What HTGF has to offer for start-ups (besides financing)

With over 600 seed investments in almost 16 years, High-Tech Gründerfonds (HTGF) is Germany’s most active seed investor. Its investment teams have strong ties with business and science. HTGF has long seen itself as a platform that offers start-ups outstanding benefits alongside financing. In this interview, HTGF Partner Claudia Raber sheds further light on the subject.

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Claudia, as a HTGF Partner, you’re responsible for relationship management at the company. If you had to name five things that you offer founders besides financing, what would they be?

Claudia: Expertise within the team, access to investors, external business experts, a network in business and science, and of course our HTGF Academy.

It’s clear what you mean when you talk about expertise within the team. Your team has over 15 years of experience in seed investment, and many of your investment managers are from the world of science or have founded a start-up themselves.

Claudia: You’re right. We always aim to interact with founders on an equal footing.

Can you tell us what you mean by the second point, access to investors?

Claudia: When our start-ups embark on additional financing rounds, we can help them find the right partner for any rounds that follow. Today, our network of investors spans the entire globe. In each and every region, we’ve got very good partners for the different phases and technologies of our start-ups.

Can you provide any figures?

Claudia: Our network comprises roughly 9,000 investors, ranging from successful private equity funds and corporate VCs to wealthy private individuals, some of whom invest exclusively with HTGF. And here we provide individual access, by engaging in very direct networking or organising events like the Family Day, where deals are sometimes born at the buffet table.

You also mentioned business experts that you bring together with your portfolio. Can you tell us about them?

Claudia: Sometimes our start-ups are looking for co-founders, additional managers or advisory board members, and here we can lend a helping hand. Our network includes over 8,000 C-level managers, consultants, service providers, mentors and candidates for advisory boards and co-founder positions.

Can you provide any examples?

Claudia: Sometimes we get successful founders and HTGF alumni on board as experts, as was recently the case in the influencer marketing business. And another person that immediately springs to mind is the co-founder of an internationally successful SaaS start-up who is now an investor and advisory board member at a portfolio company active in the field of enterprise software.

I presume your company networks are just as big?

Claudia: You bet. We’ve got more than 4,300 potential customers and cooperation partners from industry, the SME landscape and retail. Our HTGF Partnering Days are also an important networking tool. And here I’d like to really highlight our 35 fund investors, of course. Collaborations between these established companies and start-ups are common, and sometimes even result in an acquisition. One example I could give is our portfolio company Emma, which was acquired by Haniel last year. Haniel is also active as a HTGF fund investor.

Speaking of fund investors, do you offer them similar benefits to your start-ups?

Claudia: Yes, of course, and we can see that demand is constantly on the rise. That’s why we’re going to develop some additional formats.

Can you tell us about how you work with universities?

Claudia: Universities also form an important part of our active network, not just because successful founders often come from the world of science, but because we also want to give our start-ups access to experts. Also, with the HTGF Academy, we’re offering a comprehensive development programme exclusively for HTGF portfolio companies. This involves seminars and webinars about correct controlling and HR management as well as topics such as virtual share programmes.

Do your start-ups help each other?

Claudia: They certainly do. They often meet at our events and keep in touch with one another. We are strong believers in the power of peer-to-peer learning. We’ve even started to see successful founders from the past investing in our portfolio. We’re delighted to see just how well our platform concept is working.

Thank you for your time, Claudia!

Start-up meets corporate – an interview discussing the successful collaboration between Userlane and B. Braun

You could say that Alexander Katzung and Hartmut Hahn met by chance – and you’d be right, but it was in an organised setting. And it’s this idea that underpins the networking activities of High-Tech Gründerfonds when it brings together fund investors and portfolio companies. The portfolio company in this instance is Userlane, which offers software that explains other software to users as part of a step-by-step process that is easy to understand. HTGF invested in the company in 2016, and then a further financing round followed in 2018 in the form of a Series A investment. And so it came to pass that founder and CEO Hartmut Hahn met Alexander Katzung, Vice President Acceleration & Innovation at medical technology company B. Braun, at a HTGF event.

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We sat down with Alexander Katzung and Hartmut Hahn for an interview exploring their collaboration, the role that currywurst played when they first met, and how Userlane became a part of B. Braun’s accelerator.

Alexander, how did you come across Userlane? Hartmut and his team are not exactly active in the traditional medical technology field with their start-up Userlane.

Alexander: You’re right. We met at HTGF. B. Braun is a fund investor, and we have a regular seat and a vote on the investment committee focusing on the life sciences and chemicals – as you’d expect for a medical technology company like ours. But we can also take part in other investment committees as a guest participant, and here, the wide-ranging scope offered by HTGF is a major advantage. Take digital tech, for instance. It was there, in 2018, that I met Hartmut, a man brimming with confidence who made a convincing impression.

Can you tell us what was going on at that time, Hartmut?

Hartmut: The next financing round, our Series A, lay ahead. And as part of that we obviously gave a presentation at HTGF, which had already invested in our company as a seed investor. We were really confident during the committee meeting, Alexander’s right. We had already received a commitment from an additional investor. At Userlane, we help large companies simplify workflows and digital processes. Our technology is like a navigation system for the various software solutions used by companies. Alexander found our technology interesting, it would seem. During a break we ended up chatting and then we kept meeting up in the months that followed. And sometimes it was over a beer and a currywurst, like at the HTGF Family Day.

Alexander: You’re right, our intermittent meetings were very important. That’s why I’m looking forward to events like the Family Day taking place in the real world again. Digital formats are fine, of course, but personal interactions, sitting down together – that’s all an essential part of establishing contacts and getting to know people better. The Family Day is a fantastic event for that.

How did you end up doing business together?

Alexander: One of my tasks is to give B. Braun access to external innovations. That’s why I take topics from the investment committee [or from the deal flow] with me into my organisation. After our meeting, I presented the Userlane solution to my company.

What are the benefits that Userlane offers your company?

Alexander: It’s a very good training tool, both internally and externally. It saves time and simplifies the process of onboarding new users. But it also helps when it comes to software that some people only rarely use. A simple example would be submitting travel expense claims – some people may be familiar with the process. If it’s something you only do every few months – or you now need to travel again after the pandemic – you may well have forgotten how to use the tool to submit said claims. And in that scenario, the Userlane solution, which guides users through the process, is very helpful.

That said, it still did take a while before you two actually started working together.

Hartmut: Around a year later, in 2019, Alexander approached me because B. Braun had launched an accelerator. He told us: Although you’re not active in medical technology, you might still be of interest to us.

So why did it take so long?

Alexander: We had been looking at Userlane internally and had presented the start-up to the operational units. The interest was there, but we weren’t able to pursue the idea consistently in our daily business. An important lesson for us was that B. Braun first had to establish internal processes for working with start-ups and testing their solutions. That’s why we created the B. Braun Accelerator.

