cherry VenturesBerlin based Seed fund

€ 175M | Jun 2019

Earlybird Venture CapitalBerlin based Series A fund

€ 175M | Jul 2018

BlueYard CapitalBerlin based Seed fund

€ 120M | Jan 2019

Target GlobalBerlin based multi-stage fund

€ 120M | Feb 2020

Point Nine CapitalBerlin based Seed fund

€ 75M | Jun 2017

German VCs have been able to back iconic startups both domestically (Delivery Hero, Zalando) and internationally (e.g. Revolut, Spotify, UiPath).

Shortage of late stage venture capital in Germany

Page / 21 March 2020 | https://startup-map.berlin

Page 22: Shortage of later stage venture capital in Germany: more ... · Blinkist, HelloFresh, Delivery Hero €681M N26 Group €427M N26 Group, OST, Pepo €305M N26 Group, Taxfix, Coya

Source: Dealroom.co

German VC firms invest half of capital abroad, more than French VC firms, but less than UK VC firms.

Shortage of late stage venture capital in Germany

Page / 22

65% 66%

54%

63%70%

46%41%

53%48% 49% 49%

35%32%

41%35%

35% 34%

46%

37%30%

54%59%

47%52% 51% 51%

65%68%

59%65%

2015 2016 2017 2018 2019 2015 2016 2017 2018 2019 2015 2016 2017 2018 2019

Venture Capital allocated

Invested internationally

Invested domestically

UK VCs German VCs French VCsNotable domestic investments by German VCs

Notable international investments by German VCs

March 2020 | https://startup-map.berlin

Page 23: Shortage of later stage venture capital in Germany: more ... · Blinkist, HelloFresh, Delivery Hero €681M N26 Group €427M N26 Group, OST, Pepo €305M N26 Group, Taxfix, Coya

There are over 150 German VC firms, but 78% of capital is raised by Seed and Series A stage funds, whereas 83% of fundraising is late stage.

Shortage of late stage venture capital in Germany

March 2020 | https://startup-map.berlinPage / 23

German venture capital raised

since 2015(1)

Capital raised by German startups

in 2019

Source: Dealroom.co. 1. Last VC fund created after 2015. Categorized by the preferred round of investment per investor.

€0.2B€0.8B

€1.2B

Series A Series B+Seed

€2.2B€2.0B

Page 24: Shortage of later stage venture capital in Germany: more ... · Blinkist, HelloFresh, Delivery Hero €681M N26 Group €427M N26 Group, OST, Pepo €305M N26 Group, Taxfix, Coya

March 2020 | https://startup-map.berlin

Source: Dealroom.co1. Matthias Hilpert in FutureMadeInGermany.de

The most active corporate venture investors in Europe are German. Still, German corporates spend only 0.1%(1) of their revenues on external innovation; much less than their internal innovation budgets.

Shortage of late stage venture capital in Germany

Page / 24

Corporate VC investment by location of corporateMedia Automotive Industrial

Finance Retail Technology € 1.6B

€ 0.9B

€ 1.4B

€ 2.4B

€ 3.2B

€ 0.7B

€ 0.5B

€ 1.6B

€ 1.3B

€ 2.5B

€ 0.3B

€ 0.8B

€ 0.5B

€ 0.8B€ 0.8B

2015 2016 2017 2018 2019 2015 2016 2017 2018 2019 2015 2016 2017 2018 2019

Germany United Kingdom France

Investment outside Germany DomesticInternational investment Domestic investment

Page 25: Shortage of later stage venture capital in Germany: more ... · Blinkist, HelloFresh, Delivery Hero €681M N26 Group €427M N26 Group, OST, Pepo €305M N26 Group, Taxfix, Coya

Yaron Valler, Managing General PartnerTarget Global

The pension system is inherently broken due topopulation aging and longer lives. The only wayfor the funds to pay pensions in the long run willbe to increase their exposure to high yieldinstruments such as venture capital. Pensionfunds are among the largest venture capitalinvestors in the US. Perhaps there is somethingto learn from the world’s most robust economy.Furthermore, there is a national priorityquestion at stake. If Germany wants to remaincompetitive it needs to invest more in VC. Thegreat initiatives of HTGF and the various“Landesbanken” are a good start but notenough.

Jan Miczaika, Partner HV Ventures

Historically returns have been relatively low, butthis is changing according to institutionalinvestors. A larger problem is that the typicalcollectors of capital in Germany, e.g. pensionfunds, insurances and state institutions typicallydo not invest in private equity - or even stronglyin public equities, for that manner. Additionallythe German governmental "pay-as-you-go"pension system, with a relatively privatepension sector, leads to less capital available forinvestment.

