Venture Capital

Boost for Fintech Start-Ups

carsten kengeter by thorsten jansen
Is Mr. Börse now turning into Mr. Start-up?
  • Why it matters

    Why it matters

    A new fund by venture capitalist firm b-to-v Partners could stir up the German start-up market and discover promising young digital firms.

  • Facts

    Facts

    • Swiss-German venture capitalist b-to-v Partners was founded in 2000 and operates as a network, bringing together investors and young firms.
    • The firm, an early Facebook investor, has launched a new €100 million fund to invest in digital start-ups, especially fintech firms.
    • Deutsche Börse chief executive Carsten Kengeter joined b-to-v’s supervisory board in January.
  • Audio

    Audio

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Venture capitalist firm b-to-v Partners, which was founded in 2000 and has offices in St. Gallen and Berlin, has raised about €100 million from institutional and private investors for a new start-up fund in Germany.

b-to-v Partners, which was an investor in Facebook and San Francisco-based game maker Zynga, has launched the fund to invest in “young digital entrepreneurs,” the company said.

One of the focal points will be investments in fintechs, which challenge traditional banks through such products as credit platforms and mobile payment transactions. b-to-v is currently involved in seven startups in the field.

But what singles out this particular fund is the high-powered backing it has received from the head of Germany’s leading stock exchange operator.

Carsten Kengeter, chief executive of Deutsche Börse, in January took a seat on the non-executive supervisory board, which has the power to dictate strategy for companies in Germany.

Mr. Kengeter, a former UBS and Goldman Sachs banker, at the time said he hopes to “bridge the gap” between new financial start-up founders and the large, traditional financial companies that have viewed their new competitors with a mix of skepticism and fear.

Investors from the United States would see b-to-v as "truffle pigs" for the German-speaking market.

“Kengeter is helping from the supervisory board with the professionalization of b-to-v,” said Jochen Gutbrod, chairman of b-to-v. “As the head of Deutsche Börse, he also has an international overview of where innovations are occurring. His expertise on fintechs is very important to us.”

Mr. Kengeter is one of the driving forces behind the firm together with Mr. Gutbrod, who previously worked in various management positions at the Georg von Holtzbrinck publishing group, which owns Handelsblatt, and b-to-v co-founder and investor Florian Schweitzer.

The venture capitalist operates as a network bringing together investors and young firms in need of finance.

b-to-v currently manages €200 million in invested assets. It predominantly invests in Germany, Switzerland and Austria, but is open to firms around the world. Current investments include Finanzcheck.de, a credit website, Saving Global, which offers interest rate comparisons, and Outfittery, a menswear shop.

The company’s new fund has raised €63 million from institutional investors. Together with capital from a network of about 200 private investors, the fund now has about €100 million available.

Because founders of new companies usually require only smaller sums of money, the fund is in a position to finance a large number of startups.

“Investments from the new fund will generally range from €250,000 to €500,000. If we participate in further rounds of financing, we end up investing €3-4 million,” Mr. Gutbrod explained.

 

029 Deutsche Boerse Börse WTB 2014 resume-01

 

Investors from the United States would see b-to-v as “truffle pigs” for the German-speaking market. According to an analysis by Barkow Consulting, so-called “business angels,” such as wealthy private investors, together with venture capital funds, are the most important financiers of fintechs.

Venture capital financier b-to-v is primarily interested in investing in fintechs. But their valuations are now considered very high, making them less attractive as investments.

“There are certainly no bargains left,” said an industry expert with many years of experience. This is why not all dreams of high returns will come true, he added.

According to German private equity industry association BVK, a total of €650 million was invested in the venture-capital segment in Germany in 2014. But Europe’s largest economy is still well behind the United States. After adjusting for the two countries’ different economy sizes, the financing gap between Germany and the United States was about €7 billion, according to the Barkow Consulting’s analysis.

“We are still well behind the United States, but you can’t advance from a district league to the Champions League within a few years,” said Mr. Gutbrod, referring to b-to-v.

The number of new private investment funds remains relatively small, raising about €300 million in capital in 2014.

“In my view, there is still ‘juice in the lemon’ here,” said Ulrike Hinrichs, head of the German private equity association’s management board.

 

Peter Köhler is a Handelsblatt editor in Frankfurt, reporting on banks, private equity firms, venture capital and corporate funding. To contact the author: koehler@handelsblatt.com

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