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.
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.