Pawel Chudzinski, Partner Point Nine Capital

I think in line with reasons for historical lack ofVC - no track record of venture success becausethe German VC industry started in the 90s, gothit by the bus of the crash of 2000 and never wasable to show success. Now that it has, money ispiling it, and it is just easier to fill in a €100mfund then a €500m or €1b fund, but they arehappening.

March 2020 | https://startup-map.berlinPage / 25

What has been the reason for the lack of German late stage capital?

Shortage of late stage venture capital in Germany

Page 26: Shortage of later stage venture capital in Germany: more ... · Blinkist, HelloFresh, Delivery Hero €681M N26 Group €427M N26 Group, OST, Pepo €305M N26 Group, Taxfix, Coya

€ 2.1B

€ 3.0B € 3.0B

€ 4.0B€ 4.2B

€ 1.3B

€ 0.9B

€ 1.7B

€ 1.4B

€ 2.3B

€ 1.0B € 1.0B

€ 2.4B

€ 1.8B

€ 1.1B

€ 1.9B

€ 4.4B

€ 2.3B

€ 3.1B

€ 5.2B

2015 2016 2017 2018 2019 2015 2016 2017 2018 2019 2015 2016 2017 2018 2019 2015 2016 2017 2018 2019

Source: Dealroom.co

Across Europe, 2019 was a record year for new fund raising by VCs (and 2020 started strong).

Page / 26

Amount of capital raised by European VCs

€16B raised since ‘15

€7.6B raised since ‘15

€7.3B raised since ‘15

€17B raised since ‘15

March 2020 | https://startup-map.berlin

Shortage of late stage venture capital in Germany

United Kingdom Germany France Rest of Europe

Page 27: Shortage of later stage venture capital in Germany: more ... · Blinkist, HelloFresh, Delivery Hero €681M N26 Group €427M N26 Group, OST, Pepo €305M N26 Group, Taxfix, Coya

March 2020 | https://startup-map.berlin

Source: Dealroom.co1. Closing in Feb 2020.

German VCs have started raising bigger funds. Appetite from LPs is growing.

Shortage of late stage venture capital in Germany

Page / 27

EIF (European Union)

State-owned institutions &

Landesbanken

German private institutions and

corporates

Family offices & individuals

Foreign investors

€1.3B

€0.9B

€1.7B

€1.4B

€2.4B

2015 2016 2017 2018 2019

€900MSep 2019

$730MSep 2019 (1)

€306MJan 2018

$200MSep 2019

€175MJun 2019

€175MJul 2018

€120MJan 2019

€120MFeb 2020

New funds raised by German VC firmsSelected LPs in German VC firms

Page 28: Shortage of later stage venture capital in Germany: more ... · Blinkist, HelloFresh, Delivery Hero €681M N26 Group €427M N26 Group, OST, Pepo €305M N26 Group, Taxfix, Coya

March 2020 | https://startup-map.berlin

Source: Invest Europe / EDC1. DACH = Germany, Austria, Switzerland.

InvestEurope data shows that funding sources started to shift in 2018 towards more pension funds, fund-of-funds, USA and UK investors.

Shortage of late stage venture capital in Germany

Page / 28

German VCs European VCs

Funding sources by type 2015 2016 2017 2018 2018

Unclassified 63% 14% 22% 36% 23%

Government agencies 31% 33% 21% 28% 14%

Pension funds 0% 0% 0% 10% 7% > Positive developments with more upside

Fund of funds 0% 0% 1% 8% 10% > Positive developments with more upside

Family offices 3% 5% 5% 4% 8% > Upside potential

Corporate investors 0% 26% 8% 3% 9%

Insurance companies 0% 2% 1% 3% 4%

Other asset managers 0% 15% 33% 2% 5%

Private individuals 1% 1% 3% 2% 7% > Upside potential

Banks 1% 2% 5% 1% 5% > Upside potential

Endowments and foundations 0% 1% 0% 1% 4% > Upside potential

Academic institutions 0% 0% 2% 1% 0%

New funds raised 100% 100% 100% 100% 100%

German VCs European VCs

Funding sources by region 2015 2016 2017 2018 2018

Unclassified 56% 14% 22% 36% 2%

DACH 34% 66% 65% 30% 11%

North America 0% – 0% 15% 15% > Positive developments with more upside

France & Benelux 10% 17% 11% 9% 39%

UK & Ireland 0% – 1% 7% 15% > Positive developments with more upside

Southern Europe – – 0% 3% 6%

Rest of the world – – 0% 0% 0%

Asia & Australia – 4% – 0% 3%

CEE – – – – 3%

Nordics – – – – 2%

Unclassified Europe 0% – – – 4%

New funds raised 100% 100% 100% 100% 100%

New funds raised by source in Germany vs. Europe

Page 29: Shortage of later stage venture capital in Germany: more ... · Blinkist, HelloFresh, Delivery Hero €681M N26 Group €427M N26 Group, OST, Pepo €305M N26 Group, Taxfix, Coya

Yaron Valler, Managing General PartnerTarget Global

We can only welcome government initiative, butwe think there is much more that can be done.Most of these initiatives are nice for publicitybut means little. To give a recent example: for acountry as big as France to commit to € 5b over5 years is very little capital. For comparison: thisis the amount invested in Israel in only half ayear.

