Financing for startups has dried up in the early stages
: Start-up scene: Berliner Volksbank invests 20 million in start-ups
The start-up scene in Berlin is growing and growing, more and more international investors are investing in the up-and-coming Sprinter companies here in the capital. Long-serving institutions are now also putting out feelers as newcomers in this market - such as the Berliner Volksbank. The cooperative bank announced late last year that it was entering the equity finance market for startups. A separate company was founded for this, Berliner Volksbank Ventures. It is intended to participate as a lead or co-investor in young companies that develop “innovative technologies for medium-sized companies and the financial sector”.
The company has 20 million euros available for such investments over the next four years, says managing director Andreas Laule in an interview with the Berliner Zeitung. "We want to get into the young companies at an early stage," he says, "other donors have a hard time". But what has the advantage of being relatively inexpensive. Because later, when the companies get into the orbit of large venture capital funds, significantly higher sums are due for investments. "We are involved in the early phases with a maximum of one million euros," emphasizes Laule.
"The ear to the crowd"
He assumes that the company will initially invest in 15 to 20 companies. The available capital of 20 million should not be used in full immediately: “We also want to keep some powder dry. When a company is doing particularly well, we want to have the opportunity to add more. "
But why is the rock solid Volksbank, which has more than 156,000 members, getting into the venture capital business?
Managing director Laule names three goals. First of all, Volksbank wants to open up possibilities of digitization for its customers as well. For example, the Ventures company took a stake in Inventorum GmbH, the Volksbank offshoot's first ever involvement. Inventorum is a provider of iPad-based cash register systems that support small, local retailers in particular with cash register processing, customer management, accounting and inventory management, while at the same time preparing them for the digital requirements of e-commerce. Volksbank wants to combine this with the classic account business.
Second, Volksbank wants to do something “strategically for its own core business” with these investments. To put it simply: Maybe Bank 4.0 is just being invented, and Volksbank wants to be close to it or “listen to the crowd”. Internally, the Volksbank admits that many start-ups that cavort in the financial sector, the so-called fintechs, have done their job quite well. "If traditional banks want to continue to exist in the future, they have to develop further and break new ground." Wise words from the CEO of Berliner Volksbank, Holger Hatjes. Banks, it is estimated, must be part of the restructuring and changes.
Generating surpluses becomes more difficult
That leaves the third reason. And that's simply called making money. Laule names a return of eight percent on the capital employed as a fixed point for the investment company. That is more than the bank generates in the traditional lending business, and at the same time significantly less than the objectives with which the big financiers calculate. In normal business it is becoming more and more difficult not only for the Berliner Volksbank to generate surpluses. Although the banks are currently swimming in customer money, they lack the low-risk investment opportunities, just like normal customers, when Bunds no longer throw money in principle. And that is unlikely to change much or only slowly in the coming years.
Direct investments in companies are of course always associated with risks - especially in the early stages, when the decision is being made as to whether a company will really take off. The rule of thumb in the start-up scene is that out of ten investments, one really brings and has to bring a profit. Volksbank Ventures is acting much more cautiously. The internal goal is: half of the company's investments have to go well. This also means that the selection of companies is preceded by a sharp analysis and that it is carried out according to more stringent criteria than is usual in the scene.
Looking for holdings
“We want to see sales,” says Laule, who previously worked as a department head in the credit area for more than ten years. The four-person team at the Volksbank subsidiary has looked at more than 100 start-ups so far, which includes Timo Fleig, a second managing director, and two analysts, Marco Bruns and Stefan Wernicke.
Perhaps two or three of these could be considered for further investments. The amount of the stake usually goes up to around ten percent of the company's value. It's also only about companies that fit the Volksbank profile. Start-ups from the biotech or healthcare sector, for example, have no chance at Volksbank.
At the beginning of June, Volksbank Ventures announced its second investment: flexperto. The company offers an internet-based software solution with which companies in consulting-intensive industries can also sell and carry out their services online, including video consulting. Some of the largest German insurance companies, banks and healthcare providers are already working with it.
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