Ernst & Young: Venture capital and startups in germany 2014

VC Trends initiative by EY
Venture Capital and
Start-ups in Germany
2014

Welcome
| Venture Capital and Start-ups in Germany

Venture Capital and Start-ups in Germany |
Contents
Foreword BVK 4
Venture Capital Highlights 6
1
Start-ups 8
2
3
Funding 18
M&A Overview 28
Expert Essay 36
4
Appendix 38
3
Growth starts with courage, confidence – and capital
Venture capital is fundamental to the financing of companies at
an early stage and therefore crucial for the growth of start-up
companies with high potential.
Every forward-looking decision requires more than passion and
entrepreneurial spirit. It also requires courage: Courage to venture
into unknown territory and to try new ways. But courage without
caution in the assessment of risks and opportunities would not be
advisable.
EY provides different platforms and insights with regard to the
German start-up and venture capital scene. With our initiatives we
add value and initiate discussions.
We are particularly proud to present our recent study – outlining
key market trends and insights. It includes interviews with market
experts as well as overviews of investments, M&A deals, top lists
and key players.
We hope the study will be of interest to you. If you would like to
discuss current or future market issues, please do not hesitate to
contact us.
Martin Selter
Partner
Ernst & Young GmbH
Dr. Thomas Pruever
Senior Manager
Ernst & Young GmbH

Foreword
The key to innovational change and
growth, particularly in the digital market,
is a dynamic business environment. An
essential determinant for entrepreneurs
in this regard is access to funding, mainly
provided by early stage and venture
capital investors. The Federal Govern-ment
of Germany is aware of this hard
factor and has formulated ideas for policy
measures in the coalition agreement of
the Grand Coalition. Rarely has there
been so much talk about venture capital
and private equity in the political scene at
local and national level as at present but
those words need to be backed up by
deeds.
In the German start-up scene, the number
of companies founded has increased once
again. Berlin, the capital of Germany, is
known as a central hotspot of start-ups
in information and communications
technology but other federal states such
as Bavaria, North Rhine-Westphalia and
Baden-Wuerttemberg are also character-ized
by a large number of innovative
ventures. Sectors with strong innovation
dynamics in Germany include not only the
ICT sector, but also the areas of medical
technology and biotechnology. In addition,
spin-offs from higher education often
generate excellent start-up ideas.
For early-stage ventures, dedicated
funding programs have been established
not only by institutional investors but also
by venture capitalists and business angels
aiming at funding innovative business
ideas.
| Venture Capital a 4 nd Start-ups in Germany
There is a funding shortfall in Germany
when it comes to larger capital needs for
accelerating further growth by developing
new markets, expanding the product
portfolio or increasing the workforce.
Many start-ups encounter difficulties in
completing funding rounds with a volume
of EUR 1 million.
When it comes to even larger funding
tickets of EUR 5 million or higher, few
venture capital investors in Germany have
the capabilities to give support on this
scale going forward.
It is fact that there is a lack of capital
from international investors for ventures
located in Germany. One reason for this
might be linked to the limited incentives
for investors to provide funding to venture
capital funds that focus on national start-ups.
On a global scale, it is becoming clear that
the venture capital market in Germany
still has untapped potential that needs to
be released: Within the past three years,
EUR 2 billion of venture capital has been
invested in young companies in Germany,
whereas during the same period of time,
EUR 64 billion were invested in start-ups
originating from the US.
In comparison with other European
countries, Germany needs to catch up.
In absolute figures, the country is among
the top 3 European venture capital
locations, which certainly goes without
saying for the largest economy in the
European Union. In historical terms,
Scandinavian countries or the UK have
outperformed Germany and achieved
much higher values in terms of the ratio
of venture capital investments to national
gross domestic product.
A decisive factor behind this situation are
the more favorable legal frameworks of
the countries mentioned, which can be
seen as one of the drivers for their out-standing
position among their peers.
Investors such as large pension funds

Venture Capital and Start-ups in Germany | 5
Ulrike Hinrichs | Executive Member of the BVK Board
(German Private Equity and Venture Capital Association)
and insurance companies may favor
investment in other European countries
first rather than into start-ups founded
in Germany. In the current situation we
lack conditions that are internationally
competitive and set incentives for
investors.
Regulation can also have a negative
impact on investors. The ministerial draft
to modify the German Regulation on the
Investment of Restricted Assets of Insur-ance
Undertakings (Investment
Regulation) makes it more difficult for
insurance companies to invest in venture
capital funds and therefore limits the
options for investment opportunities.
The Federal Government needs to counter
additional restrictions and focus on other
political measures to enhance institutional
start-up funding.
A stock exchange 2.0 for technology-based
companies, similar to the one at the
turn of the millennium, has the potential
to open a new way of raising capital for
entrepreneurs and to provide venture
capital companies with another exit
channel. The reestablishment of a new
market segment is not the remedy for
existing financing constraints. Rather,
an entire package of political measures
which considers regulatory and tax
requirements for the digital sector and
start-ups is required in order to secure
innovation and sustainable growth in our
economy.

Venture Capital Worldwide corporates and VC
firms target the German market
Corporate players and financial
investors from all over the world
have increased activities in
the German market for digital
ventures.
Deal: German
Haufe Verlag
acquires
training-platform
Semigator
Deal: Dutch
Reed Elsevier
acquires
science
network
Mendeley,
EUR
100 million
Deal:
Takeover of
JouleX by US
technology
company
Cisco,
EUR
107 million
Deal: Axel
Springer
buys majority
stake in
Austrian
firm Runtastic
Deal: Xing
buys Austrian
professional
network
Kununu,
EUR 10 million
Deal:
Deutsche
Post acquires
SaaS-provider
optivo
Deal:
Commerce
company
Otto Group
acquires
French 3SI
ecommerce
assets
Jan 2013 Jan 2013 Apr 2013 Jun 2013 Jul 2013 Sep 2013 Oct 2013 Nov 2013
Q1 Q2 Q3 Q4
Investment vehicles of
corporates set a new funding
trend
Institutional funds with various
specializations have been initiated
to provide financial support to a
large number of entrepreneurs.
National and international VCs
shift focus onto the ecosystem
Landmark ventures, a shift in the
quality of entrepreneurs and the
ecosystem have increased the
attractiveness of the segment.
1H 2013
2H 2013
Mar 2013 Jun 2013 Jul 2013 Jul 2013
Deal: Scout24
takeover by
US investor
Hellman &
Friedman,
EUR 1.5 billion
Investments
Policy: German chancellor
Angela Merkel sends a
message to the German
start-up scene by visiting
well-known Berlin tech
start-ups Research Gate and
Wooga
Ecosystem
Community: Axel Springer’s
Plug & Play accelerator
nominates the first digital
ventures joining their program
which includes funding,
network contacts and advice
from experts
Community: Microsoft
launches its Ventures
Accelerator in Berlin, focusing
on the local start-up scene
and on promising early stage
entrepreneurs
Community: TechHub,
a provider of workspace
and services for tech
entrepreneurs, announces
the launch of a location in
Berlin

Highlights in 2013
and 2014
Deal: erento
purchases
Finnish rental
community
iRent.fi
Deal: Axel
Springer
acquires
Israeli classi-fieds
business
Yad2,
EUR
165 million
Deal:
DeliveryHero
announces
full take-over
of food-delivery
competitor
Pizza.de
Feb 2014 Feb 2014 May 2014 Jul 2014 Sep 2014 Sep 2014 Oct 2014 Oct 2014
Q1 Q2 Q3 Q4
Crowdfunding attracts
interest from a large number
of people
Internet platforms have been
established to raise monetary
contributions from a large pool
of private individuals.
IPO wave for internet ventures
to access capital market
volumes
Several start-ups have filed for
IPO at the stock exchange to
attract investments with material
ticket sizes (volume: > EUR
1 billion).
The freelance economy disrupts
the established working culture
Entrepreneurial spirit drives
market change which can be seen
in the momentum of the national
start-up scene.
1H 2014
2H 2014
Mar 2014 Jun 2014 Apr/Sep 2014
Deal: Axel
Springer
invests
EUR 20 million
in equity-stake
of US media
start-up Ozy
Deal:
Take-over of
payment firm
Sofort AG by
Swedish
Klarna;
EUR
110 million
Deal: Permira
buys software
application
firm
TeamViewer,
EUR 1.1 billion
Deal: Neiman
Marcus buys
e-commerce
platform
Mytheresa.
com,
EUR
150 million
Deal: IPO-listing
by
e-commerce
platform
Zalando and
company
builder Rocket
Internet
(market
capitalizations:
> EUR 1 billion)
Community: The annual
CODE_n program became
again a central platform for
innovative and digital business
ideas at the CeBit exhibition in
Hanover
Community: The Factory
Berlin opens a campus for
start-‐
ups and tech companies
with renowned local residents
such as Soundcloud, Zendesk
and 6Wunderkinder
Policy: The German government adjusted and released its
funding guidelines on tax exemption for investment subsidies
(ref. „INVEST – Zuschuss für Wagniskapital“), especially to
promote funding by business angels. With INVEST business
angels receive 20% of their investment refunded if they
participate with at least EUR 10,000 in start-ups. This reduces
their risk to trust in ideas and improves the chances of finding
an investor for innovative companies