Can you tell us how your accelerator works?

Alexander: We developed two programmes: A conventional accelerator programme for early-stage start-ups, and a collaboration programme for later-stage start-ups. With the collaboration programme we’re looking less for an investment opportunity but more for a supplier of innovation and innovative solutions. And the product also has to have reached an appropriate level of maturity. At the start we focused on solutions that help to improve processes in areas such as HR, logistics and finance. And on top of that, the collaboration programme enables us to not only discuss technologies and new business models in theory, but to also test them in practice as part of pilot projects. That gives us the insights we need to make further decisions. Userlane was a great fit in that respect.

Hartmut, why did you decide to sign up?

Hartmut: As the founder of a start-up, I’m obviously interested in sales, and I thought the programme presented a good opportunity to gain B. Braun as a new customer. And I was also impressed by the concept of the accelerator, which pilots innovative solutions as part of a “fast-track” process and then makes them available for B. Braun to leverage.

So what does your collaboration entail?

Hartmut: As a general rule, there are two use cases for Userlane – and we tested them both during the pilot project. On the one hand, our software works for internal processes such as CRM or HR software, while on the other, we can also help B. Braun customers. For instance, whereas previously customers often had to undergo on-site training for a digital supply and procurement process, this is now completely covered and explained by our software.

Alexander: The Solution has proven very successful and our collaboration went so well that we’re now working together on a permanent basis following the pilot project.

So that means your accelerator has clearly been a success, Alexander. What’s next on the agenda – will you be getting another HTGF start-up on board?

Alexander: In the next round, the accelerator will focus on efficient and sustainable technologies. We defined our challenges internally, and then took a look at a lot of start-ups around the globe during the scouting process in a bid to find partners for our new collaboration programme. And as a fund investor, we’re of course also keeping our eye on HTGF’s portfolio companies – that’s a major advantage. And yes, we have again taken on board an HTGF portfolio company in the form of Panda GmbH. Panda really stood out throughout the entire selection process.

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Finding Product-Market Fit: The “n=1” rule

By Andreas Olmes (Principal / Proxy)

Co-authored by Ulrike Kalapis (Investment Manager), Yann Fiebig (Senior Investment Manager) , Gregor Haidl (Investment Manager) and Fabian Hogrebe (Investment Manager)

In a nutshell

When you start looking for product-market fit, the rule of “n = 1” prescribes that you should initially focus on exactly one single customer. By contrast, introducing personas or generic customer segments is often found misleading.

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Quick wins

• Consistently focus on a single customer: “n=1”
• Create a persona from five single, uniform and paying customers
• If you are backed by venture capital, start from “n=1” and check the scalability, i.e. applicability of the PMF to further customers
• Consider any further topics such as additional features, sales partnerships or scalability topics as secondary and concentrate on a single customer

Status Quo

As found in our 2019 portfolio analysis, around 75% of our Industrial Tech businesses fail due to a lack of product-market fit (PMF). This far exceeds the failure rate of 30% for team-related factors and 10% for purely technological reasons. These findings align with observations with 101 US companies reviewed in the same year by CB Insights.

When we ask entrepreneur teams to describe their own PMF, it is surprising that customers are often described only superficially. What’s more, customers’ problems are not captured in a tangible manner. In 2018, Gregor Haidl suggested that customer segments should be presented based on a concrete individual customer example. This was the basis for setting up and implementing the first PMF workshops in 2018. During these workshops, we work out with the founding team the basic success factors: customer -> problem -> solution -> cash customer + cash start-up. In an upcoming article, we will shed light on how such a workshop is conducted in detail.

Even though we emphasize the focus on single customers prior to the workshops, we notice: Many teams still tend toward an abstract and generalized description of the target customers in the first PMF workshop. Obviously, we did not yet manage to communicate our important lessons learned to the founders.

Here’s a short excursion on how PMF is typically addressed these days, and how start-up teams are characterized:

• Based on a customer survey, a PMF canvas is made
• Here all relevant themes are described: customer segment, problem, solution, added value, sales channels, suppliers, etc.
• Unlike the strategy in the 2000s of asking customers after the product was developed, this method prevents founders building something no one is willing to buy 😉
• Additionally, by focusing on “n=1” a persona is naturally captured: “This is Alice. Alice is 35 years old, works as a production manager and faces the problem that she is forced to stop production every 8 weeks for maintenance, etc. …”
  We recommend, however, not to focus on personas, as many start-ups end up stuck in long sales cycles, lose deals, and have a poor ratio of revenue to sales effort.

So, what is going wrong?

First, the generalization resulting from customer interviews to a canvas lead to the loss of a single customer focus. Even a persona is too general at the very beginning and not a tangible description.
Further, sophisticated canvas models lead to a massive distraction for founders from the overarching understanding of the actual customer need. The canvas is thoughtfully filled out and the work gets done, but there is not enough deep questioning on whether the customer situation has really been understood.
Our conclusion using existing canvas:

• Too little focus on customer and problem box
• Too many other boxes, which end up distracting from the first (decisive) step

How do we solve this?

Physics provides us with a toolkit to solve problems. One is to imagine extreme cases to derive key insights. With the goal to sell to as many customers in a target group as possible, looking at a single customer can help us understand more accurately what is happening than reviewing any other number of customers.

• Describe exactly one customer, i.e. rule of “n = 1”
• Focus on essential points: customer -> problem -> solution -> cash customer + cash start-up

What are the resulting advantages?

The main advantage is the founding team can – and must – focus on a single customer. Details are no longer side lined and importantly the work becomes much easier. It is simply “only” about the customer Alice from company XY, who is described in great detail:

• In the best case, this immediately leads to a first turnover through an order by Alice, because a real problem has been solved. And this is our goal.
• In the worst case, we understand why a customer like Alice is not a good fit.

As a positive side effect, the “story” of a single customer is a perfect basis to describe the start-up to investors and supporters.

Is there a guideline for this?

We have significantly simplified the standard canvas and focused on these essentials. Find out more in one of our future articles.

What needs to be considered in parallel?

If start-ups seek venture capital (VC), then they must be able to present a scalable product or service. Otherwise, the start-up is a project business. This can be quite attractive from an entrepreneurial point of view but does not offer a viable venture case. Therefore, start-ups with VC ambitions should critically examine the scalability or transferability of the PMF to further customers already with the first customer (“n=1”). Note that the road to scalability can include project business as a first phase to build a highly scalable product or service business.
An additional consideration when analysing the customer Alice is to view her situation and her specific problem exclusively from her perspective (!) (customer’s problem space). Only then can a start-up evaluate if a solution can be found to Alice’s problem (solution space). As the saying goes: The problem is delivered by the customer, the solution by the start-up. This is also what Fitzpatrick writes in the warmly recommended book “The Mom-Test”.

So, what comes after “n=1”?

