Even though he likes to invest in them, Michael Riemenschneider’s office seems a long way from the hip startup incubators of Berlin. The managing director of Reimann Investors is based in the wealthy Munich district of Grünwald, home to upper-class families, old money and young soccer stars. His office might be discreet and understated, but Mr. Riemenschneider oversees the holdings of part of the Reimann family, one of the richest bloodlines in Germany.
The Reimann money originally came from the chemical industry, where one wing of the well-heeled family still has holdings in health and hygiene manufacturer Reckitt Benckiser as well as personal products group Coty. And that’s not all, they’re also amassing a growing global coffee and breakfast food empire around Krispy Kreme donuts, Keurig coffee pads and even Dr. Pepper. That branch is estimated to be worth some €33 billion ($41 billion).
But then there’s the other branch, which isn’t lacking in funds either. These Reimanns sold their inheritance in the 1990s to the four coffee empire siblings and now have their cash, like that of many German dynasties, managed by a private family investment fund. Mr. Riemenschneider and his 20 employees manage that fund. The fund is about more than just maintaining the value of the family fortune. Younger members have a special interest in seeing their money invested productively. “It’s about profitable investments, but also about developing good businesses,” Mr. Riemenschneider says.
For the Reimanns – and other German business dynasties – this increasingly means investing in startups. Arno Fuchs, head of Munich-based FCF Fox Corporate Finance, says this is partly due to low returns elsewhere, but also to the emergence of a new, “more risk-ready and digitally-savvy” generation. For startup founders, the interest in what is known in Germany as “family offices” is a godsend. In comparison with other countries, Germany’s startup scene is painfully under-financed. So-called “growth financing” deals, from €3 million to around €10 million, have particular difficulty, says Florian Nöll, head of the German Startup Association: “There are hardly any German venture capital funds in that range.”
The size of the Reimann fortune is a closely-guarded secret. But Mr. Riemenschneider says the firm makes between 10 and 12 investments per portfolio, with each investment in that magic €5 million to €10 million segment. Most of the family money is invested in the capital markets, which spreads risk and maintains liquidity.
Family offices can be more flexible than classic venture capital funds, which are tied to specific terms and liable to institutional investors, says Mr. Fuchs. Greater agility and a lack of bureaucracy mean they can be good partners when things go off-course and funds are needed quickly. “A founder wants partners who can give a startup the time it needs. And nothing forces us to sell,” says Mr. Riemenschneider.
Family offices can also bring more than money to the table: in a best-case scenario, they can also supply contacts, experience and expertise. The Strüngmann brothers, for example, were the founders of the pharmaceutical firm Hexal and offer real world experience to the biotech startups they invest in. Likewise the Fuchs family, majority owners of OHB, a leading space exploration company, puts its money in nimble new aerospace startups.
Mr. Riemenschneider says the strength of Reimann Investors is in helping startups grow into complex organizations. Although that kind of expertise could help almost any startup, Reimann focuses on a specific sector to better exploit synergies: online retail. It has a stake in premiere e-commerce sites Keller Sports and petfood retailer Alphapet.
“A good dealflow is crucial: it means you can say no.”
Fintechs are another focus. Reimann owns the private Deutsche Kontor Privatbank, which provides products and financing to tech companies under the brand Deutsche Handelsbank. One of Reimann’s earliest investments was Sofort, a fintech specializing in instant bank transfers. Taken over in 2014 by Swedish company Klarna, the firm is now worth over $2 billion. Reimann retains a small but highly valuable stake.
Not all investments pay off. Another early venture backed by Reimann ended in complete failure. “Before you have real experience, you can end up learning things the hard way,” says Mr. Riemenschneider.
Many family offices have learned similar lessons. Without good contacts and solid experience, it is difficult to access the best investment offers. “A good dealflow is crucial: it means you can say no,” says Mr. Fuchs. As a result, many families prefer indirect investments, putting their money in large funds or joint ventures. The risk capital fund La Famiglia, for example, has attracted investment from well-known business dynasties including Siemens, Miele and Swarovski.
Reimann Investors has opened its own fund to outsid investment. This is not from a need for more money, says Mr. Riemenschneider – it’s about finding partners with the right experience and networks. It also means the family fund has to be competitive, something which family members approve of: after all, they have business in their blood.
Miriam Schröder is a based in Berlin, where she covers the city’s startup scene for Handelsblatt. To contact the author: firstname.lastname@example.org