Start-ups

A pipeline full of innovative digital ideas
18
60
114
38
43
Venture Capital and Start-ups in Germany |
9
Number of German start-ups funded in the digital sector – 2010 to September 2014
The overall attitude towards establis-hed
new venture ideas has significantly
improved in Germany, both in terms of
the number of VC firms now active in the
market and the volumes raised to invest
in digital start-ups. The fact that German
entrepreneurs are more attractive to
investors than ever before can be seen
particularly in the velocity of funding
engagements – even though 2014 will
possibly show a decline compared to
previous years. Good ideas are not just
linked to one location. That is why international
investors are active in the main
technology hubs where promising ideas
emerge, either through offices, office
hours or industry events.
12
11
24
17
11
22
Overall financing for start-ups in
Germany has reached a high level,
particularly in early-stage or expansion
periods. Fund managers have put money
mainly into internet or technology firms
and based on the numbers it is evident
that promising ideas are still flowing
through the innovation pipeline.
This accounts for all areas in the digital
world. A lot of venture capital firms follow
the math that an investment needs to
have the potential to become a multi-hundred
million Euro business. Obviously,
finding start-ups that disrupt the structure
of a market successfully is not easy; it
depends on market development and
changing consumer behavior.
16
25
130
In customer-oriented firms, investors
usually engage at a later stage after a
product has achieved considerable user
uptake backed by strong download figures
or a broad client base. The proof-of-concept
is an important next step to
succeed in the ongoing competition.
Some investments are showing increasing
mark-ups in valuation during subsequent
rounds.
Investors trust that market leaders will
create disproportionate value and are
willing to back that trust with large financing
tickets. They have realized that the
market is going through a once-in-a-lifetime
change and digital will be the largest
channel for distribution.
■ Early stage
■ Expansion
■ Seed
■ Later stage
Source: ThomsonReuters
* January to September 2014
64
118
2010 2011 2012 2013 2014*
“ We perceive mobile payment as one of the major trends in the
start-up scene. Many funds have already invested in fintech and
banks also recognize the opportunity. We expect big online players
to position themselves in this market as well.”
Markus Barnickel
Eventurecat GmbH
200
150
100
50
0
9
9
3
6

Venture Capital investments in
start-ups in the digital sector – 2013 until
September 2014 – Top 15 cities in Europe
London
Copenhagen
Hamburg
Berlin
Paris
Dublin
Barcelona
Madrid
Zurich
Vienna
Munich
Stockholm
Amsterdam
Helsinki
Moscow
151–200 start-ups
101–150 start-ups
51–100 start-ups
0–50 start-ups

Venture capital
investments in start-ups
in the digital sector
in Germany 2010 to
September 2014 –
Top 10 cities
Berlin
Leipzig
Cologne
Munich
Hamburg
Frankfurt a. M.
Karlsruhe
Stuttgart
Aachen
Potsdam
201–400 start-ups
101–200 start-ups
51–100 start-ups
26–50 start-ups
0–25 start-ups
Source:
ThomsonReuters

Berlin is the most important location
for the digital economy in Germany. The
city has developed an entrepreneurial
ecosystem which also affords sufficient
room for the success of established
companies and global players. It offers
digital companies a unique store of
resources with a pool of highly qualified
and skilled people, great networking
opportunities, strong integration in the
creative sector and a relatively low cost
level compared to other international
hubs.
A couple of years ago, entrepreneurs,
design freelancers and programmers
congregated in the bars and cafes in
Berlin Mitte or Berlin Prenzlauer Berg
which offered both coffee and free wi-fi
access. Over the course of time the scene
has professionalized, developing co-working
spaces and industry events to
discuss business ideas. Most popular are
the Betahaus (co-working space), The
Factory (technology campus), Soho
House (Private Member Club) or the
St. Oberholz (meeting point for start-up
staff) which provide infrastructure and
even training courses.
The institutions mentioned have become
central meeting points for the local start-up
community. Business angels, high net-worth
individuals who provide capital or
expertise to other entrepreneurs, are
particularly active in the local scene in
supporting young people in developing
their business ideas. The ecosystem is
vibrant and enables VCs to get involved
in market discussion or to make contact
with start-ups at an early stage.
The change in the working environment
reveals that Germany is in line with
global digital development and has the
momentum to turn innovation potential
into long-term commercial success.
Berlin has managed to build a culture
of entrepreneurial spirit founded not
only on the educational sector but also
on the ability to attract global talent.
This can be seen by the large influx of
international professionals, e.g. in Sound-cloud
and Readmill, both managed by
Swedish entrepreneurs. When it comes to
investments, Berlin is far ahead of region-al
competitors in the rest of Germany.
The large number of funding rounds for
firms based in Berlin is an indicator for
the creative potential of the city, with
landmark ventures that attract attention
on the international tech scene.
However, various successful start-ups
are also coming from other German ci-ties:
• Munich, in the south of Germany, has
a track record with start-up exits, e.g.
Scout24 Group, Mytheresa, JouleX.
• Hamburg, in the north of Germany, is
the place for several mid-cap exits, e.g.
Atlas Interactive, Delasocial, Metrigo,
NuBON or Vesseltracker.
• Dusseldorf, in the west of Germany,
may not look like the typical start-up
hub at first glance, but the exit of
Trivago has been a vital sign of the
area.
• These examples underline the digital
expertise which is widespread over the
entire country.
“ Berlin’s start-up scene is characterized by its internationality.
There are so many founders who are not German or don’t
even speak German. This makes Berlin unique and extremely
competitive in Europe.”
Gabriel Matuschka
Partech Ventures

Start-up revolution across
all business sectors
Digitalization is shifting into traditional
sectors and disrupting businesses, unrestricted
by natural borders or language
barriers. In general, innovation in the
field of the internet and mobile business
complements more traditional tech-nologies
and challenges business models
that have existed for decades.
It is crucial to understand how to adapt
to these changes and to react to the pace
of innovation driving the market. A shift
in market trends over recent years can
be traced, indicating the high frequency
of business opportunities in the digital
segment.
E-commerce remains the central focus
of German entrepreneurs. Even though
the large amount of capital invested in
this sector is a result of its working capital
requirements, investments are also
significant in regard to business ideas
that relate to fashion, home & living,
travel & events or food services. One
reason might be that success is fairly
predictable and – in most cases – is
directly linked to the marketing budgets
available to the entrepreneurs:
• National start-ups have a footprint in
fashion. Alongside the flagship Zalando,
various other ventures are trying to
penetrate the sector. Their business
ideas focus on niche markets such as
luxury fashion, vintage clothes, second
hand products or children’s fashion.
• The home & living market niche has
reached a mature stage. It seems
that customers have come to accept
purchasing design elements, home
accessories or furniture via the
internet which benefits players such
as WestWing, Home24 or Monoqi.
Top venture trends (sub-sectors and selected references)
# E-commerce and
marketplaces
Network and
communication
Online and
mobile services
Marketing and
sales services
IT and other
software solutions
1 Fashion
• Second hand
• High-street & luxury
• Baby & children‘s wear
Streaming services
• Music streaming
• Video streaming
• eSports broadcasting
FinTech
• Online payments
• Cashier systems
• Peer-to-peer lending
Digital analytics
• User acquisition
• Influencer networking
• LBS marketing
Big data
• Real-time analytics
• Predictive analytics
• Credit scoring
2 Home & living
• Design
• Accessories
• Vintage furniture
Messenger services
• Social messengers
• Event guides
• Mobile dating
Personal investments
• Micro payments
• Crowdfunding
• Bitcoin platforms
Social media marketing
• Second screen TV
• Social voting network
• Marketing automation
Data privacy & security
• VPN services
• Remote access
• Data encryption
3 Travel & events
• Booking platforms
• Local travel guides
• Event ticketing
Gaming
• Mobile reality games
• Virtual reality
• Live sports data
Online education
• eLearning
• Mentored courses
• Job portals
SEO
• Management tools
• SEO microsites
• Enterprise services
Cloud services
• Dashboards
• File hosting
• Cloud invoicing
4 Food
• Organic food
• Food delivery services
• Online supermarkets
Health & sports
• Medical directories
• Fitness instructions
• Health courses
Transportation
• Taxi services
• Chauffeur services
• Long-distance bus
services
Career development
• Job engine
• Social recruiting
• Reputation management
Testing & visualization
• Crowd usability tests
• App testing services
• Simulation software
5 Others
• Sharing economy
• Art auctions
• Cleaning services
Others
• Online gambling
• Personal news
• Creative cooperation
Others
• ID verification
• Energy management
• Task management
Others
• Digital production
• Multiscreen advertising
• In-game advertising
Others
• 3D printing
• SaaS solutions
• Speech analysis

• In the shadow of the established travel
platforms Expedia, Trivago and Kayak,
several new online travel providers
focus on markets such as cruise tours,
outdoor trips or regional leisure
activities. Among them are Berlin-based
GetYourGuide or GoEuro.
• Event ticketing has attracted attention,
following the success of Eventbrite, a
marketplace that allows people to easily
host, promote and discover events.
Various entrepreneurs have focused
on this sub-sector. Among them, Tab
ticketbroker or Vamos are targeting
this segment.
• Food delivery services also remain
popular. Next to the large firms Delivery
Hero, Lieferando or Foodpanda, smaller
firms such as HelloFresh or Delinero
are expanding their business model to
attract new clients.
One of the fastest-moving areas for
new technologies is the entertainment
sector (part of the network and commu-nications
cluster on page 13) where users
are open for innovations and willing to
test new features:
• On a global scale, streaming services
such as Spotify (for music) and Netflix
(for movies and TV series) have be-come
powerful enough to put pressure
on established competitors in the media
market. German video streaming rivals
like Simfy, Watchever or Sky snap will
face strong competition as the market
is going through a tough consolidation.
• Gaming and adjacent marketing services
remain strong, with flagship firms such
as Wooga, Bigpoint.com or GameDuell.
The focus of Berlin-based game
developer Wooga is on creating regular
hits such as Jelly Splash, Pearl’s Peril
and Diamond Dash. A lot of new
ventures such as AppLift, Flaregames
or Iconicfuture have found their niche
in the market.
• eHealth has increased in popularity, a
trend reinforced by advanced sensors
in the latest smartwatches. Runtastic,
an Austrian start-up owned by Axel
Springer, is a mobile fitness app that
combines fitness with mobile applica-tions,
social networking and elements
of gamification. Other start-ups focus
on products such as diabetes monitoring,
doctor directories, elderly-care ser-vices
or fertility monitoring. Among
them are OneLife, Exelonix, Emperra or
Arzttermine.de.
Services based on online or mobile
platforms have reached significant
market relevance since customers have
understood the product opportunities and
added-value in their daily lives. As more
users show their willingness to carry out
online transactions, entrepreneurs are
queuing up to take a bet on the financial
technology sub-sector:
“ We see a high growth potential in the digital health market, as major
digital players have entered the market and Anglo-American venture
capital funds already invested USD 2.3 billion in the first two quarters
of 2014.”
Guido Hegener
XL Health
14