After “n=1” comes “n=2”, i.e. focus on the next single customer. Customer Bob should be as similar as possible to customer Alice. This allows us to start at a much higher level than with Alice. Though experience shows that surprisingly often further significant differences are revealed in the process. This is to be expected and affirms how important it is to focus on a single customer. As with Alice, the goal is to convert Bob into a paying customer.
After Alice and Bob there is Carol, Dave, and so on. The idea is to step from one single customer to the next. The sum of these customers then forms the targeted market segment of the start-up, i.e. starting from “n=1”, “n=market segment” is developed.
Over time, this enables you to uncover some common ground between customers, which can then be mapped to a persona or target customer segment to make it easier to identify the next customer.
To the mathematicians among you: This is analogous to proof by induction.😉

Literature:

• [Bla 2006] Blank: The Four Steps to the Epiphany (2006)
• [Kna 2016] Knapp: Sprint, How to solve big problems and test new ideas in just five days (2016)
• [Fit 2016] Fitzpatrick: Der MOM Test (2016 translation, original 2013)
• [Cag 2018] Cagan: Inspired, How to create tech products customers love (2018)
• [Bra 2018] Bradley, Hirt, Smit: Strategy beyond the hockeystick (2018)
• [CBI 2019] CB Insights, The Top 20 Reasons Startups Fail, https://www.cbinsights.com/research/startup-failure-reasons-top/ (6. November 2019, laut Recherche vom 12. February 2021)
• [Hog 2019] Hogrebe, Haidl, Fiebig, Olmes: Product-Market Fit: Der Hauptgrund für das Scheitern von Industrial Tech Startups im HTGF-Portfolio (May 2019)
• [Feh 2019] Fehr, Haidl, Hogrebe, Fiebig, Olmes: Product-Market Fit im Industrial Tech – Der Weg zum Kundenverständnis (July 2019)
• [Hai 2019] Haidl, Fiebig, Hogrebe, Olmes: Woran erkenne ich Product-Market Fit als Industrial Tech Gründer? (September 2019)
• [Hai 2020] Haidl, Fiebig, Hogrebe, Olmes: Wie erkennen Industrial-Tech Gründer den Product-Market Fit? (February 2020)
• [Hog 2020] Hogrebe, Haidl, Kalapis, Fiebig, Olmes: Wie nähere ich mich dem Product-Market Fit an, wenn ich keinen habe? – Der Customer Development Prozess (July 2020)
• [Olm 2021] Nachtwei, J. & Nachtwei, K. (2021). HR Consulting Review, Band 13 (Fokus Startups). VQP. p166-172

Why pivoting is a radically good move and fundamentally important

After more than 600 seed investments, High-Tech Gründerfonds (HTGF) has conducted a study to see how founders can perform a successful pivot. Managing Director Alex von Frankenberg presents the results together with his colleague and Senior Investment Manager Gregor Haidl. In addition, the two experts explain why pivoting is also important for experienced companies – and why they believe “we all make mistakes”.

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Alex, your credo is: “We all make mistakes.” What do you mean by that? Shouldn’t we be looking to not make any mistakes?

Alex: In my opinion, it’s really important to admit that we almost always make mistakes in life. Sometimes because things didn’t turn out as well as we imagined. But sometimes because they turned out better than we first thought. This mindset is absolutely crucial, because it helps us to always be prepared for changes. We can therefore adapt and react accordingly.

Gregor: I’d even go so far as to say that always being right could be fatal. I’m sceptical when companies from our portfolio haven’t made any mistakes. It leads you to ask whether the start-up has taken sufficient risks. Many companies are hesitant and therefore avoid failure – but they also miss out on potential opportunities.

Alex, why are pivots so important?

Alex: A pivot is a radical move – an about-turn in a company’s models and ideas. It can therefore be described as a fundamental realignment. There are many famous examples of how a significant shift in focus can lead to success. YouTube initially started out as an online dating platform.

Shopify, today one of the most successful shopping platforms worldwide, was once a small snowboard shop in Canada. Slack, a tool that has become essential in working environments, began as a gaming platform. Having the mindset that you can always make mistakes and being able to pivot are crucial factors in the success of young start-ups.

Gregor: It’s important that this change of course comes from the founders themselves. Especially at the start, accepting you’re wrong about target customers, the market or a product takes a great deal of willingness and a lot of discipline. Such awareness is more prevalent in the software sector, but it is also important for start-ups active in the fields of high-tech, industrial tech and hardware. A lot of start-ups must first identify their product/market fit, which means that they will always need to pivot.

You really know a thing or two about the subject of product/market fit, Gregor. You’ve even held several workshops on this topic. What have been your most important findings?

The life of a start-up can be roughly divided into two phases: before and after product/market fit. Many start-ups want to scale up quickly, employ as many people as possible, raise funds and set up a large team. But this simply doesn’t make sense before identifying a product/market fit. Our study showed that if a team is too large, this hampers flexibility and slows things down – even when pivoting.

Can the findings of the study also be applied outside the start-up world?

Alex: Absolutely! Being successful in the long term is a continuous process; the markets are always changing. Companies should always reconsider their product/market fit and continue to pivot. This is essential for SMEs, family-run enterprises and corporations – particularly in the era of digitalisation. We therefore work closely with our fund investors to share our knowledge and experience. We see this as a cornerstone of what we do in the partnership we share with our fund investors. Ultimately, there are not many venture capital companies like HTGF that – with over 600 seed investments under its belt – can draw on such a wealth of experience.

We’ve learnt that when pivoting, a team shouldn’t be too big. What are the other findings of the study?

Alex: The younger the team is, the more chance of the pivot succeeding. Young people tend to be more fearless; their lives are shaped by change. This carries over into their professional lives. But experience also plays a role. The more experienced a team is, the more successful a radical change of course will be.

That sounds a bit like the cliché: “We’re looking for a 20-year-old with 30 years of job experience…”

Alex: (laughing) No, this obviously isn’t what we mean. However: It helps to get started while you’re young. To fail with small projects when you’re young doesn’t hurt as much as when you’re older and might be hampered by private pressures.

Gregor: A diverse team can help to achieve a combination of young founders and those with a lot of experience. If I can select my team with people from various backgrounds, then I can tap into a great deal of experience. Diverse teams are more successful when pivoting.

Alex: And this doesn’t just apply to age. Teams with a mixture of male and female founders enjoy more long-term success, studies have shown. Diversity in a successful team also includes people with experience of living and working abroad. There are many examples of this in Silicon Valley – but here in Germany, too.

The study also found that too much success can stop companies from pivoting at the right time.

Alex: I’ve witnessed this phenomenon for years. A start-up has an innovative idea, they implement this idea and generate an acceptable level of sales as a result. But the start-up never really takes off. It therefore continues to do the same thing and is no longer innovative. In the long run, these companies are unable to really establish themselves or are sold below their actual value.

