Many rocket ship tech founders in Germany have a choice whether to go public in Germany or in the US. The choices come with big trade offs regarding incorporation and board governance. Tech founders wanting to play in the big leagues should list on NASDAQ or NYSE in the US

1. Confidential
WUNDERVC
Where German Tech Unicorn
Founders Should Go Public
Christian Dahlen, September 2023

2. Confidential
WUNDERVC 2
Only few Startup Founders will be able to go Public
Venture
financed startup
exceeding the
‘Mendoza line of
SaaS growth’
IPO or
sale
IPO
Sale
Sale or
shutdown
Yes
No
Only < 0.1% of
all funded
startups

3. Confidential
WUNDERVC 3
IPO Brings with it Completely Different Expectations
• Ownership change brings with it a
loss of protection from the board
of investors
• Increased public scrutiny
• Expectation management toward
the public markets
• Expectation management
towards all stakeholders
• Governance structure will
completely change and depend
on where the shares are traded
Private
company
board
Public
company
board
IPO

4. Confidential
WUNDERVC 4
The Decision to IPO is Typically made 2-3 years Prior
1m
ARR
Company first
becomes
serious about
developing
corporate
governance
systems
Hires the
CFO who
eventually
takes
company
public
Hires
inside
general
counsel
Recruits first
independent
director to
the board
IPO
Put the
financial &
accounting
systems in
place
9
Years
4
Years
3
Years
2
Years
0
Years
Hire the
external
auditor
used at
IPO

5. Confidential
WUNDERVC 5
What Matters to Founders
1. Valuation
2. Board governance
3. Board composition
4. Board control (‘Dual class shares’)

6. Confidential
WUNDERVC 6
Where to to Public?
Venture
financed startup
exceeding the
‘Mendoza line of
SaaS growth’
IPO or
sale
IPO
US
Germany
Yes
?

7. Confidential
WUNDERVC 7
Key Differences Between Germany and the US
Germany US
1. Valuation Dominated by value
investors
Valuations often 2X
higher than European
comparable
2. Board governance Two tiered AG
stakeholder model*
One tiered shareholder
model
3. Board composition Supervisory board Board of Directors
4. Board control (“Dual
class shares”)
One share – one vote** Dual class shares
*SE allows for one tier model ** Subject to changes planned in Germany’s Future Financing Act 2023

8. Confidential
WUNDERVC 8
Almost all Tech Startups are Trading
on NASDAQ or NYSE
• Higher valuation can be used as acquisition currency, to avoid
being acquired and to reward shareholders and employees
• US IPO market generally offers higher IPO valuations than the
UK, Europe and German markets. The US market shows
particular strength in small and mid cap IPOs, while European
exchanges rather have micro caps
• Many tech IPOs require knowledgeable tech analysts and in
turn informed investors
• Deeper, bigger pool of growth investors on NASDAQ and
NYSE vs. value investors
‘America is the natural habitat of the growth investor while the
FTSE today still reflects the truism that the UK is a dividend
market, representing the old economy.’
FT, Aug 2022
1. Valuation

9. Confidential
WUNDERVC 9
EV/sales in the US Historically 10x
but only 5-6x in London
1. Valuation

10. Confidential
WUNDERVC 10
Governance Models: Worlds Apart
Germany United States
Board Structure Two-tiered One-tiered
Goals of Corporate
Governance
Stakeholder model Shareholder model
CEO/Chair Duality Prohibited Permitted
Independence via Board Structure Committee Structure
Appointment of
Independent Auditor
Supervisory Board Independent Audit
Committee
Mandatory disclosures Required by law Required by SOX
Required Disclosure In Annual Report Limited in 10K, details in
Proxy Statement
2. Governance

11. Confidential
WUNDERVC 11
Two-Tier Versus One-Tier Boards
2. Governance
Company in the US
Board of Directors
Executive
Directors
Non -Executive
Directors
Company in D
Management
Board
Supervisory
Board
Executive
Directors
Non -Executive
Directors
Two-Tier AG Board Structure One-Tier Board Structure

12. Confidential
WUNDERVC 12
The Role of the German Supervisory Board
is to Control
2. Governance
The Supervisory Board is often referred
to as a ‘Kontrollgremium’, emphasizing
its responsibility to control the
Management Board of the
corporation.
• One half of the Supervisory Board members
are elected by the employees for most
companies with more than 2,000 employees
• One third of the Supervisory Board members
must be elected by employees for most
companies with 500 to 2,000 workers
The Supervisory Board appoints and can
remove members of the Management Board.
Supervisory Board cannot make any executive
decisions or give formal orders to the
Management Board
The Management Board independently
manages the company and is responsible for
the day-to-day business of the company