• Digital payment providers such as
Payleven and SumUp are expanding
their activities into the physical shelves
of retail stores. Other start-ups such as
Kreddible, Kreditech or 9cookies have
started to experiment with business
models in the field of funding or credit
scoring.
• Recent quarters have been strong for
educational technology and career
development, with new ventures
getting up and running. They focus on
expert monitoring, online learning or
vocational tech skills. Among them,
start-ups such as CareerFoundry,
NeuroNation, qLearning or Lecturio
have started to offer services in this
sub-sector.
Marketing and sales in the digital
market have motivated many
entrepreneurs to start with new ideas.
This includes email marketing, SEO,
mobile advertising, social media
marketing and many types of display
advertising. New technology is improving
most areas of internet advertising and
has given product inspiration. The rapid
development of digital technology will
help the global advertising market to
grow, with national start-ups taking
advantage:
• Germany is starting to get a reputation
for advertising technology ventures,
particularly those that play in the
mobile app space, including Adjust,
Madvertise, Ingenious Technologies or
Sociomantic. The market has recently
been influenced by mathematically
advanced methods of targeting
customer groups and handling large
amounts of client-related data.
• Search engine and social media data
has provided a new playground for
advertisers to exploit the profile of
their client target group and to focus
on customers across the desktop and
mobile world. Among them are 247
Grad, Adsquare, Crealytics and Kyto.
The digital scene in Germany has gained
awareness of the IT sub-sector and
other software solutions due to the large
number of entrepreneurs focusing on
big-data technologies, IT security, cloud
services or testing technologies:
• Back-end data analysis is becoming
more important in the effort to under-stand
customers and to drive growth.
Big data remains a strong trend and a
large group of ventures focuses on this
sub-sector. Decision-makers want to
have access to real-time results in a
highly intuitive and responsive manner.
In that context, companies have adapt-ed
the technological expertise to other
segments such as e-commerce, marke-ting
& sales, finance or health. Some
examples are Datameer, GPredictive,
Trufa, RapidMiner, RetentionGrid and
SO1.
• Data privacy and security have shifted
to become a mainstream issue for
internet users, who have become more
security-conscious. A promising player
in this market is ZenGuard, a consumer
security and privacy firm, with over five
million downloads of their VPN tool
ZenMate.
“ There are many very strong companies and incubators in Berlin,
that foster the start-up scene in the city. In terms of online marketing
skills, Berlin is probably the global leader.”
Gabriel Matuschka
Partech Ventures

German ventures have
attracted high volumes of funding
Top 30 start-ups located in Germany (based on cumulated value)
# Target name Location Target profile Founding year Total funding value
1 Delivery Hero Berlin Food delivery service 2011 USD 656.7 million
2 Bigpoint.com Hamburg Online games 2002 USD 460.5 million
3 BestSecret.com Aschheim Shopping community 2007 USD 248.0 million
4 WestWing Munich Home & living retailer 2011 USD 149.1 million
5 SoundCloud Berlin Music streaming 2007 USD 123.3 million
6 Foodpanda Berlin Food delivery service 2012 USD 108.0 million
7 Wimdu Berlin Private accommodation 2011 USD 90.0 million
8 HelloFresh Berlin Food boxes 2011 USD 67.5 million
9 Kreditech Hamburg Big data credit scoring 2012 USD 63.0 million
10 Auctionata Berlin Online auctions 2012 USD 50.0 million
11 GetYourGuide Berlin, Zurich Travel recommendations 2009 USD 45.5 million
12 Internetstores Esslingen Multi-store e-commerce 2007 USD 39.9 million
13 Quandoo Berlin Online reservation platform 2012 USD 39.5 million
14 NumberFour Berlin SaaS services 2009 USD 38.0 million
15 Open-Xchange Nuremberg Communication software 2005 USD 37.8 million
16 Webtrekk Berlin Data intelligence solutions 2003 USD 35.1 million
17 ResearchGate Berlin Academic network 2008 USD 35.0 million
18 Azubu Berlin Media sports company 2011 USD 34.5 million
19 SumUp Berlin Payment system 2011 USD 33.0 million
20 Wooga Berlin Online games 2009 USD 32.2 million
21 GoEuro Berlin Travel search engine 2012 USD 31.0 million
22 MisterSpex Berlin Glasses retailer 2007 USD 29.7 million
23 Auxmoney Dusseldorf Peer-to-peer lending 2007 USD 28.0 million
24 Netbiscuits Kaiserslautern Cloud platform for app development 2000 USD 27.0 million
25 Zimory Berlin Cloud technology 2007 USD 25.5 million
26 6Wunderkinder Berlin Task-Manager application 2010 USD 23.9 million
27 Simfy Cologne Music streaming 2006 USD 23.0 million
28 Onefootball Berlin Football community 2008 USD 20.1 million
29 AppLift Berlin Mobile games marketing 2012 USD 20.0 million
30 Windeln.de Gruenwald Baby products 2010 USD 19.6 million
Source: CrunchBase, November 2014

Top 30 German start-ups cumulated funding value more than USD 2,600 million
According to CrunchBase, the business
graph that keeps track of funding rounds,
German start-ups have managed large
volumes of venture capital along all
funding stages, from the seed phase to
the late stage:
• Established in 2011, Delivery Hero has
received USD 657 million in funding
since its foundation. The company is
among the hot candidates for an exit
on a large scale, especially after the
acquisition of local rival pizza.de.
• Established in 2011, WestWing has
managed to attract USD 149 million
of capital. The shopping club for home
& living is expanding dynamically and
has rolled out operations to more than
a dozen countries in Europe and world-wide.
• Established in 2007, Soundcloud has
raised USD 123 million over its lifetime.
In 2014, US messenger service Twitter
had the audio-sharing web service on
its radar for a takeover; however, both
companies declined to comment.
Only a few companies concluded funding
volume deals at a three-digit number.
However, this is improving and it seems
that access to large-scale venture capital
has become easier compared to previous
years.
It remains to be seen whether funding
tickets will increase to a new stage,
comparable with those of peers in the US,
Israel or the UK. German start-ups have
attracted interest on the global level in
recent years and a large group of them
are ready to exit.
The start-ups outlined here are among
the most promising ones, based both on
their funding volumes and their maturity
in the start-up cycle. Landmark deals at
multi-billion valuations such as the IPOs
of Rocket Internet and Zalando or the
takeovers of Scout24 and TeamViewer
have certainly made clear that the digital
age has arrived in Germany and its
biggest cities.
“ There are many challenges in Germany, among them
regulatory and financial, which make life difficult for
young companies. Frameworks for start-up activities
are far more developed in other countries.”
Benedikt Kronberger
b-to-v Partners

Funding

IPO Mezzanine
Evolution of business plan and strategy
Funding by Business Angels and Friends, Family, Fools (FFF)
The globalization of entrepreneurship
has been one of the key trends in recent
years. There is evidence of global
success stories coming out of Germany.
The country is one of the frontrunners
in the field of digital innovation and
optimized business models. The strong
network of internet start-ups, small &
medium sized companies and advanced
research institutes has contributed to
giving the country an outstanding
position in a worldwide comparison.
Ventures with huge potential characterize
the German hubs as new technologies
develop and user expectations shift in
focus.
The largest cities Berlin, Munich,
Cologne, Hamburg and Dusseldorf have
solid foundations upon which to build
a sustainable and transformative
emerging technology ecosystem.
The continuous influx of international
entrepreneurs and technology experts
into the urban areas is benefiting this
development at national level and has
resulted in the foundation of start-ups
with team members from all over the
world.
Corporate funding and Venture Capital
M&A and Alliances
Renowned market experts state that the
hotspots mentioned are still in their early
days in comparison to the overall set-up
in San Francisco or London. Berlin’s most
advanced companies such as e-commerce
giant Zalando, game-developer Wooga or
food-delivery platform Delivery Hero are
just four to six years old with massive
potential for business development on a
global scale. With respect to the recent
funding rounds, it is just a matter of time
until – over the next five years – a group
of German ventures sets new targets
for deal valuation.
The enthusiasm about the country as
an upcoming hub of entrepreneurial and
innovational spirit is huge, but the
ecosystem is still at the very beginning
of the transformation process. The
fundamentals at micro and macro level
are encouraging, particularly considering
that the government has been largely
absent from the local development,
despite state-backed company builder
and investment programs.
Following on from the surge of political
interest in entrepreneurship ahead of
last year’s federal election, it is good to
see that political powers appear to be
on the right path. For example, German
chancellor Angela Merkel was the key
speaker to the digital community at a
recent large start-up conference in Berlin
and visited local start-ups to point out the
importance of the scene for innovation
and creativity.
Germany’s footprint has increased
substantially which has in turn
attracted international investors to
take a closer look at the national start-up
scene. This trend can be documented for
VCs from the US, the UK and Russia as
well as Scandinavia. Among them are
blue-chip investors such as Kleiner
Perkins, Highland Capital Partners and
Union Square Ventures which are
engaged in the top technology firms
with proven track records of successful
exits. The arrival of new investors has
increased competition and has made it
more challenging for the experts involved
to identify business ideas with global
relevance.
Strong funding dynamics
Start-up financing and development cycle
Idea Early stage Expansion stage Later stage
Seed Start-up Expansion Public market Exit
• Concept, product
and team
• Market launch
• Setting up operations
and sales
• Growth and market expansion
• Product and business development
• Further innovation
• IPO
• Disposal
Source: EY • Turnaround