Gregor: It’s interesting to see how even start-ups – with their young company history – continue to fall into the corporate mindset. Some start-ups don’t pivot because they think they’ll be moving away from their core business and that they’re actually quite successful as it is. But even founders should continually ask themselves what their core business is and take a critical look at their own product/market fit.

Alex: A lack of innovation and fear of change is a very human trait – something that affects us all. To move on from something tried-and-tested is a huge step. But our experience shows that taking this step is so important. And this has now been backed up by our study.

Challenges and highlights of 2020 and an outlook for 2021

Overall, 2020 was a successful year for High-Tech Gründerfonds despite the difficult circumstances. And the seed investor just recently signed off on the best exit in its history. Managing Director Alex von Frankenberg takes a look back at the challenges and highlights of this past year and provides an outlook for 2021.

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Alex, congratulations are in order! In summer, your portfolio company MYR received conditional market approval in Europe for the first-ever drug to treat hepatitis D. US pharmaceutical company Gilead is now set to acquire the life sciences company for at least EUR 1.15 billion*. A real success story.

We’re obviously delighted. And particular credit must go to our HTGF Partner Dr. Bernd Goergen. He himself is a hepatitis expert and recognised the potential of MYR at an early stage. This marks our first unicorn exit – a fantastic effort and a real success for all of us here at HTGF. However, as Bernd Goergen continues to stress – quite rightly – this first drug to treat the disease is above all good news for the millions of hepatitis D patients.

How do you look back on 2020 as a whole?

Overall, quite positively. Even though there were some stressful moments along the way. At the start of the pandemic, we had a case of the coronavirus within our team. One of our colleagues tested positive on 12 March. But we were lucky. He’s doing well and nobody else was infected. Like so many companies, we quickly made the switch to working online and remotely. Our team adapted to the transition fantastically.

At the start of the crisis, you announced that the company would continue to invest. Did that work out?

Absolutely. That is our job and we reached all our goals. We made 40 new investments, our portfolio acquired approx. EUR 400 million in follow-up financing and we sold 19 companies. Financially, it was a very successful year for High-Tech Gründerfonds. 

And for your start-ups?

For us, success is defined by the success of our start-ups. We obviously had companies in our portfolio that suffered a great deal. But at the same time, we also had a whole host of companies that did really well. Naturally, those companies focused on anything to do with digitalisation were successful, but so too were other companies from our life sciences portfolio. As MYR has shown, we’re also active in this sector as a seed investor. Before the pandemic, start-ups in the life sciences sector were struggling to obtain follow-up financing. But now all of sudden everyone is starting to see the value and innovation potential that start-ups have to offer in this field. This has also been aided by the success of companies like Biontech and CureVac that launched their IPOs this year.

CureVac went public in New York, not in Europe.

I’ve been saying for a long time that we need more IPOs here in Germany. There have been almost no IPOs here. We had TeamViewer going public last year and Delivery Hero joining the DAX, but these are the exceptions rather than the rule. Instead, we saw Rocket Internet withdraw from the stock exchange in Germany. This, unfortunately, is an aspect that needs to be considered when looking back at 2020. While various experts are expecting more German companies to launch IPOs in 2021, it is not yet clear whether they will launch on the German stock exchange or in another country. In total, we should be seeing 20 to 30 IPOs per year from the German start-up ecosystem – but in reality, it’s not even a handful.

That aside, what did the year 2020 bring for investors?

In March, the entire market was unsure about what was going to happen. But many investors didn’t hold back, contrary to expectation. Quite the opposite, in fact. Our VC colleagues at Atomico confirmed as much in their latest State of European Tech report. It revealed that US$ 41 billion was invested in the European market – a record high despite the crisis and roughly US$ 2.5 billion more than the previous year. This is a really strong sign for the European start-up scene. Nevertheless, we need to take a closer look at the situation in Germany. And the report reveals that around US$ 5.4 billion was invested in start-ups in this country, roughly 20 percent less than in 2019. However, Germany ranks second in terms of investment volume in comparison with other European countries – behind the UK but ahead of France and Sweden.

What’s your view on the government’s financial support for start-ups? Are you happy with developments?

This support was and remains extremely important. At HTGF, we quickly put into place a framework that enables us to leverage these “rescue funds” as part of our follow-up investments. We’ve already seen the investment of tens of millions of euros through this programme. I’m happy with these developments and I think it’s really good news that it is being extended. Originally, it was only set to run until the end of 2020. This has now been extended until 30 June 2021.

Let’s consider June 2021 for a second. What do you think the situation will be for the start-up scene in Germany by then?

I’m optimistic. In spite of the crisis, 2020 was a good year for European start-ups. We shouldn’t overlook the fact that there were also some start-ups and companies that unfortunately didn’t make it due to the coronavirus crisis. It’s also part and parcel of the start-up industry that some young companies simply don’t survive. That’s just the way it is. But the sector’s continued development despite the crisis and the inventiveness it has demonstrated shows that start-ups and innovation as a whole became even more important in 2020. I hope that in June 2021, this trend will have continued and the difficult months will be behind us – thanks in part to vaccinations that were developed by former start-ups such as Biontech.

The coronavirus pandemic has had an accelerating effect on digitalisation. What would be your advice to Germany’s major companies and medium-sized enterprises?

I can only advise all these companies to get on board with the digitalisation drive. At HTGF, we work with many family businesses, medium-sized enterprises and companies as fund investors. Together with us, they always have an eye out for the latest and most innovative developments in the start-up scene. And our exits show that this type of collaboration is worthwhile.

Aside from MYR, can you point to any other examples?

The sale of our portfolio company Emma, for instance, an e-commerce platform for mattresses that has developed into a very successful sleep company over the years. One of our fund investors, Haniel, acquired Emma this year. This was a huge success for the start-up, Haniel and, of course, for us. Because ultimately, whilst we are Europe’s most active seed investor, we also see it as our role to expand the entire ecosystem and the network that connects it. And we’ve been very successful in doing so. 

Gilead Sciences, Inc. (Nasdaq: GILD) and MYR GmbH (MYR) announced that the companies have entered into a definitive agreement pursuant to which Gilead will acquire MYR for approximately €1.15 bn in cash, payable upon closing of the transaction plus a potential future milestone payment of up to €0.3 bn million (both payments subject to customary adjustments).

Closing of the transaction is subject to expiration or termination of the waiting period under the Hart-Scott-Rodino Antitrust Improvements Act and receipt of merger control approvals in certain European jurisdictions.

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How passion and expertise led to a billion-euro exit

As a High-Tech Gründerfonds (HTGF) partner, Dr. Bernd Goergen has just signed the most successful exit in HTGF history. US pharmaceutical company Gilead Sciences is set to acquire German biotech start-up MYR for roughly EUR 1.15 billion. In this interview, he speaks about the fight against Hepatitis D, drug development and his own personal successes.

