With more than 180,000 people working in Germany’s creative industry, the state of Berlin wants to help these companies grow and become more visible, says Roger Bendisch, who has been investing in Berlin’s startups for 17 years.
As the head of the Investitionsbank Berlin’s venture capital fund, he has helped dozens of young Berlin startups on their feet, from music software innovator Ableton to e-commerce success story Outfittery.
Focussing on four different branches (life sciences, creative industries, IT and industrial tech), the state-backed investment bank has worked with hundreds numerous private VCs to provide capital for Berlin-based innovations.
IBB Venture Capital
- Founded: 1997
- Annual funds: €82 million
- Industry focus: Tech and life sciences innovation (€52 million) and creative industries (€30 million)
- Prominent investments: Ableton, Babbel, DailyMe, Outfittery, Sofatutor
WebMagazin: What kind of investments does the IBB VC fund make?
Bendisch: We make investments in the early stage phase, which means we do seed-investments and startup investments. Last year we made 50 transactions and out of these transactions there were 11 new companies and 39 follow-on investments in our portfolio. Currently we have a portfolio of 75 companies.
One of our most promising company is called Babbel, which is a language-learning platform and already the world leader in its field. Together with a private fund we gave them money to start the company. Ableton and Outfittery are more example of our successes.
Scopis is an innovative medical device company, which has pioneered a clinical navigation system. The system enables the surgeon to perform minimally inrasive operations based on the visualization of the inside of the human body. Scopis products are intuitive, adaptable for different applications and compatible with clinical environments.
WebMagazin: How many ideas manage to get IBB funding?
Bendisch: We’re very picky when looking for good companies. Last year we analysed 300 companies. Out of these 300 companies, only 10% are interesting for VC investments. We then finalised investments with half of that 10%.
WebMagazin: And how many of the 5% have been successful?
Bendisch: All of last year’s companies are still in the development phase and none of them have failed. But it’s different now. 2001-2005 was a bad time. Lots of companies went bankrupt and so did some of our startups.
Euphorias and depressions
WebMagazin: What changes have you noticed over your 17 years in the business?
Bendisch: We have seen lots of change. In the late 90s we had a big boom called the Neuer Markt (’new market‘). There was an IPO craze in Germany and Germany wanted its own version of NASDAQ, called Neuer Markt. That boomed and then went bust in 2000, and the Neuer Markt closed in 2003. Then we had the Lehmann crisis in 2008, so we had some difficulties in 2009. We’ve seen many cycles in Berlin.
There’s lots of euphoria, then maybe some depression. And then some startups are not as successful as everyone thinks. But since 2010, Berlin has seen a tremendous boom in the startup scene.
WebMagazin: Is this another boom like before 2000 and 2008?
Bendisch: This boom is new. In the old days there were different technologies, biotech and nanotech were on our agenda. We see specific technology trends in certain times.
This boom is new.
I think what’s interesting is that we’re seeing huge international venture funds approaching to Berlin-based startups. Outfittery received money from Highland Capital. ResearchGate received money from Bill Gates. Berlin-based companies are getting a huge amount of money from abroad. That’s completely new and it’s exciting.
WebMagazin: What other funds in Berlin should entrepreneurs be aware of?
Bendisch: We are a public venture fund, and the other public venture fund is HTGF (High-Tech GründerFond). Then there are a number of private venture capital firms, like WestTech Ventures or the German Startup Group, or BMP. There’s a number of big players in Berlin and Germany.
WebMagazin: Are you competing with them?
Bendisch: IBB always works together with private funds. So with DailyMe we invested together with BMP Media. The private VC funds are happy to share the risk and to have a good partner who has been in the Berlin startup scene for a long time.
WebMagazin: What obstacles are there for startup founders in Berlin?
I think what we’re seeing is a lot of competition amongst good talents. Because there’s so many good companies looking for the best people. And quite often they compete against each other for the best people.
Ideas comes first, money follows.
WebMagazin: What comes first, the startups of the investors?
First come the startups, always. The talented people are always the driver. If they have good ideas, then money follows.
WebMagazin: How does the selection process work?
Bendisch: Usually we first see a short presentation where the company is saying what they want to do if they receive a certain amount of funds. Then we invite the team over so we can see what people are behind these ideas. Then we evaluate the market potential and consider competitors for example. Finally of course we have to analyse financial projections. Team, unique selling proposition, market size and financial projections are the biggest factors.
There are four people in our investment committee, that make decisions to invest and if any one person is unhappy, then we don’t do the deal.
WebMagazin: Is there a social or environmental aspect to your company?
Bendisch: There’s a lot of cleantech in Berlin. Apart from web investments, Cleantech is certainly one major focus for our investments. We have a lots happening in the educational field with Babbel and SofaTutor, but there’s not so much hardcore social investment.
WebMagazin: Where do your funds come from?
Bendisch: It’s state funding only. 50% comes from IBB Bank, but the bank is also owned by the Berlin state. So this money indirectly belongs to the state of Berlin. And the other 50% comes from the European Commission, a program called EFRE, which is a structural development fund for Berlin.
The fund lasts until next year. And at the moment we’re discussing with the Berlin senate to increase the Berlin public venture offering significantly. Our funds were provided to a period until 2015, but because there is so much demand we were able to invest all this money over the last seven years. And we’re very pleased to have an increase for the next period until 2020.
WebMagazin: So Berlin is a good place to start a web company?
Bendisch: Given the data you see, Berlin is the place to start a web company.