20 5 / 2013
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25 4 / 2013
Make or break - what we have seen so far.
At the beginning of the year, I explained why the rules of the VC game are changing in 2013 and that founders need to “Adapt or leave” the ecosystem. I explained the structure of the funding pyramid in Europe upon which the financing of startups in Europe will be based.
The first quarter of 2013 has passed and it is time to have a first review on those metrics:
Series A crunch landed in Europe
We haven’t seen a remarkable deal flow in the first quarter in recent years. When returning to my desk in January, my inbox quickly filled with requests from fellow VCs introducing their seed funded companies for a series A round. In parallel, we hear the news about seed funded companies merging as a last resource with competitors, as well as about some asset deals or even insolvencies. There wasn’t a particular vertical sector which was hit hardest - it was across board. Also we hear about loans given by some institutions to startups on reasonable interest rates to give more runway – the time a startup has enough money to operate from - for those still in fundraising. We will hear more of those stories in the course of the year. This development is in particular more focused on Berlin as predicted by me in January because Berlin had the most Seed Deals which are mainly affected by this metric.
Deep pockets right from the start
A recent report by CBS Insights revealed an interesting fact for the US: Seed companies which received funding from VCs with deeper pockets have higher chances to receive follow on funding - aka surviving the Crunch - than those companies reaching to follow on rounds without significant backing from current investors - most seed investors are only planning for the next round with a new, additional investor. It is too early to tell for Germany if this is true as well. However, we see at our fund even more stable conditions and interests for investments than in recent years. Fellow VCs seem to trust our pockets to discuss syndication for the next rounds. On the other hand, we didn’t see any victims of the Crunch in the portfolio of other VC funds managing similar sizes of funds as we have in the market. In the first quarter, we invested in several early stage companies in Germany as well in the USA. Some have been announced, some will be revealed in the coming weeks.
13 4 / 2013
Transactions, the new nuggets in SaaS
There will be interesting announcements next week and in the near future in our portfolio, which motivated me to summarize some thoughts I was focusing on lately.
During my last meetings with fellow investors, founders and journalists I was asked what will be the Next Big Thing VCs will look for to invest. Many expected to hear about a certain industry, verticals and trend areas. Yes, there are a lot of interesting verticals emerging with a 3.0 or 4.0 era. Obviously a more B2B focus is dominating the scene, which draw some attention to new businesses and models. But these are just small spots on a bigger map. The real game changer and Big Thing will be business models purely based on Transactions.
So why are transactions more valuable than premium features and additional services?
02 2 / 2013
Mentor the German Ecosystem - because German entrepreneurs deserve it.
Today I will be a mentor and judge at “3 Days Startup” event at the famous WHU university near Koblenz. I will join some friends in the jury who I know for several years now - e.g. Carlo Matic - and some founders of Startup companies we invested in - e.g Tim Marbach of KaufDA and Felix Swoboda of Mobileeventguide. Knowing the event format from the recent event 3DS in Aachen and our “Pirates on a Plane” trip to London this week, getting involved with very early stage founders brings more experience for me. I feel this contribution by VCs and successful entrepreneurs is important to develop the German Startup Ecosystem. For our friends in US and UK it may seam very common to bring experienced and young entrepreneurs together to share thoughts, experience and knowledge - it is not that common in Germany. We need to do more - not only in Germany but in continental Europe as a whole. Seedcamp is bringing a lot of contribution to Eastern Europe and young ecosystems - the more mature ecosystems like France, Germany and Austria are failing to build those mentoring support.
03 1 / 2013
“I tried to put a good game plan together. I wasn’t sure how healthy you were.”
The new year began with a surprising turnaround of traditional NFL team Washington Redskins coming back from 3-6 and going into the postseason with 10-6. We don’t know how far the Redskins will go but this turn around in this year NFL season was something we could learn from. Young rookie quarterback Robert Griffin III lead the team and was promoted captain of the team. An he did lead the team to success. He crashed the news conference of his coach Shanahan after the last game:
“What did you do for New Year’s?” Griffin asked.
“I tried to put a good game plan together. I wasn’t sure how healthy you were, so it was hard without you calling me,” answered Shanahan
It will be similar for startups and investors this year. Everybody will try to put a game plan together but uncertainties are very high to make a fair call. The funding scene as we know it will change and founders need to adapt or leave. Prepare for a different and new way of raising funds. But the real change will be from an investors perspective - so I leave the founders view this time. They will not play the main role in this drive.
We read a lot of Series A crunch and Not a Series A crunch and No crunch at all. The experts talked about tailwinds and headwinds. For 2013 this is not of the essence anymore. Change is imminent and the players will be the investors this time. After four years of a Startup Scene where founders lead the negotiations the coming year will change the rules of the game. Here is how and why:
More money will be injected
First indications of new deals at the end of last year showed massive injection of new cash in successful startup stories. There will be more of this. Why? because investors will select their targets from a whole bunch of startups in a certain trend area. After selecting their target they will go for “All In”. Investors have understood that the bloodbath is around the corner and they need to make winners not just survivors. To win, those companies need cash - a big pile of it. They need the money for hiring the top talents, they will need the cash to drive market making by features and advertising and they will need the options to take over the weaker ones who will not be able to raise big funds. Investors of those survivors will look out for mergers and takeovers rather than going into the fate of a long lasting death and a cheap asset deal. Those investors who will come to their senses early in the year 2013 and push for those deals will be winners at the holiday season this year. Investors injecting those massive rounds will also be winners in their sector.