It is fair to state that the VC community
is diverse, characterized by a large
number of highly specialized national
and international investors. Among
them, Earlybird has been fairly active in
recent years, especially when it comes
to late-stage funding. The company
manages around USD 1 billion in assets
for an international investor base. EyeEm,
a photo sharing mobile app, and Onefoot-ball,
a global football community plat-form,
are portfolio firms with large user
base.
Another respected investor is the High-
Tech Gründerfonds, a vehicle backed by
public and private investors that has been
financing young technology companies
and supporting their management teams
with a strong network and entrepreneurial
expertise. The company has provided
funding to more than 250 start-ups from
the digital world as well as other industry
areas such as biotech or clean technology.
The portfolio of the High-Tech Gründer-fonds
includes Trademob, a mobile app
marketing platform and 6Wunderkinder,
the company behind Wunderlist and
Wunderkit. Other respected investment
vehicles initiated by national or local
governments are the IBB Beteiligungsgesellschaft,
the KfW Bankengruppe or
Bayern Kapital.
Since the early 1990s, specialized
investment arms of media holdings
have been among the first investors
who were active in the national market.
The most prominent examples are Axel
Springer, Bertelsmann Digital Media
Investments, DuMont Venture, DLD
Ventures (Burda), Gruner + Jahr,
Holtzbrinck Ventures or TheMediaLab
(Madsack, WAZ Group). Their investment
activities initially focused on the digital
media landscape. Over the course of
time, these firms have gone through a
transition from media-focused equity
holdings to strategic investments in order
to tap into new markets or profit from
shifting business models.
In recent years, Axel Springer has been
most prominent for the takeovers of
classifieds portals yad2 (Israel) and
Jobsite (UK) as well as the acquisition
of majority stakes in LaCentrale (France,
51%) and Immoweb (Belgium). Other
examples are the investment of Bertels-mann
in the Indian real estate firm
IndiaProperty.com or the acquisition
of the Polish advertising firm Sunrise
System by Bauer Digital.
A key player in the early-stage segment
is Rocket Internet. The business model
focuses on creating versions of successful
venture ideas tailored to the requirements
of other regions or customer groups.
The best-known portfolio firm has been
Zalando, which was founded in 2008 and
went through an incredible development
phase up to a revenue of EUR 1.8 billion
in 2013.
In October 2014, Zalando and Rocket
Internet carried out two of the largest
technology sector IPOs since the 2000
listing of Deutsche Telekom. In addition,
Rocket Internet has recently started to
establish ventures in emerging market
countries (e.g. Dafiti, Foodpanda,
Lamudi, Lazada) to take advantage
of the digital change at local level in
so far untapped markets.
In parallel to Rocket Internet, other
German company builders have extended
their activities including Team Europe,
Project-A Ventures, Hanse Ventures or
the German Startups Group. Their portfolios
are also full of promising start-ups
including DeliveryHero, a food-delivery
platform that already operates in about
23 countries.
Alongside VC firms and incubators, more
corporate players from Germany are
taking note of the start-up scene and
actively getting involved in fostering
“ It’s a uniquely German thing – they innovate in terms of execution. Companies
like Rocket Internet have made it safe for investment bankers and consultants
to take a sabbatical from their jobs at a mid-level and try out start-up life as a
C-level executive, even a co-founder. I don’t see this anywhere else in the world.”
Colette Ballou
Ballou PR

ventures. Various incubators have
entered the market or expanded their
local investment activities in the digital
sector. Such programs focus on early-stage
investments in promising entre-preneurs
including offering additional
benefits such as free office space,
professional services or other incentives
to sign up.
The trend to accelerators has been
followed by several corporates, e.g.
Allianz (Allianz Digital Accelerator), Axel
Springer (Axel Springer Plug and Play),
Deutsche Telekom (hub:raum), Siemens
(Siemens Technology Accelerator) or
Telefonica (Wayra academy). Berlin-based
Betahaus, hy! and Hardware Berlin
have started an accelerator breed
focusing on hardware venture ideas
rather than software.
In 2011, GMPVC German Media Pool
as Germany‘s first media for equity
advertising fund was founded. GMPVC
provides entrepreneurs with the ability
to achieve breakthrough cross-media
campaigns while conserving cash to
finance their growth.
Privately backed initiatives such as Google
for Entrepreneurs, the Alexander von
Humboldt Institute for Internet and
Society, the Microsoft Centre or the Berlin
Innovation Consensus, in combination
with the strong network effect of the eco-system,
are expected to have positive
impulses on the local start-up environment.
If the scene can meet the expectations
that are outlined by international
press and industry insiders, there are
promising quarters ahead of us with
German ventures gaining importance
and finding investors.
This prediction is already being translated
into real-world phenomena if we look at
developments in the current year. The
above-mentioned IPOs of Zalando and
Rocket Internet as well as ongoing market
rumors relating to several German
ventures have put the country on the map
of the technology world. This is a strong
indication of the commercial success
of local ideas which focus on business
models in the internet and mobile market
segment.
The landscape for business angels,
VCs and institutional investors has
gone through some structural changes.
Several institutional investors have
adjusted their allocation strategies and
their overall business positioning, e.g.
moving from a large portfolio of ventures
to a limited number of business relation-ships,
which they aim to develop. For
example, Team Europe announced a
material modification in their business
strategy. The company builder for online
ventures intends to downsize its activities
and to focus more on existing operations.
In addition, Lars Hinrichs, founder of
business portal Xing, decided to shut
down his incubator HackFwd. The vehicle
is no longer accepting start-ups for its
program, focusing instead on existing
ventures. Epic Companies, an incubator
of the media holding ProSiebenSat.1
established in 2014, has also been shut
down. However, the company will continue
to focus on the digital business via another
incubator called Seven Ventures as well
as exclusive cooperations with incubators
in the US, Israel and Europe. These
examples demonstrate that competition
in the local market has increased,
resulting in certain transitional change
with implications for the stakeholders
involved.
“ Currently, we are seeing a consolidation in the accelerator market –
a lot of them are just not set up correctly or don’t follow a clear
strategy. Success stories are built if ‘digital feeling’ is a common
sense and the accelerator is fully integrated into the group strategy.”
Benedikt Kronberger
b-to-v Partners

Material increase in funding volumes
focusing on the digital market
New institutional funds identified from 2013 to June 2014 – alphabetical order
# Investor Name Location Volume Announced
1 Acton Capital Heureka Growth Fund II Munich EUR 150 million January 2014
2 Berlin Technologie Holding – Berlin EUR 50 million February 2014
3 Earlybird Earlybird Digital East Fund Berlin USD 130 million January 2014
4 Earlybird Earlybird Later Stage Fund Berlin EUR 150 million July 2013
5 Eran Davidson Davidson Technology Growth Debt Berlin EUR 100 million January 2014
6 Federal state Berlin Startup Unit Berlin EUR 100 million June 2014
7 Freistaat Bayern Wachstumsfonds Bayern Munich EUR 250 million April 2014
8 Global Founders Fund – Munich EUR 150 million March 2013
9 Index Ventures – Geneva EUR 400 million June 2014
10 Otto Group Project A Ventures Berlin EUR 30 million October 2013
11 Partech Ventures Partech Ventures Seed Fund Berlin EUR 160 million October 2013
12 Point Nine Capital Point Nine Capital II Berlin EUR 40 million February 2013
13 SAP SAP Ventures Fund II Palo Alto USD 650 million October 2013
14 Siemens Industry of the future Fund Munich USD 110 million February 2014
15 UnternehmerTum GmbH UnternehmerTum Garching EUR 25 million August 2013
Source: EY Research
“ I see great opportunities for pushing overall fund volumes if venture
capitalists can win the KfW again as a cornerstone investor. Likewise – and
as permitted by the regulatory framework in other countries – I consider
VC funds a good investment alternative for pension funds.”
Jens Spyrka
bmp media investors

Overview of key VCs, accelerators
and incubators in Germany
In recent years, several funds were
closed by German VCs that are
committed to young and dynamic
European technology companies. Anglo-
Saxon institutional investors in particular
have become more confident of Europe’s
potential. The volumes of funds or fund-of-
funds total up to nine-figure amounts,
as can be seen for key players such as
Earlybird, Index Ventures, Partech,
SAP or Siemens. Each fund has its own
individual strategy, differing in the timing
or region of their investments in internet
and technology companies.
Some of the players with large-scale
assets under management focus on seed
stage investments with smaller equity
ticket sizes while other go for the late-stage
deals to finance market expansion.
Earlybird has been broadening its options,
focusing on late-stage deals as well as
ventures in the growing Central and
Eastern European region, extending the
geographic diversity of the company.
Partech Ventures, a VC firm that operates
from offices in Paris, Berlin and Silicon
Valley, has closed a fund to ramp up the
number of early stage investments in the
digital market.
Siemens, the diversified industrials
conglomerate, has initiated a fund called
Industry of the Future Fund, targeting
investments in early stage start-up
companies with technologies that will
transform manufacturing. These
examples indicate the different investment
strategies of the VCs. The regional focus
adds another dimension since some of the
funds are channeled directly into Western
European start-ups whereas other more
specialized funds focus on geographical
areas such CEE, Russia, Turkey or
Emerging Markets.
There is a large magnitude of investors
and investment vehicles focusing on
the digital market in Germany. On the
following pages, a brief aggregate of VCs,
business angels, accelerators, incubators
and other interest groups are displayed
that have been active throughout the
last two years. They differ in size and
investment focus but all together
contribute to the strong dynamics of the
local start-up scene and the development
of the set of ventures. Among them are
smaller vehicles backed by reputated
business angels and large-sized
institutional investors with material
leverage to provide funding.
The overview not only includes market
players which are located in Germany but
also international investors that have
been particularly active in latest funding
rounds or M&A takeovers.
The latter is of importance and outlines
the attractiveness of local ventures for
VCs that operate at a global scale. In fact,
they have played a key role in supporting
ventures throughout the transition from
the expansion stage to the later stage.
Famous examples are the exit of Zalando
with major involvement of Swedish
investment company Kinnevik or the
divestment of TeamViewer backed by the
US investors Bessemer Venture Partners
and Insight Venture Partners.
“ The lag of venture funding in the range of
EUR 4–15 million can be traced back to a lack of
venture capital funds in Germany with sufficient
fund size to invest these volumes.”
Guido Hegener
XL Health