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Bernd, congratulations are in order! In 2011, HTGF took up a stake in MYR. And now you’re about to close a billion-euro deal. And yet you’ve said that there was an even more important moment in your own personal history with MYR. What was it?

The exit is obviously really great, truly fantastic, and I’m delighted. You might say that the sale is the icing on the cake. But it’s also true that perhaps the nicest moment came on 31 July 2020. It was late at night when I received the news that the drug, which MYR had taken from preclinical development to market launch, had received conditional approval from the European Medicines Agency. I got the champagne bottle out the very next morning.

What type of drug is it?

It’s called Hepcludex ® and it’s the first and only approved drug to treat chronic hepatitis D infections. Around 15 to 20 million people worldwide suffer from this disease and they will now be able to receive treatment.

Investments in life science companies often represent very long-term gambles. Numerous studies need to take place before a drug is approved. A lot can go wrong on the path to an exit. So what convinced you with MYR?

We got to know the founders in 2009. They had a really strong team. On the one hand you had Dr. Alexander Alexandrov, an expert with a great deal of experience and expertise in the field of drug development. On the other hand you had Dr. Jörn Möller, a co-founder who contributed a lot of financial expertise and formed the organisational backbone of the company. The scientific concept and the data that had been published back then were already excellent. So we initially invested EUR 500,000 in 2011 to get the company up on its feet and acquire further capital, which successfully took place.

Isn’t developing these types of drugs quite capital-intensive?

Yes, it costs money, but MYR worked extremely efficiently. For a long time, the company consisted of just the two founders. Even today, it only has around 35 employees. After the exit, I spoke to the original inventor of the active ingredient, Professor Stefan Urban, who is still researching hepatitis viruses at Heidelberg University Hospital.  He compared the progress of MYR with that of a marathon runner who runs barefoot for almost 42 km and who the public only take notice of with surprise when he runs into the stadium for the last lap without any shoes on and wins the race. I think this is a really fitting analogy.

What makes this new drug so special?

Firstly, it’s important to know that people only ever have hepatitis D in combination with hepatitis B. Most investors probably expected that a cure would be found sooner for hepatitis B, which, in theory, would also solve the hepatitis D problem. However, this ignores the fact that there are millions of people who suffer from a chronic hepatitis D infection and who need to be helped. To this day, there is no cure for hepatitis B. I think that the appeal of the market and MYR’s speed of development was simply underestimated. Right from an early stage, however, we were convinced that it would make sense to do something about the smaller indication, hepatitis D, to see whether the drug could also be used to treat hepatitis B.

Why was that?

Hepatitis D is a bit of a scrounger. In order to replicate, it requires the shell of the hepatitis B virus, which it essentially “steals”. Hepcludex ® is what is known as an entry inhibitor. It works by blocking the docking stations on the liver cell surface and thus prevents the spread of the virus from cell to cell. Since the shells are identical, it is, in theory, a highly innovative approach to treating both viruses. However, the biology of the hepatitis B virus is much more complex, which is why a combination of several antiviral strategies is possibly the only path to successful treatment. Hepcludex ® might play an important part in this process, but there is a lack of clinical evidence so far.

You’re a hepatitis expert yourself. Did your expertise help you with the investment?

Definitely. Over the course of my degree and doctoral thesis, as well as my time as a postdoc and seven years of marketing in the field of hepatitis diagnostics, I was able to develop a strong understanding of the illness and establish a network of key thinkers on the issue. I also dealt with the subject in my subsequent time as an investment banker.
However, when it comes to investing, having in-depth technological expertise in a particular field means there’s always a danger that you’ll focus more on the risks and less on the opportunities, because you know about everything that might go wrong. I’ve dedicated the majority of my professional life to this subject and it seems as if we’ve struck the right balance at HTGF. 

So this is also why the day the drug was approved was so important for you?

Like I said, I’m delighted about the exit. But the day the drug was approved was much more important for the people who’ll now receive treatment with the new drug.

Bernd, thank you so much for speaking to us.

* Gilead will acquire MYR for roughly EUR 1.15 billion in cash, which is payable on closing, in addition to a milestone payment of up to EUR 0.3 billion (both payments subject to customary adjustments). The closing of the transaction is subject to the expiration or termination of the waiting period according to the Hart–Scott–Rodino Antitrust Improvement Act and the receipt of merger control approvals in several European countries.

Successful Internationalisation

Markus Kurch joined Crealytics as Chief Operating Officer in 2013. He was given the important task of internationalising the online marketing specialist’s business. Today, Crealytics has offices in New York, London and Berlin. In this interview, Kurch and HTGF Partner Romy Schnelle talk about their successes and setbacks and explain how the analytical approach adopted by the search engine advertising (SEA) specialist might serve as a blueprint for other founders seeking to internationalise their business.

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Romy, HTGF has held a stake in Crealytics since 2009. Had the internationalisation of the business been planned from the start? 

Romy: Right from the start, Crealytics was available as a software solution for search engine advertising in various languages. You could therefore say that internationalisation was in the company’s DNA. In addition, Crealytics had acquired an international client at an early stage in the shape of fashion label Asos. In 2013, we were already managing 15 markets for Asos. And we had a very international team, even back then.

So how did things get started?

Markus: At first, we conducted a thorough analysis of our business and decided that we should primarily concentrate on major clients. This was more in line with our orientation as a company and was also the better business model.

Romy: That’s right, we took a clear decision to focus on targeting big companies as clients. We called it “elephant hunting”.

Markus: And, of course, we studied the international markets very closely in order to decide where we wanted to expand. We contemplated the idea of Brazil and South East Asia, but naturally also considered Europe and the USA. At the same time, we made English the official language of the company. This enabled us to be closer to clients and to attract excellent personnel from around the world. 

In the end, you opted for an office in London. Why not South East Asia or Brazil?

Markus: As mentioned, we were looking to target major clients. So we did our research on the markets of these various countries. Online retailers or brands are crucial clients for us. In many South East Asian countries, however, there is just one dominant player in each country. We would have had to handle the various retailers differently in each country. That would have been a really inefficient way of doing things. And in China, Google – which was our major focus back then – was not particularly well-established, despite there being many providers there. We even sent a colleague to Brazil just to test the waters, but after three months we realised that there aren’t enough major clients there for our business.

And in London, you already had a client in the shape of Asos.

Romy: That’s right. But I just want to emphasise that the move to open up an office in London was not based on a random decision. It was instead the result of an in-depth analysis that Markus just alluded to. This is something that start-ups which go abroad should take to heart. And they have to know that even then, not everything will work out immediately. This was certainly the case at Crealytics.

What happened?

Romy: We didn’t have any luck with the first Chief Sales Officers we hired in London, although they could have been considered top hires in terms of expertise and experience.

