The added value of collaborations
How can established companies and start-ups develop side by side? The secret is cooperation, to which HTGF attaches particular importance. Alex von Frankenberg, Managing Director of HTGF, picks up on a number of successful examples from the roughly 200 collaborations between portfolio companies and fund investors to show why in some cases one plus one equals three.
Alex von Frankenberg, what would you say are HTGF’s main tasks?
HTGF is a seed investor. And as this description suggests, we are often the first investor in a start-up. While we may sometimes be the sole investor, we’re also really happy to have other investors on board, too. When making these investments, we ensure that the start-up is well positioned after the seed round. For instance, we make sure that the intellectual property is fully retained by the company and that reporting processes or an advisory board are established. The most important goal in the seed phase is to secure a Series A funding round. However, often there is very little time to achieve this aim – usually just 12 to 18 months. We provide assistance with strategic issues such as product/market fit, offer support with recruitment through our network of contacts and act as a catalyst for fundraising, for example by opening doors to follow-on investors.
HTGF is often seen as an interface between portfolio companies and fund investors. Can you elaborate on this role?
It is important to understand that our private investors are not solely interested in returns. This is obviously one of the aspects they consider, but they primarily want to secure tangible added value for their companies.
And what would that be?
We work closely with investors beyond just the fund investment in itself. We are firmly committed to providing our investors with access to the knowledge, experience and network that we have built up over the past 16 years. We help to maintain collaborations between fund investors and our portfolio companies. We want to strengthen our fund investors’ innovation capabilities, inspire them, connect them, and of course open the door to co-investments or acquisitions.
You just touched on the subject of cooperation. What form does this take?
There are many different types of collaboration. For example there’s R&D cooperation, where research is conducted on a collaborative basis. Then there are sales collaborations where a large company uses its power to market the product of a young company on a global scale. Or the two companies make joint purchases and take advantage of the better conditions of the company with the greater sway. But it can also go in an entirely different direction. For instance, our fitness company eGym is helping our fund investors Fraunhofer, EWE and DHL keep their staff fit and healthy.
Looking back at the previous funds, can you give us any examples of particularly successful collaborations?
There are so many. We’ve helped establish roughly 200 collaborations in total. Off the top of my head, I would have to think of Juniqe, an online shop for art enthusiasts that we’ve been involved with since 2014. Juniqe is collaborating closely with our investor Cewe. Europe’s largest photo service provider produces prints for Juniqe, not only generating sales for the company but also helping it to learn from the approach and spirit of the start-up. Elsewhere, our fund investor Bosch and the Bonn-based start-up Code Intelligence have joined forces to help make software safer in the automobile sector. Another example that springs to mind is the Swiss start-up AMAL Therapeutics, which we financed together with our fund investor Boehringer Ingelheim. Boehringer then bought the company for several hundred million euros.
So one plus one makes three in a way?
Exactly. In the best-case scenario, that innovative spark gets passed on. The small company comes up with a new technology or business model, and the large company learns from it without having to compete with the portfolio company. The investors gain fresh impetus and insight to help drive their cultural transformation and digitalisation while also developing or adding to their core business in a targeted manner. This worked extremely well in the case of Solandeo, for instance. The Berlin-based tech firm specialises in smart metering solutions and intelligent forecast and analysis products. For a large energy company such as EWE AG, this start-up was electric – in the truest sense of the word. EWE AG took up a stake in Solandeo and now both companies are working together to help make the energy transition a success.
And what role does HTGF play in this process? Are you a kind of “matchmaker” or “date doctor”?
We bring both parties together and place great value on dialogue. Each fund investor is looked after by two experienced investment managers who serve as central contact points. Their job is to find companies in the deal flow, portfolio or indeed on the market that match the search criteria of the fund investors. This often takes place at our regularly held events such as the HTGF Family Day or the HTGF Partnering Days. In many cases, the two parties would never have found each other without our help. Start-ups and larger companies often speak different languages. It can therefore be helpful when you have someone to act as an “interpreter”.
In some instances, neither side needs an interpreter. The two parties might be such a good match that the investor fully acquires the start-up there and then.
Yes, this has happened on eleven occasions in the past – most recently with JeNaCell. This was a biotech company that had developed a nature-identical material to treat wounds and burns in the field of dermatology and medical technology. In 2012, HTGF became one of the first seed investors in the company. Specialty chemicals company Evonik invested in JeNaCell in 2015 through its venture capital arm and is now integrating the firm’s portfolio into its own healthcare business. This is a great example of how we also help fund investors and start-ups to work together in the long term.
If I’ve understood it correctly, a hallmark of these collaborations is that both companies learn from each other.
This simply has to be the case, as our efforts should clearly lead to a win–win situation. The large company knows a thing or two – and the same applies to the smaller company. The two companies establish a dialogue and share their expertise with each other. One plus one often doesn’t make three, but five – we see quite significant synergies on a regular basis. What’s important to remember is that collaborations are only successful in the long run if both parties benefit. Again I’d stress here that while it is of course important that the High-Tech Gründerfonds portfolio shows good development, it is just as important that we support our fund investors in achieving their goals. We’re enjoying success on both these fronts.
Has the start-up scene in Germany changed at all over the last decade?
I think so. We’re seeing a lot of experienced founders reappearing on the scene. This never really happened before. The whole scene is also much more mature. The young business leaders are fitter, better and more professional. They know exactly what they want to do. And I’m also especially pleased to see that many entrepreneurs are more ambitious and setting the bar high.
And High-Tech Gründerfonds helps them to achieve their objectives?
Absolutely. We understand the special challenges that entrepreneurs face and understand their needs. In addition to flexible financing, we offer start-ups crucial benefits that are tailored to their individual situations. We primarily act as a strategic springboard for both our portfolio companies and our fund investors. For our fund investors, we are the platform that offers access to start-ups and, in turn, the innovations of tomorrow – essentially we offer them a glimpse into the future.