Berlin-Potsdam area
• 500 Start-ups
• Atlantic Internet
• Axel Springer Plug and Play
• Axel Springer Ventures
• BC Brandenburg Capital
• Bergfürst
• Berlin Hardware Accelerator
• Berlin Start-up Academy
• Berlin Ventures
• Bertelsmann Digital Media Investments
• Betafabrik
• bmp media investors
• b-to-v Partners
• BVP Berlin Venture Partners
• Catagonia Capital
• e.ventures
• Earlybird
• ECONA AG
• estag | Capital AG
• Founders Link
• German Startups Group
• GMPVC German Media Pool
• Grupo Intercom Berlin
• Hasso Plattner Ventures
• Heilemann Ventures
• Hitfox Group
• hub:raum (Deutsche Telekom AG)
• IBB Beteiligungsgesellschaft
• K – New Media
• Lakestar
• M Cube (Check24-Group)
• M10
• Microsoft Ventures (Microsoft,
HTGF, Seedcamp)
• Möller Ventures
• Next Station (Deutsche Bahn)
• Partech Ventures
• Point Nine Capital
• Project A Ventures
• Rheingau Founders
• RI Digital Ventures
• Richmond View Ventures
• Rocket Internet
• Seedcamp Berlin
• Siemens Technology Accelerator
• Sky & Sand
• Springstar
• Startupbootcamp Berlin
• Team Europe
• Vogel Ventures
• WestTech Ventures
• XL Health
Munich area
• Acton Capital Partners
• Allianz Digital Accelerator
• Ananda Ventures
• ASTUTIA Ventures
• BambooVentures
• Bayern Kapital
• Breed Reply
• Cipio Partners
• DLD ventures (Burda Media)
• Ecommerce Alliance
• European Founders Fund (EFF)
• Fraunhofer Venture
• General Atlantic
• Global Founders Capital
• Holtzbrinck Ventures
• P7S1 (ProSiebenSat1)
• Paua Ventures
• Sevenventures (ProSiebenSat1)
• Siemens VC (Siemens AG)
• Sixt e-ventures
• Target Partners
• TIBURON Unternehmensaufbau
• Tomorrow Focus AG
• UnternehmerTUM
• VentureStars
• Vodafon Venture
• Wayra Academy (Telefonica)
• Web Holding AG
• Wellington Partners
• Xange
Cologne/Bonn-Dusseldorf-
Wuppertal area
• Crossventures (Business Angels)
• curtis newton labs
• Droege Ventures
• DuMont Venture
• DvH Ventures
• EnjoyVenture
• High Tech Gründerfonds
• Iris Capnamic Vent. (Orange, Publicis)
• Media Ventures (Stroer)
• netSTART Venture
• RTL interactive (RTL Media Group)
• Tengelmann Ventures
• T-Ventures (Deutsche Telekom)
• Venista Ventures
• VHB Ventures (Holtzbrinck Media)
• Vorwerk Ventures
Hamburg area
• Bauer Digital
• Capnamic Ventures
• Cinco Capital
• Digital Pioneers Germany
• Fielmann Ventures
• Gruner + Jahr
• Hanse Ventures
• Innovationsstarter Fonds Hamburg
• iVentureCapital
• J.C.M.B. Beteiligungs
• Neuhaus Partners
• Shortcut Ventures
• Start 2 Ventures
• TheMediaLab (Madsack, WAZ Group)
• Tivola Ventures
• TruVenturo
Frankfurt(Main)-Wiesbaden area
• Aurelia Private Equity
• Creathor Venture
• HR Alpha Venture Partners
• KfW Bankengruppe
• Main incubator (Commerzbank)
• Omnis Mundi
• Sirius Venture Partners
• TEV Global Invest
Others
• Blue Fund (Wahlstedt)
• Bm-t Beteiligungsmanagement
Thüringen (Erfurt)
• eCAPITAL (Münster)
• Grazia Equity (Stuttgart)
• KIZOO Technology Capital (Karlsruhe)
• MGO Digital Ventures (Bamberg)
• NABRU Ventures (Mettingen)
• PDV Inter-Media Venture (Augsburg)
• Technologiegründerfonds Sachsen
• United Internet (Montabaur)

Foreign VC funds engaged
in German start-ups 2014
(selection of major players)
Five German epicenter
as the bases of key
investors, accelerators
and incubators
• Accel Partners (US)
• Access Industries (US)
• Advent Venture Partners (UK)
• Atlas Venture (US)
• Atomico (US)
• Balderton Capital (UK)
• Bessemer Venture Partners (US)
• Bright Capital Digital (RU)
• Chernin Group (US)
• Creandum (SE)
• CSVJ Ventures Holding (CH)
• DN Capital (UK)
• Doughty Hanson & Co (UK)
• DST Global (RU)
• Excellion Investment (LU)
• Fidelity Growth Partners Europe (UK)
• First Love Capital (AT)
• Grey Corporate Investments AG (CH)
• Highland Capital Partners (US)
• HOWZAT Partners (UK)
• i5invest (AT)
• Index Ventures (UK)
• Insight Venture Partners (US)
• J.P. Morgan Digital Growth Fund (US)
• Kennet Partners (UK)
• Kinnevik (SE)
• Kite Ventures (RU)
• Kleiner Perkins Caufiled & Byers (US)
• Kreos Capital (UK)
• Logan Capital AG (CH)
• Macquarie Group (Australia)
• Mangrove Capital Partners (LU)
• Mosaic Ventures (UK)
• Mountain Partners AG (CH)
• Nokia Growth Partners (FI)
• Omnes Capital (FR)
• Passion Capital (UK)
• Phenomen Ventures (RU)
• PROfounders Capital (UK)
• Redalpine Venture Partners AG (CH)
• Redpoint Ventures (US)
• RTA Ventures (PL)
• Runa Capital (RU)
• ru-Net (RU)
• Schlegel & Friends (UK)
• Sequoia Capital (US)
• Seventure Partners (FR)
• Spark Capital (US)
• Summit Partners (US)
• Sunstone Capital (DK)
• Taishan Invest AG (CH)
• Tenaya Capital (US)
• Time Equity Partners (FR)
• Union Square Ventures (US)
• VM Digital (AT)
• XAnge (FR)

Interviews
What is the basic concept and the story
behind the Betahaus?
The Betahaus, located in the center of
Berlin, is one of the largest co-working
institutions in Europe and definitely the
hotspot for start-ups and freelancers in
the German capital. Co-working is a style
of work that involves a collaborative
environment, often linked to jointly-used
office space. These type of areas were
initially established as an alternative to
working in cafes or to isolation in home
offices. Over time, an entire ecosystem
has been developed, including areas for
art exhibitions, networking events, work-shops,
ups with a digital focus, with Berlin as the
center of the national start-up scene.
At Betahaus, our team has experienced
various highly successful start-ups that
originated from young professionals, such
as Coffee Circle, Ezeep, GoEuro, LUUV,
Somewhere, Protonet or Orderbird. All of
them are still at the first stages of strong
success curves as can be seen in the level
of funding rounds that they have raised
recently. In some of these cases, the
initial contact between entrepreneurs
and investors was made in dedicated
pitch-sessions in our house. These
ventures are perfect references for the
added-value of co-working, particularly in
the early-stage period before approaching
investors.
What are the latest projects the
Betahaus team has been working on?
One of our latest in-house projects is the
development of the Betahaus hardware
accelerator program, to help innovative
hardware start-ups get off the ground and
to present their concepts and prototypes.
With this, we aim for a platform where
entrepreneurs can present ideas for
physical prototypes, as another layer to
the entire digital sector. Nowadays, most
of the start-ups focus on software but
there are also powerful aspects behind
hardware ventures which can be seen in
the latest technology trends such as 3D-printing
or wearable technologies. This
topic is complex but there are a couple of
unique business models that have strong
potential for the mass market. In our
building in Berlin, we also host Open
Design City, a collaboration space where
new products and relationships can be
formed. In the coming year, we even plan
to organize a tour through 10 cities in
Europe where entrepreneurs from other
countries will have the chance to pitch to
the hardware accelerator program and
promote their ideas to a larger audience.
26
investor meetings and so much
more. The strong demand for co-working
services can be seen in our institution.
The Betahaus started in 2009 with about
40 members in 400 sqm and by this year,
we have extended our space up to 2,500
sqm and over 350 members on three
stories.
Which aspects made the co-working
idea so attractive on a worldwide scale?
The success of the co-working model was
initially seen in large urban hubs such as
Barcelona, Berlin, London, New York or
San Francisco but it is spreading rapidly
all over the world. People who are looking
for a flexible working space most often
have their initial contact point in co-working
spaces due to a range of benefits.
Entrepreneurs have all the tools they need
to share ideas. However, an essential part
of developing concepts is linked to net-working
opportunities and the facilitation
of interaction.
In a co-working space, you will find all
kinds of people, from graphic designers,
programmers, photographers, architects
and NGOs to journalists or bloggers.
This forms a creative scene with potential
for innovative and disruptive thoughts.
That is unique compared to the historical
model of interaction most people are
familiar with.
How has the concept of co-working
evolved over the last five years?
Since we launched the Betahaus idea,
there has been an evolution of co-working
spaces. Initially, like-minded talented
people and start-ups used our institution
to work or to develop innovative business
models. Over recent years, we have seen
larger companies looking at this as office
space provision or the opportunity to
partner with digital ventures. This is
a very promising development: Since
the concept of a collaborative working
environment was established, it has
attracted huge attention from institutional
and corporate partners. Every week we
host around 50 events, to connect peers
and support their personal and entre-preneurial
development. For example, we
established the event Betapitch to form
a community to bring entrepreneurs
together with business angels and VCs
that we trust. Another popular initiative is
our weekly Betabreakfast, where every-one
can join to learn about a certain topic
and connect with other like-minded
people.
How do you see the development of the
start-up scene in Berlin?
In my opinion, we are still at the early
development stage in Germany for start-
1
Christoph Fahle
CEO and Co-founder of Betahaus
Germany’s largest co-working space

