An exciting topic: matching startups that need capital with investors who want to invest in a good idea. This is exactly where the concept of nextFATbusiness Munich Startup spoke with Sven Schielke, one of the initiators, about the idea behind nextFATbusiness and the Munich investor scene in general.
How did the idea for nextFATbusiness come about?
While implementing my own projects, I first came into contact with venture capitalists, business plans, and the whole spirit of founding teams. When I then watched "Dragons' Den," the parent show of "The Lion's Den," in London, I was inspired by the idea behind it and thought that something like this should actually be done in Germany, in a modified form: Why not just give people with a good idea 10,000 euros and say: “Now just start and no more excuses.“ Perhaps a simple idea, admittedly, but those were the first beginnings.
I then founded nextFATbusiness. Initially, nextFATbusiness was a website where startups could present themselves. They had the opportunity to post their business plans and present themselves and their ideas. To advance to the negotiation rounds and thus also to access capital, the companies had to gather as many votes as possible via voting buttons. The crowd concept played an important role here. However, two factors led us to revise the nextFATbusiness concept: Firstly, the crowd was obviously not always correct in its assessment, especially when the overall number of votes was insignificant. Secondly, the platform was increasingly showing less serious projects. This was sometimes a real waste of time. Therefore, we decided to set up nextFATbusiness as an offline project. And this change of direction has paid off, as we have now already held our 11th grill session (Editor's note: pitches) in Munich.
Startups can apply to participate in your barbecue events free of charge. What criteria do you use to select participants?
We're interested in startups that aren't too niche, but whose idea isn't just about the 100th delivery service. We're particularly interested in startups that are discovering trends, such as blockchain, and whose idea has the potential to make a splash in the market. Furthermore, the capital they're seeking shouldn't exceed €500,000–€600,000. And the startups shouldn't request a valuation of more than €3 million. Otherwise, they'll quickly lose interest for the business angels and investors in the audience. We also engage with teams that exceed these sizes, of course. We then pass them on directly to potentially interested investors. Our major advantage is that we know all of the investors personally. Furthermore, we've always made sure to offer a good mix of the industries the startups operate in at each barbecue. However, we could also imagine organizing industry-specific or perhaps even country-specific events in the future.
On the other hand, we are not so interested in purely university founders, as we consider the chances of success for founders with professional experience to be significantly higher.
Do many Munich startups approach you?
Yes, many people from Munich are approaching us. This is also because we currently work primarily with Munich investors, who then connect us with startups from Munich or recommend us as a platform to Munich startups.
How does a barbecue appointment like this work?
We conduct a very intensive pre-screening process for the teams that want to pitch for funding. We are two partners, Stephan Galleitner and I. Both partners speak to the teams independently, and both must give the thumbs-up, otherwise the team won't be invited.
At the actual barbecues, three of the selected startups usually pitch. We give the teams a comparatively large amount of time, around 40 minutes in total. This sets us apart from typical pitching events, and the investors think it's fantastic. First, they introduce themselves and their project, and then the investors can ask questions. After that, the team leaves the room so the investors can discuss things among themselves. The request for this "intimate" session came from the investors themselves, by the way. This kind of shared exchange naturally only works when the audience isn't too large. That's why nextFATbusiness isn't intended to be a huge event, but rather maintain a friendly atmosphere. But that doesn't mean it's exclusive, because the event is certainly open to other investors.
What do investors value when they want to invest in a startup?
First and foremost, the team! That's why we no longer include individual founders in our barbecue sessions. There has to be a team that already has the essential skills and abilities. There may still be one or two skills missing and can be supplemented by additional staff, but there can't be any major gaps. That's why we've also stipulated that at least two team members must give the pitch at the barbecue sessions. This gives investors a first impression of how the team interacts. Is the chemistry within a startup right or not? The team has to work well, because many investors are primarily interested in the people behind a startup. The idea comes second. Why? Because a good founder can always turn a bad idea into something, but a bad founder will ruin every good idea. The team is the key.
How do you ensure that startups and investors who want to meet and work together at a barbecue always go through you?
We initially considered contractually binding the startups. But we actually deliberately don't want to take that step, as it would contradict the spirit of the nextFATbusiness. Our concept is more based on trust. This works, for one thing, because we know most of the investors personally. And, for another, we brief the startups in advance about the process for subsequent negotiations. Of course, we can't prevent someone from circumventing this. But we don't actually want a contractual commitment.
What else do you have planned for nextFATbusiness?
nextFATbusiness is a commission-based model, meaning we receive a commission on the amount financed. The barbecue events serve as a nucleus for getting investors in the audience excited about a startup and bringing both sides to the negotiating table. Monetizing this concept is certainly challenging, as perhaps every other event results in a deal. As a platform, you don't really earn that much. Therefore, in the future, we will not only act as an intermediary between teams and investors, but also position ourselves as an intermediary between the investors. The idea behind this is that there are always investors who, for example, have a startup in their portfolio that no longer fits their concept and that they would like to sell. Since we know the portfolios of other investors, we can contribute to a successful matching process. We will become the secondary market for venture capital. In the medium term, we also plan to build our own fund for seed and pre-Series A companies. We now see a lot of teams in Munich, and some have subsequently been invited to major events, such as Bits&Pretzl. One team even made it to the Lions' Den after a barbecue. We have a very good nose for potentially successful teams, and we will use that accordingly.
How do you assess the investor scene in Munich?
I think Munich investors are quite well connected. This is certainly also due to the fact that there aren't that many events in Munich, such as the Venture Capital Club. At first, I was confused by the seemingly large number of events and networks. But over time, the fog clears and you realize that the number of truly serious circles is manageable. Everyone knows each other in the scene, which I believe has also remained very down-to-earth. People here still talk to each other on an equal footing. And that's very important to us at our barbecues: we want founders and investors to always meet on an equal footing. The idea is to find partners here – NOT in the master & service style.
How do you rate Munich as a startup location?
On the IT side, Munich has the potential to become truly strong. And by that, I don't mean the copycat sector, but rather more complex IT applications. The environment for this is ideal in Munich, not least because of its outstanding university landscape. When graduates join forces with experienced founders, a fruitful and promising collaboration can emerge.
What else do you wish for Munich as a startup location?
I would like to see an institutionalized exit option. I consider it downright negligent to leave this field to the Frankfurt Stock Exchange, which then implements it only half-heartedly.
