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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 
| Venture Capital a 6 nd Start-ups in Germany 
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 
Venture Capital and Start-ups in Germany | 7 
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
| Venture Capital and Start-ups in Germany 
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 a 10 nd Start-ups in Germany
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 
Venture Capital and Start-ups in Germany | 11
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. 
| Venture Capital a 12 nd Start-ups in Germany 
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
Venture Capital and Start-ups in Germany | 13 
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. 
| Venture Capital and Start-ups in Germany 
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
Venture Capital and Start-ups in Germany | 15 
• 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 
| Venture Capital a 16 nd Start-ups in Germany
Top 30 German start-ups cumulated funding value more than USD 2,600 million 
Venture Capital and Start-ups in Germany | 17 
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
| Venture Capital and Start-ups in Germany 
Funding
IPO Mezzanine 
Venture Capital and Start-ups in Germany | 19 
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. 
| Venture Capital a 20 nd Start-ups in Germany 
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
Venture Capital and Start-ups in Germany | 21 
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 
| Venture Capital a 22 nd Start-ups in Germany
Overview of key VCs, accelerators 
and incubators in Germany 
Venture Capital and Start-ups in Germany | 23 
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 
| Venture Capital a 24 nd Start-ups in Germany 
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) 
Venture Capital and Start-ups in Germany | 25 
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, 
| Venture Capital and Start-ups in Germany 
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. 
Venture Capital and Start-ups in Germany | 27 
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.
| Venture Capital a 28 nd Start-ups in Germany 
M&A Overview
M&A deal values for digital start-ups 
in Germany have reached a new stage 
Venture Capital and Start-ups in Germany | 29 
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 
| Venture Capital a 30 nd Start-ups in Germany 
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% 
Venture Capital and Start-ups in Germany | 31 
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 
| Venture Capital a 32 nd Start-ups in Germany 
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 
Venture Capital and Start-ups in Germany | 33 
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 
| Venture Capital a 34 nd Start-ups in Germany 
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
Venture Capital and Start-ups in Germany | 35 
• 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, 
| Venture Capital a 36 nd Start-ups in Germany 
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 
Venture Capital and Start-ups in Germany | 37 
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”.
| Venture Capital and Start-ups in Germany 
Appendix
Venture Capital and Start-ups in Germany | 39 
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.
Insights 
VC Trends Quarterly 
With our regular Venture Capital (VC) 
Trends Quarterly we at EY aim to provide 
additional value for those with a vested 
interest in the emerging German market 
for tech and media ventures. 
The newsletter provides detailed 
information on recent activities and 
trends in the start-up segment as well 
as current transactions and financing 
rounds. 
If you would like to add your name to the 
distribution list, please send an email to 
thomas.pruever@de.ey.com. 
| Venture Capital a 40 nd Start-ups in Germany 
Start-up Barometer 
On behalf of Ernst & Young GmbH, the 
independent market research institute 
Valid Research runs a telephone survey 
of 151 start-up companies to gain 
representative insights into the current 
state of the German founder scene. 
All results were analyzed graphically 
and comprise the basis for the Start-up 
Barometer 2014. 
www.ey.com/DE/de/ 
newsroom(April 2014) 
For more information or 
comments please contact 
peter.lennartz@de.ey.com. 
Helping your business grow, fast 
EY is the world leader in advising venture 
capital backed companies. If you want to 
turn a good business into a great one, we 
know what it takes. 
You can access our latest thinking and 
resources in centers of excellence: 
(1) Entrepreneurship and Innovation, 
(2) Venture Capital, (3) IPO and 
(4) Family Business Center. 
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.
Venture Capital and Start-ups in Germany | 41 
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
EY | Assurance | Tax | Transactions | Advisory 
About EY 
EY is a global leader in assurance, tax, transaction and advisory services. 
The insights and quality services we deliver help build trust and confidence in 
the capital markets and in economies the world over. We develop outstanding 
leaders who team to deliver on our promises to all of our stakeholders. In so 
doing, we play a critical role in building a better working world for our people, 
for our clients and for our communities. 
EY refers to the global organization, and may refer to one or more, of the 
member firms of Ernst & Young Global Limited, each of which is a separate 
legal entity. Ernst & Young Global Limited, a UK company limited by 
­guarantee, 
does not provide services to clients. For more information 
about our organization, please visit ey.com. 
© 2014 EYGM Limited. 
All Rights Reserved. 
BKR 1411-301 
ED None 
Print compensated 
Id-No. 1216923 
www.bvdm-online.de 
In line with EY’s commitment to minimize its impact on the environment, this document has been 
­printed 
on FSC®-certified paper that consists of 60% recycled fibers. 
This material has been prepared for general informational purposes only and is not intended 
to be relied upon as accounting, tax, or other professional advice. Please refer to your advisors 
for specific advice. 
www.ey.com

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Ernst & Young: Venture capital and startups in germany 2014

  • 1. VC Trends initiative by EY Venture Capital and Start-ups in Germany 2014
  • 2. Welcome | Venture Capital and Start-ups in Germany
  • 3. 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
  • 4. 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
  • 5. 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.