business angels’ investments in start-ups
across Europe is almost impossible to
collect. When it comes to the architecture
of the start-up scene within continental
Europe, it seems fair to say that Germany
does not need to fear comparison.
Certainly, Great Britain is still some way
ahead, having a highly active start-up and
investment ecosystem.
Looking at policies that support the
start-up scene, however, the German
government has been embracing a more
active role in recent years. For example,
the European Angels Fund was launched
in 2012, which matches investments of
renowned business angels on a pari
passus basis.
The EUR 70 million fund is financed by
the European Investment Fund and
the ERP special assets. In 2013, the
investment grant “INVEST – Zuschuss
für Wagniskapital”
was launched by the
German government; it provides business
angels with a grant of 20% of their
investment sum in eligible, mostly
high-tech start-ups. As of June 2014,
about 700 companies have already been
found eligible for INVEST.
These policies, along with other initiatives
like the German Accelerator Silicon Valley,
the “exist”-scholarship for founders,
the KfW’s “ERP Startfonds” and of course
the High-Tech Gründerfonds provide
German start-ups with even more
possibilities to found and build their
companies. However, the most important
factors in building a vital start-up
scene are still the dedicated young
entrepreneurs and potent investors.
Which general trends and drivers do
you see for German start-ups in their
early-stage phase?
Over the past few years, the start-up and
early-stage venture capital ecosystem
has become more diverse. BAND, in its
original function as a representative of
the business angels networks in Germany,
acknowledges these developments and
market players such as super angels,
business angel funds, seed funds, venture
capital companies and family offices with
a focus on early-stage investments.
More recently, a flurry of incubators,
accelerators and company builders have
entered the scene aiming to support start-ups
in growing their business. More often
than not, these programs are being led by
experienced actors of the ecosystem,
such as serial entrepreneurs or business
angels.
Crowdinvesting, albeit still with a relatively
small investment sum total, is growing
fast and can be a valuable addition or
predecessor to business angels invest-ments
(the plans for protection of small
investors by the government could hurt
crowdfunding investors, however).
In general, these developments illustrate
the diversity of the early investment land-scape
today, which offers a range of
possibilities for start-ups to build their
company and raise capital. To help
innovative start-ups at an early stage to
take the next step, it is necessary for all
the different actors within the ecosystem
to collaborate instead of working against
each other.
What role do business angels play for
start-ups as a provider of expert know-how
and seed funding?
Business angels invest their capital in
early-stage start-ups, where the bottle-neck
for financing is narrowest. By doing
that, they play an important part within
the financing chain for start-ups. Business
angels are also valuable for start-ups in
providing their know-how and personal
network of business contacts. By
providing both capital and know-how,
business angels fill a tremendously
important role in the German and Euro-pean
economy.
However, in order for business angels
and innovative companies to succeed, it
is necessary that follow-on financing is
available, which is usually provided by
fund-based venture capital companies.
Therefore, venture capital companies
and business angels are partners in the
financial chain of start-ups.
Which structural and institutional
changes would help Germany to foster
creative venture ideas? How do you
think the country is positioned in
comparison to its European peers?
Reliable and comparable data relating to
2
Matthias Wischnewsky
Project Manager at Business Angels
Netzwerk Deutschland e.V.

M&A Overview

M&A deal values for digital start-ups
in Germany have reached a new stage
Number of M&A transactions in the German digital sector – German target companies
120
100
80
60
40
20
With valuations of more than one billion
euros for single ventures, the M&A market
for digital start-up businesses in Germany
has reached a new stage.
For a long time, there were no major
deals on a national scale, but the
activities in 2013 and 2014 seemed
to break that spell. Even though the
number of digital deals has slightly
decreased in Q2 2014, the market has
become vibrant among investors and
recorded large-scale exits – sales to
larger corporate companies or financial
investors – even outshining the major
takeover of Trivago by Expedia in Q4
2012. The reason for this is simple:
A range of ventures located in Germany
have managed to establish themselves
as market leaders in their segments
and reached maturity stage in terms
of business development.
Several private and institutional shareholders
have taken the decision to divest
their businesses due to the attractive
deal environment with great business
opportunities and particularly high
valuations. This accounts for smaller
transaction in the range of up to
EUR 50 million but also for outstanding
deals that break the billion euro mark.
The development in Germany moved in
close parallel with global digital trends
in the deal market, i.e. mobile services,
social networks, mobile marketing, big
data analytics or online payment, as can
be documented in key regions like the US,
the UK or Israel. The usage of the internet
via mobile is growing fast and becoming
more dominant in comparison to classical
communication channels. This applies to
the established Western countries, but
also at an increasing pace to the emerging
markets. In addition to German players,
financial and strategic investors from other
European and Anglo-Saxon countries play
an important role in the digital segment,
since in most transactions they act as
the key driver for major takeovers.
This
observation can be also traced in the real
data of recent transactions. Private equity
in particular have reappeared and have
an increasing interest in business ideas
focusing on internet or mobile. They
have become a strong influencing factor
for national sentiment, pushing deal
valuations to an extraordinary high level.
M&A confidence is strong and activities
by renowned firms from Germany as
well as the Netherlands, the US or the
UK have increased. International players
have strengthened their engagement
in the sector, focusing on innovation
(acquisition of Skobbler by Telenav), a
share in the European market (acquisition
of Plista by GroupM) or access to regional
talent (acquisition of Readmill by Drop-box).
While recent M&A deals in Germany
have been dominated by local corporate
and financial players, we anticipate that
more cross-border deals will be recorded
in future.
E-commerce/marketplaces led the
industry ranking thanks to several
major deals disclosed over the course of
recent quarters. More than one third of all
transactions were located in this segment.
The largest deal during the period was
Hellman & Friedman’s EUR 1.5 billion
offer for 70% of the Scout24 Holding. The
firm’s main platforms are the classifieds
business for real estate and cars, running
under the brands ImmobilienScout24 and
AutoScout24.
■ Total number of
acquisitions
■ Number of acquired
start-ups
Source: ThomsonReuters,
0
EY Research 1st Quarter 2013 2nd Quarter 2013 3rd Quarter 2013 4th Quarter 2013 1st Quarter 2014 2nd Quarter 2014

Other major deals in relation to e-com-merce
and marketplace-related busi-nesses
were the takeover of the payment
provider Sofort AG by Klarna, the coupon
platform Retailo by Blackhawk Networks,
food-delivery service Lieferando by
Takeaway.com or online tire seller Tirendo
by Delticom.
IT and software solutions rebounded in
terms of attractiveness to investors.
One megadeal took the national
community by surprise: The IT solution
provider TeamViewer, well-known for a
desktop sharing software, was acquired
by the private equity investor Permira
for a deal value of approximately
EUR 1.1 billion. The target is operator of
the world’s most downloaded remote-support
solution for private consumers
and SME businesses. Other IT-driven
deals included the takeover of energy
management provider JouleX by Cisco,
messenger application Hoccer by Media
Ventures (Stroer), or street-map provider
Skobbler by Telenav. All of them had
received a great deal of attention prior
the M&A deal due to strong growth
figures or a unique business model with
the potential to become one of the global
players worldwide.
German companies in the digital sector
continue to focus on product portfolio
acquisition or optimization. Recent
mid-cap deals with national participants,
while small in terms of deal size, illustrate
these recurring takeover themes. This
accounts for Gamigo tapping into mobile
games, Stroer further expanding into
digital advertisement or Delticom
acquiring competitors in the online retail
market. The trend is steady and further
acquisitions based on that rationale are
foreseeable as a result of continuous
innovation and market consolidation.
Investments in ventures can be a bold
strategic move for competitors who want
to establish a scale position in particular
markets and gain access to critical
capabilities. The history of the internet
has proven that it is very challenging for
traditional companies to build highly
scaled offerings with large user bases
on their own. Due to this limitation,
established players tend to acquire start-ups
to buy shares in the market. The
digital shift is changing the structure of
our economy, resulting in tremendous
implications for traditional companies.
This particularly accounts for corporate
players that are forced to increase their
interest in digital business models.
One of the consistent themes is the
expansion of corporates into the digital
market, as outlined above. In June 2013,
Otto Group took over the majority owner-ship
of the e-commerce conglomerate 3SI
that runs significant digitals operations in
France, Spain, Belgium and Germany. This
major transaction supports the ambitions
of the company to become a global online
retailer for fashion and lifestyle. Similar
activities can be seen for United Internet
and their takeover of webhosting provider
Arsys in Spain and Deutsche Post’s
acquisition of register information
provider Riser ID Services. Such M&A
deals by established firms are expected
to increase in the coming quarters, since
several German corporate players have
announced that they intend to focus on
the digital market to further diversify their
business models.
Another M&A trend is the expansion of
German ventures into foreign markets
such as Brazil, France or Sweden.
Evidence for this can be seen in the
strategy of Rocket Internet’s food-delivery
start-up Foodpanda into emerging
markets. In 2013 and 2014, the venture
continued to drive external growth
through a couple of acquisitions. In 2013,
Mister Spex strengthened its position by
acquiring Swedish online eyewear shops
with significant operations in Scandinavia.
A similar strategy can be traced for food-delivery
venture Delivery Hero, online
marketplace provider Scout24 or job
board platform StepStone.
“ We see high growth potential in specialized e-commerce concepts.
In particular, online brands and market niches, which themselves can
be quite large, are seeing a lot of activity and we regard them as
having a lot of promise.”
Aljoscha Kaplan
GMPVC German Media Pool

2%
1%
9%
Acquirer countries of German start-ups in the digital sector – 2013 compared to 2014
2%
6%
6%
Analysis of M&A transactions involving
German digital start-ups in 2013 and
2014 shows that a share of around three
quarter of the deals was executed by
domestic investors.
About 78% of the M&A deals were
executed by domestic investors in 2013
and 71% in 2014. The high share of
national participants can be traced back
to the characteristics of the start-ups
and the stage of maturity at which these
entrepreneurs managed to close the exit.
Most of the M&A deals took place in the
seed stage, early stage or expansion
phase of the relevant venture. During
that time, the start-ups have gained
attractiveness on a national scale, either
(a) for their local media and customer
groups, (b) for a direct competitor
operating in a similar market sector or
(c) due to the uniqueness of their busi-ness
model.
About one quarter of the M&A deals
covered by this analysis have been linked
to at least one international investor
involved. This group is most often
interested in ventures during their
expansion or late stage. Anglo-Saxon
investors from the US or the UK account
for more than half of the transactions.
Among them are technology firms such
as Amazon, Cisco Systems, Dropbox or
Telenav, as well as renowned financial
investors such as Bregal Capital, Hellman
& Friedman, Permira or TA Associates
Management.
These investors are followed by those
from Switzerland, Sweden, France and
Spain. Key drivers have been corporates
such as Conrad Electronic, Klarna, Mobile
Network Group, Takeaway.com or Zoo-gigant
as well as financial players such
as Blackfin Capital or EQT Partners.
In general, the buyer structure of foreign
players in the recorded deals has been
very diverse.
We expect that the importance of
foreign investors will continue to
increase. The key objective of corporate
firms are business opportunities in
Europe’s fastest growing technology hub
and in Germany as a whole. In addition,
there is increasing interest from big-name
VC firms that announced their intention
of increasing their involvement in the
German market (e.g. Accel, Balderton,
Index Ventures, Mangrove Capital,
Partech Ventures).
International investors
increase their share
■ Germany
■ US
■ UK
■ Sweden
■ Other
Source: EY Research
78%
8%
2013
71%
8%
2014
9%
■ Germany
■ US
■ UK
■ Spain
■ Israel
■ Other

