Growth financing in Germany must grow
As the name indicates, Growth Invest Partners will focus on financing fast-growing companies in the elaborate growth phase. Specifically, we are targeting technology companies in the IT, Internet, telecommunications and energy technology sectors with sales of around EUR 10 million and high-margin core business. We support these companies with growth capital and strategic input when entering new markets, internationalizing or pursuing a buy-and-build strategy.
We do not collect the capital for this in a closed-end fund, but put together the optimal financing syndicate for each investment from among our investors — these are leading family offices and large institutional investors. For the companies, this has the advantage that we are flexible with regard to the optimal financing structure. The participating investors can decide for themselves when and to what extent they want to invest in certain topics.
The VC market in Germany is still in the development phase. A lot has happened in recent years, especially in the early stages. With the High Tech Gründerfonds and a number of regional seed programs, as well as an increasing number of business angels who were successful startup entrepreneurs themselves, not only new capital but also a lot of entrepreneurial experience entered the early stage VC market. This has a very beneficial effect on the variety and quality of the startups we are dealing with today. At the same time, the total amount of venture capital available, especially for the subsequent growth phase, declined significantly. For a startup with initial successes in its home market, it has become even more difficult since the onset of the financial crisis to raise five or ten million euros in growth financing for international expansion, for example. There are hardly any German VC funds left that can handle such rounds.
The positive news is that initial large US VCs such as Kleiner Perkins, Union Square and Accell have again made sporadic investments in promising companies. But there is still a big gap here. Together with our investors, we are focusing specifically on this critical phase in the company’s development.
It remains extremely difficult to mobilize sufficient private capital for the growth phase. This is due on the one hand to the long holding periods, the difficult exit environment in Europe and certainly not least to the comparatively less favorable framework conditions for venture capital in Germany. This is why Germany is well below the European average, particularly in terms of capital for the growth phase (in the early phase, we are now roughly in the European midfield). Countries such as France and the UK are much better at mobilizing capital at all stages of financing. Of course, as part of the BVK’s association work, we will continue to campaign for an improvement in the framework conditions here in Germany — but that will take time. With our deal-by-deal approach and clear focus, we are already able to significantly shorten holding periods for our investors. And with our Advisory Board, we are actively working to develop the European tech exit markets.