  • 6. 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 | Venture Capital a 6 nd Start-ups in Germany 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
  • 7. 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 Venture Capital and Start-ups in Germany | 7 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
  • 8. | Venture Capital and Start-ups in Germany Start-ups
  • 9. 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
  • 10. 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 a 10 nd Start-ups in Germany
  • 11. 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 Venture Capital and Start-ups in Germany | 11
  • 12. 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. | Venture Capital a 12 nd Start-ups in Germany 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
  • 13. Venture Capital and Start-ups in Germany | 13 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
  • 14. • 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. | Venture Capital and Start-ups in Germany 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
  • 15. Venture Capital and Start-ups in Germany | 15 • 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
  • 16. 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 | Venture Capital a 16 nd Start-ups in Germany
  • 17. Top 30 German start-ups cumulated funding value more than USD 2,600 million Venture Capital and Start-ups in Germany | 17 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
  • 18. | Venture Capital and Start-ups in Germany Funding
  • 19. IPO Mezzanine Venture Capital and Start-ups in Germany | 19 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
  • 20. 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. | Venture Capital a 20 nd Start-ups in Germany 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
  • 21. Venture Capital and Start-ups in Germany | 21 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
  • 22. 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 | Venture Capital a 22 nd Start-ups in Germany
  • 23. Overview of key VCs, accelerators and incubators in Germany Venture Capital and Start-ups in Germany | 23 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
  • 24. 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 | Venture Capital a 24 nd Start-ups in Germany 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)
  • 25. Foreign VC funds engaged in German start-ups 2014 (selection of major players) Venture Capital and Start-ups in Germany | 25 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)
  • 26. 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, | Venture Capital and Start-ups in Germany 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
  • 27. 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. Venture Capital and Start-ups in Germany | 27 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.
  • 28. | Venture Capital a 28 nd Start-ups in Germany M&A Overview
  • 29. M&A deal values for digital start-ups in Germany have reached a new stage Venture Capital and Start-ups in Germany | 29 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
  • 30. 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 | Venture Capital a 30 nd Start-ups in Germany 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
  • 31. 2% 1% 9% Venture Capital and Start-ups in Germany | 31 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
  • 32. 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 | Venture Capital a 32 nd Start-ups in Germany 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.
  • 33. The age profile of German start-ups when an exit takes place varies considerably Venture Capital and Start-ups in Germany | 33 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
  • 34. 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 | Venture Capital a 34 nd Start-ups in Germany 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
  • 35. Venture Capital and Start-ups in Germany | 35 • 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
  • 36. 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, | Venture Capital a 36 nd Start-ups in Germany 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
  • 37. iness model– the winner takes it all Venture Capital and Start-ups in Germany | 37 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”.
  • 38. | Venture Capital and Start-ups in Germany Appendix
  • 39. Venture Capital and Start-ups in Germany | 39 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.
  • 40. Insights VC Trends Quarterly With our regular Venture Capital (VC) Trends Quarterly we at EY aim to provide additional value for those with a vested interest in the emerging German market for tech and media ventures. The newsletter provides detailed information on recent activities and trends in the start-up segment as well as current transactions and financing rounds. If you would like to add your name to the distribution list, please send an email to thomas.pruever@de.ey.com. | Venture Capital a 40 nd Start-ups in Germany Start-up Barometer On behalf of Ernst & Young GmbH, the independent market research institute Valid Research runs a telephone survey of 151 start-up companies to gain representative insights into the current state of the German founder scene. All results were analyzed graphically and comprise the basis for the Start-up Barometer 2014. www.ey.com/DE/de/ newsroom(April 2014) For more information or comments please contact peter.lennartz@de.ey.com. Helping your business grow, fast EY is the world leader in advising venture capital backed companies. If you want to turn a good business into a great one, we know what it takes. You can access our latest thinking and resources in centers of excellence: (1) Entrepreneurship and Innovation, (2) Venture Capital, (3) IPO and (4) Family Business Center. 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.
  • 41. Venture Capital and Start-ups in Germany | 41 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.
  • 42. | Venture Capital a 42 anndd SSttaarrtt--uuppss iinn GGeerrmmaannyy
  • 43. 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
  • 44. EY | Assurance | Tax | Transactions | Advisory About EY EY is a global leader in assurance, tax, transaction and advisory services. The insights and quality services we deliver help build trust and confidence in the capital markets and in economies the world over. We develop outstanding leaders who team to deliver on our promises to all of our stakeholders. In so doing, we play a critical role in building a better working world for our people, for our clients and for our communities. EY refers to the global organization, and may refer to one or more, of the member firms of Ernst & Young Global Limited, each of which is a separate legal entity. Ernst & Young Global Limited, a UK company limited by ­guarantee, does not provide services to clients. For more information about our organization, please visit ey.com. © 2014 EYGM Limited. All Rights Reserved. BKR 1411-301 ED None Print compensated Id-No. 1216923 www.bvdm-online.de In line with EY’s commitment to minimize its impact on the environment, this document has been ­printed on FSC®-certified paper that consists of 60% recycled fibers. This material has been prepared for general informational purposes only and is not intended to be relied upon as accounting, tax, or other professional advice. Please refer to your advisors for specific advice. www.ey.com