E-commerce remains the
driving force of the digital M&A market
Sector split of acquired German start-ups in the digital sector – 2013 compared to 2014
■ E-Commerce/Marketplace
■ IT/Software solutions
■ Network/Communication
■ Marketing/Sales
■ Online/Mobile services
■ Other
Source: EY Research
31%
19%
10%
20%
7%
2013
13%
The deal structure in Germany is
dominated by e-commerce related
business models, followed by transactions
relating to communication platforms as
well as online and mobile services.
E-commerce and marketplaces are still
the flagship in attracting M&A flow.
The main focus was on start-up ideas with
B2B or B2C focus, especially with respect
to real estate, recruiting, fashion, travel,
food delivery or furniture. Takeovers in
these fields were mainly carried out by
financial investors or direct competitors,
resulting in a significant number of M&A
deals in the business sector.
The majority of network or communication
start-ups were acquired by media houses
or corporate players aiming to expand
into the digital segment. The shift from
classical to digital businesses is continuing,
giving a powerful impetus to the overall
frequency of M&A transactions.
Online communities and social platforms
are also a popular target, often used to
gain access to a specialized audience or
to push online awareness. According to
the data analyzed, other business models
focusing on online directories or social
messengers are favored by many
investors.
Mobile and internet marketing as well
as online sales services remain a very
popular sector in terms of deal
attractiveness. The growing smart
mobile penetration and a strong demand
for big data analytics have resulted in the
development of global markets with large
volumes. Several German ventures have
an active share in this momentum and
have gained worldwide recognition by
offering unique services. The latter has
resulted in an increasing number of
transactions, especially by financial
investors aiming to profit from scale-up
business opportunities.
32%
10%
16%
18%
5%
2014
19%
Online and mobile services are a strong
growth sector. Alternative payment
systems, online gaming and the sharing
economy have reached the size of mass
markets and the trend is expected to
continue. From a corporate acquisition
perspective, this sub-sector is
experiencing increasing M&A interest
from established market players.
Deals linked to IT and software
solutions are fairly rare compared to
the e-commerce segment but the sub-sector
is catching up rapidly. Global
trends such as big data, VoIP-communi-cation
or cloud computing have resulted
in strong interest for software-driven
ventures, evidenced by several transactions
at extraordinary valuations.
Taking recent funding rounds into account,
the number of software M&A deals is
likely to increase in number and volume.

The age profile of German start-ups when
an exit takes place varies considerably
Age of German start-ups that exited in 2013 or 2014
18%
27%
31%
> 10 years
7–10 years
4–6 years
0–3 years
24%
Source: EY Research
It is often assumed that M&A deals in
the digital market are driven by young
entrepreneurs and recent business
models. However, this is not always
the case. The average age of German
ventures that have recently made an exit
is distributed equally across the range.
Despite the high frequency of deals for
ventures aged from one to six years,
there is a large group of start-ups with
a much more senior profile aged seven
years or older.
About 31% of the start-ups that disclosed
an exit had been founded three years
previously or even earlier. Famous
examples for such transaction are the
online tire marketplace Tirendo, founded
in 2011, the last-minute travel offers
platform JustBook, founded in 2011, or
network sharing platform Amen, founded
in 2012. Key drivers for the deals
mentioned was market consolidation
initiated by competitors or firms with a
complementary product portfolio.
About 27% of the takeovers focused on
mature companies with an age profile
from four to six years. Well-known
examples are personalized radio provider
Aupeo!, founded in 2008, online games
developer Aeria Games Europe, founded
in 2008, and food-delivery platform
Lieferando, founded in 2009. These start-ups
have experienced longer development
periods backed by large-sized funding
rounds to boost market growth.
About 42% of the deals focused on
digital ventures with an age of seven
years or more. Generally, these firms are
established players in their niche markets
with an exclusive profile that is very
attractive to corporate and financial
investors. Activity has focused on well-known
firms such as the finance platform
Finanzen.de, founded in 2004, SaaS mail-provider
Optivo, founded in 2001, or
content-provider Jesta Digital, founded
as Jamba in 2000. Among them are ven-tures
characterized by sustainable busi-ness
models which even managed
to overcome the dot-com crisis in the
millennium years.
“ A trade sale will remain the no. 1 exit scenario in Germany. Nevertheless,
I think that a new stock market segment with a certain minimum of
regulatory requirements can serve as an attractive additional exit channel
for volumes of about EUR 20 million and above.”
Jens Spyrka
bmp media investors

Transaction values
have reached new heights
Top 15 deals in Germany from 2013 until October 2014 – based on announced or rumored value
# Target name Location Target Profile Buyer Name Country Buyer Profile Value* Announced
1 Rocket Internet Berlin Company
Builder
IPO (stock exchange) GER Various EUR 5.7 billion** October 2014
2 Zalando Berlin E-commerce IPO (stock exchange) GER Various EUR 4.6 billion** October 2014
3 Scout24 Munich Classifieds Hellman & Friedman US Private equity EUR 1.5 billion
(70%)
November 2013
4 TeamViewer Goeppingen Remote
software
Permira UK Private equity EUR 1.1 billion May 2014
5 pizza.de Braunschweig Food-delivery
service
Delivery Hero GER Food-delivery
service
EUR 290 million August 2014
6 Delasocial (and
other agencies)
Hamburg Advertising Equistone Partners GER Private equity EUR 217 million April 2014
7 Fyber Berlin Mobile
advertising
RNTS Media ROK Digital
content
EUR 150 million October 2014
8 Mytheresa Munich E-commerce Neiman Marcus US Department
store
EUR 150 million September 2014
9 Sociomantic Berlin Display
campaigns
Dunnhumby UK Customer
services
EUR 144 million March 2014
10 Sofort AG Gauting Payment
provider
Klarna SE Payment
provider
EUR 109 million February 2014
11 JouleX Munich Energy
management
Cisco US Technology
provider
EUR 83 million May 2013
12 Retailo Cologne Coupon
platform
Blackhawk Network US Coupon
platform
EUR 50 million March 2013
13 Lieferando Berlin Food-delivery
service
Takeaway.com NL Food-delivery
service
EUR 50 million April 2014
14 Tirendo Berlin Online tire
seller
Delticom GER Online tire
seller
EUR 50 million September 2013
15 Hoccer Berlin Messenger
application
Media Ventures GER Advertising EUR 50 million March 2014
Source: EY Research and publicly available information
* Values are projected based on 100% of the company
** Market capitalization as of 4 October 2014

• In November 2013, US investor
Hellman & Friedman LLC agreed to buy
70% of the Scout24 Holding digital-classifieds
business from Bonn-based
Deutsche Telekom AG. The purchase
valued the business at EUR 2 billion
including debt. The Scout24 holding,
founded in 1998, is the operator of
Germany’s largest real-estate and
dating portal, also providing online
classifieds for cars, recruiting and
travel.
• In May 2014, the UK-based private
equity firm Permira entered into an
agreement to acquire TeamViewer,
a leading global provider of secure
remote support software and online
meetings. The company was in the GFI
Software shareholding, whose largest
shareholder is Insight Venture Partners.
TeamViewer’s remote support product
has become very popular among
internets users with more than
500 million devices installed.
• In March 2014, private equity firm
Equistone merged various digital media
agencies and consulting companies
under one holding company called
Performance Interactive Alliance,
including the operations of Perfor-mance
Media, econda, Blue Summit
Media and Delasocial. The new
company headquarters will be in
Hamburg and its affiliates will continue
to focus on clients in German, Austrian
and Swiss markets.
• In April 2014, the UK-based
Dunnhumby, a data and consumer
insights unit of British retailer Tesco,
agreed to take over Berlin-based retail
targeter Sociomantic Labs. The terms
of the deal were not disclosed but
have been reported in the range of
USD 175 million–USD 200 million. At
the point of the takeover, Sociomantic
employed 200 employees in 16 offices
globally.
• In December 2013, the Sweden-based
online payments company Klarna
agreed to acquire Germany’s market
leader Sofort AG from majority
shareholder Reimann Investors. No
details were shared about how the
acquisition was structured but
according to press reports, the price
was around USD 150 million. Together,
the two companies will form Klarna
Group with the objective of becoming
Europe’s leading alternative online
payments provider.
• In May 2013, the US-based technology
firm Cisco announced its acquisition
of privately-held JouleX, a leader in
enterprise IT energy management
for network-attached and data center
assets, for approximately USD 107
million. The start-up is based in Munich
and Atlanta and will be integrated into
the Connected Energy Solutions team
within Cisco’s Industry Solutions Group.
“ Although we still do not have exit levels where they ideally need to be to drive
market growth, we are seeing an increasing number of international investors
looking at the European market. In addition to the maturing of the scene here,
this may also result from a lower level of valuations in Europe versus the US,
where some investors are being priced out of the market.”
Aljoscha Kaplan
GMPVC German Media Pool
IPOs of Rocket Internet and Zalando over EUR 10 billion