13. Confidential
WUNDERVC 13
Founder CEOs are Better Stewards
of Their Company
2. Governance
• Stewardship theory suggests that firms with CEO duality -
where the CEO serves as the chair of the board of directors-
allow the CEO to develop a clear, executable strategy
• Statistically significant correlation between dual leadership
and CEO tenure, and firm performance
• Specifically, there is a positive correlation between CEO
tenure and probability of firms going public or acquired in
firms with duality
• Considering the relatively small size of the board of directors
in venture funded startup firms, being in dual position for
longer tenure means better understanding of human capital
for efficient consolidation of power and unity of leadership

14. Confidential
WUNDERVC 14
In the US the CEO can Assemble Their own
Board of Directors
• Current industry relevance –> important for tech
companies
- Insight into recent and future trends
- C level insights into fast growing companies
• Regulatory requirements, i.e. qualifications for
committees: audit committee, nominating
committee, compensation committee
• Diversity: Nationality/background, gender, age
• Independent board members
• CEO day job: build strong
executive team
• CEO job leading up to the IPO:
Assemble strong board or directors
- gain/keep control
- solicit advice
- maximize value
3. Composition
CEO responsibilities Board member qualifications

15. Confidential
WUNDERVC 15
US BoD Composition - Examples
HQ
location
Listing Market
cap
Board composition
Zoom Silicon
Valley
NASDAQ $20.3B • 9 Board members (all US based)
- 1 CEO and Chair aged 52
- 2 active public tech company CEOs
- 2 VCs with board experience
- 2 public sector and policy exec
- 1 tech CFO and investor
- 1 angel and lead director
• 4 Board Committees
UiPath London ->
NY
NYSE $8.5B • 7 Board members (US dominated)
- 1 CEO and chair age: 50
- 3 active public tech company
CEOs/CFOs
- 3 VCs with board experience
• 3 Board Committees
3. Composition

16. Confidential
WUNDERVC 16
German Supervisory Board Composition - Examples
3. Composition
HQ
location
Listing Market
cap
Board composition
BioNTech SE Germany NASDAQ $29B • 6 Board members (D dominated)
- 5 with track record in healthcare,
pharmaceutical and biotechnology
- 1 with audit and accounting background
• 3 board committees
TeamViewer
SE
Germany Frankfurt €3.1B • 8 Board members (6 German)
- Key skills: Private equity, corporate finance,
consulting
- Backgrounds predominantly in traditional
industries
- Very limited SW experience and exposure to
SW companies through boards
• 2 board committees

17. Confidential
WUNDERVC 17
Control: Dual Class Shares For Founders
Publicly held corporations can issue different classes of common stock
The most common practice is to issue Class A shares and Class B shares. Each class comes with a
different set of rights for stockholders.
- Class B shares give stockholders multiple (3/10/35) votes for each share they own
- Class A shares give stockholders 1 vote for each share they own.
Pros (for founders)
Gives founders, executives, and any other key
stakeholders enough super voting shares to help
retain control over the company
Concentrating voting rights among a particular
class of shareholders makes a takeover attempt
more difficult
Cons (for common shareholders)
Class A shareholders may feel that insiders have
too much control over the company and won’t
act in the best interests of ordinary
shareholders, causing the company and its
stock to underperform
The Class A shareholders can try to force a vote
of all shareholders to get rid of the two different
stock classes and their unequal voting rights
4. Control

18. Confidential
WUNDERVC 18
Almost Half of Tech IPOs Have Used Dual Class Shares
4. Control
Examples
• Zoom: 1 B share = 10 A shares
• UiPath: 1 B share = 35 A shares
• Meta: 1 B share = 10 A shares
• Google: 1 B share = 10 A shares
6%
14% 15%
11%
6%
37%
24%
43%
36% 35%
43%
47%
2
0
1
0
2
0
1
1
2
0
1
2
2
0
1
3
2
0
1
4
2
0
1
5
2
0
1
6
2
0
1
7
2
0
1
8
2
0
1
9
2
0
2
0
2
0
2
1
Dual Class Tech IPOs, %

19. Confidential
WUNDERVC
Many rocket ship tech founders in Germany have a choice whether to go
public in Germany or in the US
The choices come with trade offs regarding incorporation and board
governance
Tech founders wanting to play in the big leagues should list in the US