2018 was a Record year for VC investments in German startups, and Munich startups also have a large piece of the pie It's high time, then, to take a closer look at Munich's investor scene, with its VCs and business angels. Founders who are just starting out or new to Munich will find an overview here.
In Bavaria, more than 200 companies raised €1.4 billion in venture capital in 2018, according to figures from the Federal Association of German Private Equity and Venture Capital (BfD). Bavaria remains the leader in terms of the number of companies financed, with over 230. A study by the consulting firm EY also ranks Munich among the top locations for raising venture capital.
The first question that arises regarding the Munich investor scene is: Do venture capital (VC) firms and business angels really have to be located in Munich for the local ecosystem to benefit? The answer is: No, of course not. Because strong startups always find interested investors. Barbod Namini, Partner at Holtzbrinck Ventures, says:
“Professional investors take the city more than serious and strong entrepreneurs have consistently been able to attract both local and international top tier investors.”
And the figures from the Bonn-based High-Tech Gründerfonds (HTGF) for Bavaria and Munich also show that an investor doesn't have to be based in Munich to find local startups exciting. To date, a total of over €617 million has been invested in the Bavarian HTGF portfolio in a total of 92 companies based in the state capital (This may also include funds provided by other donors such as Bavaria Capital have invested).
A cluster of local investors is therefore not absolutely necessary for a startup. However, a well-functioning ecosystem, in addition to a close network of startups, corporates, politicians, talent, researchers, know-how providers, and many other players, also features a network of investors.
Munich has a very diverse investor scene
What does the investor scene in Munich look like now? In Munich and the surrounding area, our Map Currently, there are over 40 entries listed with the label “Investor.” From A to Acton Capital Partners to X like XAnge. These include larger VCs like Acton, Holtzbrinck, and Target, which have their headquarters here, or Carsten Maschmeyer's investment firm, Alstin. Then there are companies like Speedinvest from Austria, Ventech from France or Earlybird, which has a branch in Munich. Other VCs such as Kurma Partners from France, Occident from Switzerland or the investor network Prime Crowd recently opened their own offices in Munich.
Investors with a special focus
Munich is also well-equipped with investors who have a special focus. These include, for example, Ananda Ventures and BonVenturethat focus on social enterprises, or AM Ventures for 3D printing-related companies.
Another special feature are the investment companies of large companies such as BMW i Ventures, the Fluxunit Osram or SevenVentures, the investment arm of the ProSiebenSat.1 media group. In addition, there are countless business angels, who invest in a wide variety of industries and technologies, depending on their own backgrounds. The exact number of Munich-based angels, however, will likely remain a secret. More on that later.
Sebastian Wossagk, Managing Partner at the international venture capital firm Acton, assesses the local scene as follows:
"Naturally, when it comes to startups and VC in Germany, people always look to Berlin first. One reason for this is certainly that the capital and its players are a bit louder and more colorful. However, I don't believe that this means that local investors are underestimated."
For Wossagk, Munich is also one of Europe's most important tech hubs. The proximity to industry and renowned universities such as the Technical University of Munich and the Ludwig-Maximilians University of Munich ensures a high level of education and fosters many young, motivated entrepreneurs, according to the investor. He further explains:
"In addition, some of the most experienced VCs in Germany are based here. Founders quickly recognize this and are very consciously looking for capital in Munich. In our view, the location offers decisive advantages – for example, a little distance from the capital sometimes doesn't hurt when it comes to distinguishing between substance and hype."
Financing networks provide orientation
Financing networks that act as intermediaries are particularly helpful. The best-known local player in this area is Baystartup, whose investor network includes around 300 private and over 100 institutional investors. In the fiscal year In 2018, Baystartup brokered 62.7 million euros Seed and growth capital in a total of 50 financing rounds. Last year, the network also welcomed around 40 new business angels into its network.
Another helpful contact point is Munich Network, which connects startups not only with SMEs and industry, but also with investors. In addition, the Alpha Circle Startups with its medium-sized network – among the approximately 5,000 family businesses are also investors. There are also various networks with a sector focus: The Bioangels have a matchmaking format specifically for the Life Sciences and Healthtech sector, which ESA Business Incubation Center has good contacts with investors in the aerospace sector. There are also several smaller intermediaries.