A successful bus In recent months, large-scale and
in some cases even billion-dollar
investments in online businesses have
generated much public interest. Most of
the target companies have one thing in
common: A rapid international expansion
story.
Whether it is messaging services, social
media or even mobile casual multiplayer
games: User growth drives user growth
and often the global crowd will migrate
to the dominant service provider where
they find the most peers or the most
content.
So what are the business models
that are suited to rapidly win global
traction?
The service needs to create value as an
aggregator of dispersed information, as
a meeting point of supply and demand
or as an infrastructure to link people. If
the value-add is big enough, e.g. in non-transparent
and fragmented markets,
the new offering might be “disruptive”,
i.e. might entirely change consumer
behavior and consume the traditional,
usually offline, solution. These
businesses are largely technology-/
platform-businesses that build their
success on acquiring a large community
of business partners and private
customers (Business Models no. 2 and
3). Product-driven businesses, i.e. online
retailers (Business Model no. 1), do not
usually create a “network” value-add,
but can increase their attractiveness
via the same principles (social shopping,
user-generated content such as reviews).
Furthermore, the service should be
effectively scalable, also on an inter-national
level. This is again easier for a
technology-driven company and even
easier for a company that only has
private customers (e.g. social media).
They can be identified and acquired
The winner takes it all – simplifying categorization of business models
Business model driven by
technology and acquisition
of business partners
2
Business model driven
by physical goods
1
Business model driven by
technology and acquisition
of private users
3
Examples Business
drivers
Value-add from aggregation
and interlinking of parties
International scalability Monetization horizon
• Online shop • Assortment Low Low
(country-specific marketing, country-adapted
assortment, local supply chain)
Short term
• Marketplaces
• Classifieds
• Daily deals
• Online food
delivery
• Media libraries
• Payment services
• Number of
business
partners
• Number of
users
Middle-High Low-Middle
(country-specific marketing, acquisition of
local business partners [and customers])
Short term
(commission-based services)
Mid term
(financed through advertising)
• Social networks
• Messaging services
• B2C-collaboration/
file sharing
• Number of
users
High High
(usually no to little adaption of platform,
marketiing supported byword-of-mouth
acrosscountry borders)
Mid term – long term
(often starts as free offer or
“freemium”, monetization through
advertising)
1
2
3
International
scalability
Low High
Value add from
aggregation and
interlinking
of parties
Low High

iness model– the winner
takes it all
more easily than local business partners
and often volunteer in “spreading the
word”.
What does this mean for investors and
founders?
As outlined, Business Model no. 3 has
the most opportunities for rapid expan-sion,
but is also a risky all-or-nothing bet.
In that sense, investors and founders
should be clear that a conservative
financing approach is not adequate and
could even be the root of market failure.
If the business can be rolled out to
new regions without re-inventing the
company, a business plan should foresee
that in order to avoid losing monetization
potential, to be attractive for globally
operating business partners and
advertising clients and to benefit from
operational economies of scale.
Surprisingly, EY found in a recent survey
of 151 start-ups (EY Start-up Barometer
Deutschland) that only 27% are target-ing
the global market. Although not all
start-ups are suited for an international
rollout, the figure suggests some caution
among German founders.
Even in highly dynamic businesses, the
basis is still realistic and detailed plan-ning.
The founder should be able to
demonstrate a path towards profitability,
even if the monetization is initially low.
Another important cornerstone is a
very clear picture of competitors.
Obviously, it’s not a good idea to
compete with the top dog that has
already reached a critical size and has
a clear no. 1 position. However, it might
be advantageous
to be in an adjacent
business that is likely to become relevant
for the market leaders – also in view of
a possible later exit.
No matter how ambitious the founders
are and how appealing the business case
is, it will not grow without the proper
funding. In 2013, WSJ revealed that
average deal sizes for VC-funding are
considerably lower in Europe than in
the US (e.g. average first rounds
stand at USD 2.7 million in Europe vs.
USD 6.6 million in the US*).
Author
Martina Liggesmeier
Martina Liggesmeier is Senior
Manager at EY’s Commercial
Advisory Services. She deals with
commercial due diligence and
strategy advice. Martina’s back-ground
is based on Private Equity
and strategy consulting.
Founder Investor
Financing need Think big if required by business logic Invest bigger sums in a
* WSJ, 31 July 2013, citing VentureSource-data, 10-Year Averages
high-risk environment
Business model
economics
Demonstrate that monetization is possible
and show that it is plausible to gradually
reach the breakeven point (e.g. through
lower marketing costs)
Finance also for businesses that
plan the breakeven in 3–4 years
Competitive
landscape
Assess and secure competitive advantage
(new service, value add, likelihood to be
copied, intellectual property)
Assess later interest of competitor
or strategic (exit opportunity)
Given the potential of our dynamic
founders’ scene across the country, one
should hope that Germany can attract
the necessary money to become the
birthplace of more global players.
Until then, founders should not hesitate
to “think big”.

Appendix

Methodology and Disclaimer
This study has been prepared by
Ernst & Young GmbH Wirtschaftsprüfungsgesellschaft
(hereinafter “EY“)
with the purpose of providing the public
with information about developments in
the venture capital and start-up sector.
EY points out that the study does not
represent an adequate basis for a final
decision about the information shown in
the study. The study is not comprehensive
or complete in the sense of containing
all the facts which might be of interest
in connection with the information
described.
The study has been prepared with the
usual care required for such analysis.
Unless referring to EY itself, the infor-mation
presented has not been reviewed
by EY with regard to its accuracy or
completeness. The information have
been gathered by desktop research
(public sources, disclosed information
and acknowledged databases) and inter-views,
complemented by our own market
knowledge, but includes no confidential
information in any sense – qualitative
and quantitative research. EY is not
responsible for incomplete or false infor-mation.
Thus, readers are recommended
to examine all information prior to any
decision. EY is not liable for any missing
or false information and statements in
this study or other oral or written remarks
made in connection with the study.
The information in the presentation has
been prepared for a certain target date,
prior to the presentation. The main
cut–off point for the research is 30 June
2014, with some exceptions relating to
research and deals mentioned. Thus, the
accuracy at the date of the presentation
cannot be guaranteed. Any statement
regarding future developments is not
binding and merely represents an
expectation. Stating a value does not
represent a valuation as understood in
IDW (generally accepted standards for
valuation engagements).
We define M&A activity as mergers and
acquisitions in which the targets are
German-based companies acquired
by either German or foreign buyers.
Specifically, values and volumes used
throughout this report are based on
completion dates for transactions with a
disclosed deal value and supplemented by
additional independent research – some-times
based on rumors stated in public
sources.
Information related to previous periods is
updated periodically, based on new data
collected for deals closed during previous
periods but not reflected in previous data
sets, i.e., in EY’s VC Trends Quarterly.
Information for start-ups, financing, funds
and M&A activity includes information for
companies which fall into one of the digital
sectors. Certain adjustments have been
made to the information to exclude trans-actions
that are not specific to digital.
The digital sector has been defined
corresponding to the sector cluster within
The National Venture Capital Association
2013 Yearbook (US-based), which is
based on data from Thomson Reuters and
analyzed through the ThomsonONE.com
(formerly VentureXpert) database
of Thomson Reuters and the relevant
industry codes (VEIC).
Accordingly, the digital sector comprises
companies and information mainly
focused on consumer products and
services; computer software; IT services;
media and entertainment; and retailing/
distribution. The specific VEIC codes and
any other information regarding the
research and the study can be gained on
request from EY. The specific VEIC codes
and the respective clusters are also shown
in the publicly available National Venture
Capital Association 2013 Yearbook.

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www.ey.com/Startup
Here you will find essential guides on a
global scale such as Venture Capital and
Private Equity Country Attractiveness
Index or Venture Capital Insights.

Access
VC Trends Get Together
Because of the city‘s reputation as a
creative “breeding ground” offering
myriad sources of inspiration, the
opportunity to interact and a perfect
infrastructure/environment, Berlin has
developed into an impressive start-up
location and is internationally known for
its innovative scene.
Consequently, we have chosen this
location for our annual “VC Trends
Get Together” – an afternoon full of
stimulating conversations between
selected start-up companies, venture
capital firms, corporate investors and
relevant business associations.
Prominent keynote speakers give
exclusive insights and share experiences.
More than 100 participants make the
event a great success.
For more information please contact
thomas.pruever@de.ey.com.
CODE_n
CODE_n is a global innovation platform
for outstanding young companies and
leading corporations. One core element
of the CODE_n ecosystem is an annual
start-up contest. The CODE_n CONTEST
seeks the most exciting founders and
companies with leading edge business
cases.
In 2015, we are looking for ground-breaking
new hardware and software
solutions, IT applications or IT-based
business models that contribute to the
evolution of the Internet of Things.
The contest is organized around the
sub-themes DIGITAL LIFE, SMART CITY,
FUTURE MOBILITY and INDUSTRY 4.0.
The 50 finalists will exhibit their leading-edge
business cases in the 5,000 square
meter space of Hall 16 during the CeBIT.
All start-ups invited will get to showcase
their business solution free of charge
from March 16th to March 20th 2015.
For more information please visit
www.de.ey.com/start-hub or contact
annekatrin.nowotny@de.ey.com.
BITKOM Trendkongress
The BITKOM Trendkongress is all about
digital trends and disruptive technologies.
It links global players and representatives
from start-ups and the political and
scientific fields to create a common
communication platform about our
digital future.
EY is partner of the BITKOM Trend-kongress.
For more information please
contact peter.lennartz@de.ey.com.

| Venture Capital a 42 anndd SSttaarrtt--uuppss iinn GGeerrmmaannyy

Contacts
Venture Capital and S Sttaarrtt--uuppss iinn GGeerrmmaannyy | 43
Editor
Ernst & Young GmbH
Wirtschaftsprüfungsgesellschaft
Friedrichstrasse 140 | 10117 Berlin
Martin Selter | Partner
Dr. Thomas Pruever | Senior Manager
+49 30 25471 0
www.ey.com
Editorial responsibility (alphabetically)
Markus Greif (Lead Author)
Steffen Mahlow
Dr. Thomas Pruever
Research and overall study team
(alphabetically)
Markus Greif
Steffen Mahlow
Dr. Thomas Pruever
Victoria Welk
Franziska Wunderlich

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