This Tuesday, I’ve attended for the first time the “Investor Lunch”, from CTI Invest, in Zürich. The event is restricted to CTI Invest members, which I have the chance to be through the company I’m working for (Creapole), and aims to gather the investors regularly in order to grow the community and enhance collaborations.
A special guest was invited to talk about his Venture Capital fonds: Dr. Alexander v. Frankenberg, Managing Director of the german High-Tech Gründerfonds.
Started in 2005, the fonds is an initiative from the German state to fill in the gap in seed financing observed from 2002. High-Tech Gründerfonds was allocated around EUR 250 mios, mainly from State but also from corporate partners, which is now over (they made 270 investments, with 45 failed projects and 19 successful exits (the other ones are still on track)).
For their second fonds, HTGF raised recently EUR 300 mios, but with a lot more little stake from German government. Big corporations (like BASF, Zeiss, Deutsche Telekom, etc.) invested in the fonds not especially to get a financial return on investment, but rather to get “fringe benefits” like access to innovation at a cheapest price. Let me explain: big corporation often fail to deliver innovation or it takes too much time. With startup, you externalize the risk (financially, brand, people, etc.) and bet that the entrepreneurs will provide you solutions quicker than an internal project.
In matter of fact, having big corporations as backer is one of the underlying concept of HTGF. They have direct access to these potential big customers that startup only can dream of, and work closely with in order to help startup succeed.
First slice of an investment has to be under EUR 500’000.00, for which HTGF ask for a 15% participation in the company. Afterwards, they can lend you some money up to a following EUR 1.5mios as a convertible loan (in order for them to maintain their 15% participation during next financing round).
Motto of High-Tech Gründerfonds is “speed seed”, which means that the whole process should not go longer than 2 months.
- First of all, you send your complete Business Plan (direct is possible, if you can get a personal recommendation (coach, investor, etc.), it’s ALWAYS better!)
- Secondly and after review of the documents, the entrepreneur will be invited to a meeting (if it fits the criterions). This step lasts only one week.
- Third, after getting a term-sheet (the standard conditions of HTGF), the due diligence (with help of external experts) will be started and will be delivered in less than 6 weeks. In case of a positive evaluation, a participation recommendation will be sent one of the 3 investment committees (IT, AUtomation, Photonic / Life Science, Material Science, regenerative Energy / Telecommunication, Media, Software).
- Finally, the entrepreneur will pitch the committee and… get financing directly afterwards in the positive case.
The founders have to bring personally 20% of the first slice of financing from High-Tech Gründerfonds. The company has to be not older than one year (I’ve felt than they can sometimes do little exceptions, but never if your company is 2 years old or more).
The core philosophy that HTGF has developed is the following:
- they listen (to what you say)
- they (really try to) understand
- they build a strong relationship with founders (hugs included!)
- they have an open and honest communication with people
- they focus on adding value
Until now, HTGF was restricted to invest in Germany, but they can now also invest in Switzerland, which is an absolute great additional and potential financing source! So don’t way to get a recommendation to be able to ask for a financing!
There’s currently a big debate on top level if such a financing tool (mainly powered by state) would be adequate to Switzerland or if Swiss Government should rather “only” change the legal framework to fuel the system of startup financing.
I think both are really needed and I’ve felt that we can expect that guys like Jean-Pierre (Managing Director of CTI Invest) will put great efforts to convince Swiss Governement to make take this step!
Lastly, I’d say that I definitely share the philosophy of HTGF and hope they’ll contribute to a new era in startup financing in Switzerland. Maybe this German investing presence will put some pressure on swiss government to act… NOW!