Also worth mentioning here are the government funding programs for startups. It is also worth talking to Bavaria Capital, which, as a venture capital company of the Free State of Bavaria, supports innovative high-tech companies in Bavaria with equity capital. Bayern Kapital is a subsidiary of the LfA Förderbank Bayern and, together with the High-Tech Gründerfonds, offers advisory days. These appointments are coordinated via Baystartup. Another important player is the Bayerische Beteiligungsgesellschaft (BayBG), which, according to its own statements, has invested in around 30 percent of all local startups (more information how startups get capital through BayBG or. what distinguishes BayBG from other private VCs).
Business Angels in Munich
Back to the business angels. It is precisely in this area that the Business Angels Network Germany, or BAND for short, to ensure greater transparency, exchange, and cooperation across the region. The "MunichAngels," in turn, are an investor group of Munich business angels who invite startups from a wide range of sectors to pitch at regular dinners. There are also lists like the one on the Angel List blog. The website attempts to provide a regional overview (However, the blog only achieves this realistically to a limited extent, as this delicacy shows).
Business angel Florian Huber shares his insights. He explains that many years ago, as the founder of United Domains and Neubau Kompass, he was looking for capital and that the contact details of the few active business angels were passed on secretly. There was no startup community at the time. Fortunately, this has changed in recent years. For Huber, Munich is the most dynamic startup location in Germany after Berlin, with a large number of active business angels and VCs. However, the question of transparency, according to Florian Huber, which was named ‘Business Angel of the Year' was elected, furthermore:
“The startup financing market – especially in the seed phase – is very opaque: investors and startups usually find each other through personal networks."
For business angels, too, less 'black box' and more transparency would be important. Therefore, Huber has done a lot to improve the situation, in his view. He explains:
"As As one of the few angels in Germany, I list my own investments — including exits and failures — transparently on my Website. I also have www.chain.de a directory of all German blockchain startups and blockchain investors has been created to ensure greater market transparency."
A first step that, if more angels follow this example, could bring more clarity.
Intransparent — for all involved
Overall, the topic of financing is opaque for everyone involved. Just as it's often unclear for startups who in the investor community is currently looking for investment opportunities, startups are equally unlikely to announce to the world that they urgently need money.
Therefore, startups should invest time in good investor relationships right from the start. This includes getting to know the industry's practices, maintaining existing contacts with suitable VC investors, and understanding the financing round process. Initial contact can be made, for example, by attending the right events or by Pitches.
Munich events with a high investor density
Especially for Munich and startups in need of financing, we would like to highlight some events with an unbeatable high density of investors. Cashwalk is a biannual event organized by the LMU EC — if you are a startup looking for funding and investors, you shouldn't miss this pitch event.
Also exciting is the Munich Investment Forum, which is organized by Fraunhofer Venture as well as LMU EC, SCE and UnternehmerTUM and takes place once a year. And for those who want to get in regular contact with VCs, the regular meetings of the 'Venture Capital Club' something. Non-members can also register here.
Worth its weight in gold: A personal introduction to a VC
For Barbod Namini of Holtzbrinck Ventures, it's also important to get to know strong startups as early as possible. In addition to data-driven sourcing, he relies on the many conferences and tech meetups that have sprung up across Europe over the past few years. However, leads from his own network remain his most important source, as they probably are for all other investors.
Therefore, personal introductions to a VC prove to be the best path to (financing) success for startups. These introductions can be made through startup friends. However, personal contacts through accelerators or participation in pitches and competitions such as the Munich Business Plan Competition are much more helpful. A startup should avoid blind inquiries from investors, so Carsten Rudolph, Managing Director of Baystartup:
"I can't recommend any startup approaching any VC blindly. The scene relies heavily on personal references. So try to reach out to VCs through a personal recommendation! This should be the preferred route for a startup."
Transparency in all matters?
Rudolph also advises every company to carefully consider who they trust to discuss financing issues or details about their business idea. Boris Hardi, founder of Capmatcher and business angel, clearly states this aspect:
“Transparency in fundraising is only good if you, as a startup, have control over who receives which information.”
However, Hardi also believes that transparency is important for the general exchange between the actors:
"When it comes to the industry and the community, transparency is certainly good and important. Startups can exchange ideas and even meet informally with VCs and business angels."
We aim to provide an overview of the local investor scene with this article, which serves as an introduction to the topic. Those who want to delve deeper can find more information in our Map an overview of the registered investors (also as a list). In our many interviews give investors like Munich Venture Partners, Senovo or Tiburon willingly provide insights into their working methods and explain what is important to them, how negotiations proceed and on what Events they can be found.