Markus: We had top-quality candidates, but unfortunately it didn’t work out on two occasions. We learnt that we definitely need to send someone from Germany to the city where we’re opening an office. That’s why our founder and CEO Andreas Reiffen upped sticks to New York with his family.

In 2014, you set up an office London; in 2016 one in New York. What was your approach there?

Markus: I’d studied in the USA and also written my dissertation about German companies in the USA in cooperation with the German Chambers of Commerce Abroad (AHK). The AHK was therefore a good first point of contact. It also runs a five-day programme (STEP NYC) for start-ups. Through this programme I was able to make the relevant contacts and meet headhunters. We also took part in the German Accelerator programme. However, our CEO didn’t yet have a visa and therefore couldn’t be there for the official start of the programme in July.

So what did you do?

Markus: We sent an intern who’d been with us for a month. He was subsequently going to work full-time for us for four years – and now he’s just set up his own company. And we hired a Chief Sales Officer from New York before our official launch in the USA. Neither of them knew the company particularly well at that stage and yet they had to introduce Crealytics on their first day of the German Accelerator. Our CSO would later jokingly say: “I did what every red blooded American would have done, I made it all up.”

And did things start to pick up in the USA from that point onwards?

Romy: To be honest with you, the first two years in the USA were a bit quiet. Things had been different in London, despite the initial recruitment problems. In this kind of situation, it really helped that Crealytics kept us investors in the loop and in the end, they delivered. Trust is key in these situations.

Markus: You should also know that it took us six to nine months before we secured a client. What’s more, nobody had heard of us in the USA. I recall that we had the chance to pitch to Staples. At that point, we’d perhaps only been active in the USA for six months. I’m still convinced that Staples knew back then we were the best provider for them. But, of course, we were the riskiest option. We were just a wild start-up from Germany up against other established providers. So that didn’t work out at the first attempt. Today, however, Staples is one of our biggest clients.

So the message here is that internationalisation requires time, patience and perseverance?

Romy: Yes, in addition to reliability and the ability to build relations and look after clients. These are the basics in life really. But they’re really important ingredients for the internationalisation of a business. And don’t give up on one market too quickly to go looking for the next one.

Today, Crealytics generates one third of its sales in the UK, one third in the USA and the rest in Europe. So the internationalisation drive was a success. How did your collaboration contribute to this success?

Romy: Good cooperation is important. This isn’t just the case for internationalisation. When we decide to invest in a start-up, we focus on a specific target to work towards. There’s no one perfect strategy, meaning it’s important to exchange ideas. What’s generally important, however – and this is the foundation of our cooperation with Crealytics – is to always adopt an approach of mutual respect and appreciation. Especially in challenging times.

Markus: That’s right. We were always able to speak openly with HTGF, particularly when things weren’t going well. It’s not about just communicating when things are going well; you have to have an honest discussion about future plans and together analyse what steps to take next. This is something that has been a great help – even beyond our internationalisation drive.

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Markus and Romy’s five tips for all start-ups looking to internationalise their business 

1. Ask yourselves why you really want to internationalise your business and whether this is something you can implement on an organisational level. Define clear goals and make sure to time things right.  
2. Analyse your target markets very closely and consider which country promises truly relevant business for your company. Don’t aim to do too much at once. It often makes more sense to set up in just one other important market rather than opening up five offices at once.  
3. Keep in close contact with your office abroad, for instance by getting an experienced member of your management team to take up a permanent position in the new office.
4. Make sure to take on the right people where your offices are located. Are they a good match for your company and the culture of your business? Are you launching with a good salesperson or a partner who will sell your products? 
5. Make use of suitable programmes that will support you in internationalising your business. Invest time in setting up a local network, which you will then need to look after. And don’t forget that for all your perseverance, you’ll also need to show a bit of patience.  

Pivoting to become the market leader

In this interview, Ralf Rottmann, Managing Director and founder of grandcentrix, and HTGF Partner Markus Kreßmann talk about how grandcentrix made a radical departure from its original business idea to become a leading IoT solutions provider – and why HTGF was the only conceivable investor for the team of founders.

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Markus, HTGF was the sole investor in grandcentrix. The exit took place just under a year ago, in November 2019, when Vodafone completed a takeover of the company, which has since gone on to establish itself as the leading IoT solutions provider in Germany. Is this the kind of success story that investors dream of?

Markus: Absolutely. Not just on a business level, but also a personal one. Ralf and I have become great friends. We’ve gone through crises and challenges together, getting to know each other really well in the process.

Ralf: I couldn’t agree more. And I can say right from the off that if we’d have had a different investor to High-Tech Gründerfonds, things would have gone differently. And we, the founders, would have probably suffered at least one burnout along the way. But our partnership was luckily a really good fit and HTGF was a real tower of strength for us.

How did things get started?

Ralf: grandcentrix originally consisted of myself and three other founders. When we came up with our business idea, the smartphone had just become programmable. And although it might be hard to believe now, back then it was unclear whether the smartphone would establish itself on the market. Only 30,000 smartphones had been sold in Germany at the time and surfing the internet on your phone was really expensive. Nevertheless, we had faith in its development and took a really strategic approach to the market.

What was your idea?

Ralf: We wanted to develop a platform that would enable larger SMEs in particular to take their solutions and business processes to mobile internet in the form of apps. In short, we wanted to develop an SaaS platform. We came up with a business plan and presented it to investors.

Markus: Which luckily included us, since you spoke to a lot of investors. We were able to win out in the end. We really made an effort to make an impression, as the team of founders was more than promising, very experienced and the pitch deck was extremely professional. It would not be an exaggeration to say that we – the investors – pitched to you. We then closed a financing deal in March 2010.

Sounds like you got off to a good start. At what point did the crises you mentioned earlier start looming?

Ralf: In terms of business, things were running extremely well from the offset. We secured major, high-profile clients really quickly, particularly from the media and publishing industries. But these contracts were all about IT project business. So we ended up slipping into the service sector.

Although you actually wanted to develop an SaaS platform?

Ralf: Exactly. But instead of pursuing this development, we ended up taking on an increasing number of orders, hiring more developers and sales were rising. At the same time, we were acutely aware of the fact that this was kind of taking us in the wrong direction.

How did HTGF react to this change of course so soon after providing the financing?

Markus: Both we and the team at grandcentrix were, of course, delighted by the high sales in the first two years. But the costs were also increasing enormously, being spent on more personnel, more office space, etc. And none of this had been part of the business plan in which we’d invested. So we spoke to the founders, discussed a great deal and continuously challenged this development. 

Ralf: It was a difficult time. We didn’t want to be a service provider, and IT project business can be extremely tedious. At the same time, an increasing number of start-ups had been set up in the USA with the same original idea as us and who were working with whole different levels of funding, as is typical for the market there. Internally, there was a great deal of pressure. But HTGF luckily gave us the time we needed. I dread to think what would have happened if we’d have had a VC that had pushed us to pursue Series A funding after just one month.

