German tech scene seeing major investments and exits in 1Q2015

Germany has been a competitor to the UK’s tech scene for some time now, as the two countries are the major players in a burgeoning European start-up landscape. However, increasingly even London corporate finance is sending money to Germany, as German tech entrepreneurs are finding success by dreaming up global concepts and breaking an inward-looking approach of building German versions of Silicon Valley hits.

This more ambitious mindset is attracting a rising tide of well-financed US investors, measured by the number of early-stage financing deals, sizeable acquisitions and promised stock market flotations. Venture capital tech funding in Germany more than doubled to $1.28 billion in 2014 from $578 million a year earlier, according to venture research firm CB Insights. Germany took in $1.15 billion in the first quarter of this year alone.

The start-up movement is centred in Berlin, where a dynamic digital creative market and low rents serve as a competitive advantage over other major tech hubs such as London. The trend is also taking root in business centres in Munich and Hamburg.

“In the last 12 months the appetite for late-stage companies in Germany by Anglo-Saxon investors has increased significantly,” said Dirk Graber, chief executive of Mister Spex, Germany’s biggest online optician, which is active in five other countries across Europe. The Berlin company raised $40 million in a round led by Goldman Sachs this year.

Graber said opportunities for firms like his have opened up since the public market flotations of online retailer Zalando and German ecommerce investor and former Zalando backer Rocket Internet last year.

“There is a strong and growing interest by foreign investors, especially the Americans, in the German start-up market,” agrees Rocket Internet spokesman Andreas Winiarski.

Adding to the momentum, Apple recently acquired Munich-based Metaio, a maker of augmented reality software used to overlay text or graphics on real-life images and video, while Microsoft bought personal planning software maker 6Wunderkinder of Berlin. Terms were not disclosed in either deal, but both are estimated to have been in excess of $100 million.

Delivery Hero has already received a round of $110 million in pre-initial public offering funding from two unnamed US public companies, valuing the global online food takeaway service at 2.8 billion euros ($3.1 billion).

In the first quarter of 2015, Europe saw 140 exits via acquisitions as well as a handful of initial public offerings and mergers, up 168% from the first quarter of last year. Germany had 30 such exits, double that of each of Britain, Spain and Israel, its closest rivals, according to a analysis.

However, European tech hubs, including those in Germany, continue to be dwarfed by the venture capital industry pioneered in Silicon Valley, where start-ups sport far higher valuations due in part to a well-developed path to public market listings.

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