Jan Miczaika, Partner HV Ventures

The EIF is an often under-acknowledged pillar ofEuropean startup activity. Without it, therewould be much fewer funds (and startups). I amin general always sceptic of individualgovernment interventions. But for example theNordic system of loss-prevention guarantees forpension funds investing in VC led to the creationof a vibrant financing ecosystem, at very littlecost to the government.

Pawel Chudzinski, Partner Point Nine Capital

I like the European Investment Fund (EIF), Ithink they did an amazing job on keeping the VCindustry alive and forming it, Europe-wide.However, maybe they were focused too muchon the smaller funds and not on the later stagefunds.

March 2020 | https://startup-map.berlinPage / 29

Shortage of late stage venture capital in Germany

How important is government funding?

Page 30: Shortage of later stage venture capital in Germany: more ... · Blinkist, HelloFresh, Delivery Hero €681M N26 Group €427M N26 Group, OST, Pepo €305M N26 Group, Taxfix, Coya

March 2020 | https://startup-map.berlin

Our conclusions.

Shortage of late stage venture capital in Germany

Page / 30

▪ Germany still ranks #2 in Europe by most key measures. But in mid growth stage venture capital, Germany has been overtaken by France, which is also apparent by the number of “future unicorns”

▪ Large rounds (€50M+) dominate in Germany and those are 85% funded by foreign investors. Asian and USA investors have built up significant stakes in Berlin’s most promising startups. Being attractive to foreign investors is a sign of strength, but Germany stands out by its low % of domestic venture capital

▪ Germany’s VC industry is top-class in Europe in early stages (by number of unicorns invested for example). There are over 150 German VC firms, but 78% of capital is raised by Seed and Series A stage funds, whereas 83% of investment is late stage

▪ Larger German funds have started to emerge. According to InvestEurope data, German VC firms are starting to raise more of their capital outside of the DACH region (70% in 2018, up from 40% in prior three years). Pension funds have started to invest more in 2018. Academic institutions and family offices are still lagging

Page 31: Shortage of later stage venture capital in Germany: more ... · Blinkist, HelloFresh, Delivery Hero €681M N26 Group €427M N26 Group, OST, Pepo €305M N26 Group, Taxfix, Coya

The most complete and detailed picture of Berlin’s tech ecosystem, in partnership with City of Berlin: https://startup-map.berlin

March 2020 | https://startup-map.berlinPage / 2

3,800+ startups & scaleups

200+ Accelerators, workspaces

1,200+ funds & corporate investors

3,000+ Funding rounds & exits

Shortage of late stage venture capital in Germany

Page 32: Shortage of later stage venture capital in Germany: more ... · Blinkist, HelloFresh, Delivery Hero €681M N26 Group €427M N26 Group, OST, Pepo €305M N26 Group, Taxfix, Coya

Live since July 2019

Coming soon …

Live since October 2019

Live since March 2018

Live since March 2020

March 2020 | https://startup-map.berlinPage / 32

Ecosystem solutions already four major hubs in Germany, and soon launching one more.

Shortage of late stage venture capital in Germany

Page 33: Shortage of later stage venture capital in Germany: more ... · Blinkist, HelloFresh, Delivery Hero €681M N26 Group €427M N26 Group, OST, Pepo €305M N26 Group, Taxfix, Coya

March 2020 | https://startup-map.berlinPage / 33

An expanding combined network: each new member adds more value.

Shortage of late stage venture capital in Germany

Page 34: Shortage of later stage venture capital in Germany: more ... · Blinkist, HelloFresh, Delivery Hero €681M N26 Group €427M N26 Group, OST, Pepo €305M N26 Group, Taxfix, Coya

Initiated by

Supported byFor founders

Know your ecosystemGet inspired

For VCs & corporatesDiscover hot startups & scaleups

Get new insights & trends

For researchersApply for data access, to

support your research projects.

For governmentsBetter understanding of startup

ecosystem dynamics

Visit https://startup-map.berlin

Powered by