Where did things go from there?

Ralf: Myself and Martin Willow, one of our co-founders, took the decision in 2015 to make the pivot official and exclusively concentrate on the service sector. We also wanted to solely focus on industry clients. The decision was a tough one and led to disagreements between us founders. Things went so far that a long-term friend and co-founder ended up dropping out in what was a very painful process and we haven’t spoken since.

How did you react to this decision at HTGF? By this point it had ultimately become clear that you wouldn’t be getting the product you’d originally invested in.

Markus: That’s right. But this wasn’t a decision that was taken overnight; it was the result of years of discussion. We could see that the founders had tried everything and made sacrifices. And they again presented a very analytical concept for the pivot.

What did it entail?

Markus: The term “IoT” wasn’t in use back then, but we were in the early stages of such developments. You could see that an increasing number of industry clients would have to make use of networking technologies and the products were becoming more intelligent. And grandcentrix had the knowledge and experience to support companies across the entire value chain – from the development of electronics to a secure cloud service and their display on smart devices. This was what convinced us.

And did the plan work out right away?

Ralf: As soon as we reached this decision internally, we continued to grow very quickly and profitably. We were able to secure key corporations and industrial SMEs as clients within a short space of time. And with the support of HTGF, we were then able to set up a very good management team. We really started to have fun from that point onwards.

So how did it come to the exit?

Ralf: We weren’t actively looking for a buyer at the time, as things were working really well for us. But we were always open to the idea and had already spoken to Markus about it. Our first contact with Vodafone – which was on the lookout for an IoT service provider – was also set up by HTGF, who guided and supported us through the entire process.

And you’re still in contact one year later?

Ralf: Of course. We recently met up with Markus again because we want to become more involved in the ideas of founders as an angel investor. Ultimately, we know just how important it is to have someone believe in you.

Markus: And that’s what it’s all about for us: bringing successful founders and up-and-comers together so that they can expand their knowledge. This is the key to a successful and sustainable start-up ecosystem.

Thank you for your time!

“HTGF plays a valuable role that goes beyond seed financing”

High-Tech Gründerfonds (HTGF) is celebrating its 15-year anniversary. Professor Dieter Jahn, who spent many years heading up BASF Group’s Science Relations and Innovation Management competence centre, was one of the initiators and driving forces behind the seed-stage investor back in 2005. Since day one, Jahn has been at HTGF’s side as a member of its advisory board. In an interview, he talks about how it all began, underlines HTGF’s importance as a driver of innovation, and explains how HTGF can provide important stimulus both now and in the future.

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Professor Jahn, you’ve been a member of HTGF’s advisory board for 15 years now, and prior to that, you were part of the working group that came up with the idea of HTGF so to speak. Tell me how the idea of creating a seed investor as a public-private partnership was born?

At that time, we had three developments coming together. First, there was the initiative launched by Gerhard Schröder, who was chancellor at the time, to do more to promote innovation in Germany. BASF, the company I worked for, was involved. I can remember being in a meeting in the chancellor’s office and noting how in Germany we didn’t have enough venture capital for start-ups. It’s a topic that I ended up discussing with an official from the German ministry for economic affairs after the meeting.

So the ministry for economic affairs was already exploring how it could boost innovation with the help of venture capital?

That’s right. And that was the second factor. The third point was that at BASF we had seen how, like many other major corporations, we were unable to work effectively on our own when it came to early-stage financing. As such, we were interested in collaboration. So these three factors coming together provided a window of opportunity – that was highly fortunate.

You say that corporations are unable to work effectively on their own – can you elaborate?

Large companies have very limited innovation capabilities, especially when they’re successful, as there’s no reason to change anything. And even when the need to make changes because crystal clear, there are all of sudden thousands of reasons why they are not relevant. Electric mobility being a case in point.

Can start-ups help with innovation?

Yes, they can, because start-ups face different conditions to major corporations when working on innovations. Start-ups in the early stage need to have a very broad focus, however. It’s a bit like a funnel. At the start there are lots of possibilities. And then it gets narrower and narrower until ultimately an innovative company is born. The broad range of investments that companies would technically have to make at the start is just not something they can manage on their own. That’s why we were looking for partners at the outset, and thankfully we found some.

Today we have lots of private-sector investors who have invested in HTGF’s funds.

I’ve been very pleased to see HTGF welcoming an increasing number of investors on board over the years. That’s testament to the success it has achieved. There are now many examples of small start-ups leveraging the financial strength of large companies to become successful.

What benefits do HTGF’s fund investors enjoy?

HTGF plays a valuable role that goes beyond seed financing, also playing a key part in improving our economy’s ability to innovate. And that’s important in my opinion. That’s why HTGF’s biggest investor – the public sector in the form of the ministry for economic affairs or KfW bank – benefit a great deal. The German state gets its money back, and may even make a profit. I think that’s quite special.

… because HTGF was set up as a venture capital fund?

Precisely. And herein lies the biggest difference with the conventional funding instruments at the state’s disposal. That obviously makes HTGF a perfect instrument for innovation.

How does HTGF benefit its fund investors from the private sector?

I’d mention three things. Firstly, there’s the “window on technology” aspect. For a company to be innovative, it need to constantly monitor the market. Start-ups provide an important source of new technological developments and business models. HTGF has made almost 600 investments in the past 15 years, giving rise to valuable contacts and in-depth knowledge on innovation and technological developments that our fund investors can access if they so wish. And on top of that there’s the networking across various industries. Our fund investors are now very diverse and are active in different sectors. Personally, I’ve always enjoyed learning from other industries, as I already know my own industry, it’s my bread and butter. That’s why I think HTGF provides companies with a great opportunity to learn from other industries and drive innovation. And the third point is corporations gaining access to the start-up culture. Although the larger company will not be able to replicate this culture entirely, it can indeed stimulate new ways of thinking.

In an interview 12 years ago, you said: “With large successful companies there’s a danger that they’ll take their foot off the gas. They need a thorn in their side.” Are start-ups still that thorn in their side?

Yes, they are, but back then I wished that the thorn was embedded somewhat deeper than it is today. Large companies have a very tough outer shell, and they can’t be fundamentally revolutionized by start-ups. That’s because if the thorn is just too painful, it’ll simply be removed. But having that outside thorn is important.

What are your three highlights from 15 years of HTGF?

Gaining so many business investors is certainly one of them. And I’m also impressed by the way HTGF has developed since starting out. At the beginning there was just a small team with a couple of Managing Directors. It then grew into the organisation that we have today. Structural change was an important step that the team handled exceptionally well. On top of that, the team has managed to create an ecosystem. And with platforms like the Family Day, it’s also attracted global attention. It’s something we weren’t even thinking about at the start and represents a remarkable leap.

You’ve highlighted the networking focus, the start-ups, the team and the ecosystem. What do you expect the next 15 years to bring?

One of HTGF’s important tasks moving forward will be to ensure that it has a broad footing because our activities serve the wider economy. That’s an important function, and that’s why HTGF will continue to make risky investments in future. Established companies are risk-adverse. That’s not a criticism, it’s simply a matter of fact. HTGF’s job is to offset that, and to achieve this, it needs to remain agile above all else.

How so?

We can’t overload HTGF with too many regulations and we need to consistently face up to new challenges. Take the coronavirus crisis, for instance. HTGF has been functioning very well, remaining completely active and operational and continuing to invest. That’s a fantastic achievement. HTGF is playing a significantly more important role now during the crisis than a year ago when capital was in plentiful supply. It will continue to make a key contribution to advancing Germany’s innovation capabilities even further – both now and in the future.

15 years HTGF: 15 facts & figures

Our operational business started on September 1st, 15 years ago. To celebrate this, over the past 15 days we have shared facts, figures and little insights about the last few years via social media. To kick off, we celebrated our 591 closings to date and close the 15 days today with 114 exits in 15 years! The exciting postings of the last 15 days are summarized here in this graphic. Have fun discovering fun facts!

The facts and figures presented are based on the reporting date. Reference date: 31 August 2020.

“HTGF plays a valuable role that goes beyond seed financing”

Professor Dieter Jahn, who spent many years heading up BASF Group’s Science Relations and Innovation Management competence centre, was one of the initiators and driving forces behind High-Tech Gründerfonds back in 2005. Since day one, Jahn has been at HTGF’s side as a member of its advisory board. In an interview, he talks about how it all began, underlines HTGF’s importance as a driver of innovation, and explains how HTGF can provide important stimulus both now and in the future.

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Professor Jahn, you’ve been a member of HTGF’s advisory board for more than 15 years now, and prior to that, you were part of the working group that came up with the idea of HTGF so to speak. Tell me how the idea of creating a seed investor as a public-private partnership was born?

At that time, we had three developments coming together. First, there was the initiative launched by Gerhard Schröder, who was chancellor at the time, to do more to promote innovation in Germany. BASF, the company I worked for, was involved. I can remember being in a meeting in the chancellor’s office and noting how in Germany we didn’t have enough venture capital for start-ups. It’s a topic that I ended up discussing with an official from the German ministry for economic affairs after the meeting.

So the ministry for economic affairs was already exploring how it could boost innovation with the help of venture capital?

That’s right. And that was the second factor. The third point was that at BASF we had seen how, like many other major corporations, we were unable to work effectively on our own when it came to early-stage financing. As such, we were interested in collaboration. So these three factors coming together provided a window of opportunity – that was highly fortunate.

You say that corporations are unable to work effectively on their own – can you elaborate?

Large companies have very limited innovation capabilities, especially when they’re successful, as there’s no reason to change anything. And even when the need to make changes because crystal clear, there are all of sudden thousands of reasons why they are not relevant. Electric mobility being a case in point.

Can start-ups help with innovation?

Yes, they can, because start-ups face different conditions to major corporations when working on innovations. Start-ups in the early stage need to have a very broad focus, however. It’s a bit like a funnel. At the start there are lots of possibilities. And then it gets narrower and narrower until ultimately an innovative company is born. The broad range of investments that companies would technically have to make at the start is just not something they can manage on their own. That’s why we were looking for partners at the outset, and thankfully we found some.

Today we have lots of private-sector investors who have invested in HTGF’s funds.

I’ve been very pleased to see HTGF welcoming an increasing number of investors on board over the years. That’s testament to the success it has achieved. There are now many examples of small start-ups leveraging the financial strength of large companies to become successful.

What benefits do HTGF’s fund investors enjoy?

HTGF plays a valuable role that goes beyond seed financing, also playing a key part in improving our economy’s ability to innovate. And that’s important in my opinion. That’s why HTGF’s biggest investor – the public sector in the form of the ministry for economic affairs or KfW bank – benefit a great deal. The German state gets its money back, and may even make a profit. I think that’s quite special.

… because HTGF was set up as a venture capital fund?

Precisely. And herein lies the biggest difference with the conventional funding instruments at the state’s disposal. That obviously makes HTGF a perfect instrument for innovation.

How does HTGF benefit its fund investors from the private sector?

I’d mention three things. Firstly, there’s the “window on technology” aspect. For a company to be innovative, it need to constantly monitor the market. Start-ups provide an important source of new technological developments and business models. HTGF has made more than 600 investments, giving rise to valuable contacts and in-depth knowledge on innovation and technological developments that our fund investors can access if they so wish. And on top of that there’s the networking across various industries. Our fund investors are now very diverse and are active in different sectors. Personally, I’ve always enjoyed learning from other industries, as I already know my own industry, it’s my bread and butter. That’s why I think HTGF provides companies with a great opportunity to learn from other industries and drive innovation. And the third point is corporations gaining access to the start-up culture. Although the larger company will not be able to replicate this culture entirely, it can indeed stimulate new ways of thinking.

In an interview end of the 2000s, you said: “With large successful companies there’s a danger that they’ll take their foot off the gas. They need a thorn in their side.” Are start-ups still that thorn in their side?

Yes, they are, but back then I wished that the thorn was embedded somewhat deeper than it is today. Large companies have a very tough outer shell, and they can’t be fundamentally revolutionized by start-ups. That’s because if the thorn is just too painful, it’ll simply be removed. But having that outside thorn is important.

What are your three highlights at HTGF so far?

Gaining so many business investors is certainly one of them. And I’m also impressed by the way HTGF has developed since starting out. At the beginning there was just a small team with a couple of Managing Directors. It then grew into the organisation that we have today. Structural change was an important step that the team handled exceptionally well. On top of that, the team has managed to create an ecosystem. And with platforms like the Family Day, it’s also attracted global attention. It’s something we weren’t even thinking about at the start and represents a remarkable leap.

You’ve highlighted the networking focus, the start-ups, the team and the ecosystem.

One of HTGF’s important tasks moving forward will be to ensure that it has a broad footing because our activities serve the wider economy. That’s an important function, and that’s why HTGF will continue to make risky investments in future. Established companies are risk-adverse. That’s not a criticism, it’s simply a matter of fact. HTGF’s job is to offset that, and to achieve this, it needs to remain agile above all else.

How so?

We can’t overload HTGF with too many regulations and we need to consistently face up to new challenges. Take the coronavirus crisis, for instance. HTGF has been functioning very well, remaining completely active and operational and continuing to invest. That’s a fantastic achievement. HTGF is playing a significantly more important role during the crisis than it did shortly before when capital was in plentiful supply. It will continue to make a key contribution to advancing Germany’s innovation capabilities even further – both now and in the future.