Bullish on Bavaria: the VC landscape in Munich

Munich is booming. In economic terms, the capital of Bavaria is consolidating its role as one of the most important cities in Germany. Similarly, the startup scene is quickly evolving and drawing international attention. Outstanding deals in the first half of 2018 include the $20M Series B of IoT company KONUX and, more recently, the $50M Series B of process mining specialist Celonis. In both deals, prestigious US venture capital firms (New Enterprise Associates and Accel Partners, respectively) led the deals. KONUX and Celonis illustrate the approach that characterises the new generation of Munich-based startups: a highly technical value proposition, an enterprise sales model, and a global go-to-market-strategy. A cohort of mature, consumer-focused startups like FlixBus and WestWing complete the picture of Munich as a breeding ground for successful companies.

It thus shouldn’t surprise anyone that, right after Berlin, Munich is the home of the largest number of VC funds in Germany. In this post, I present an overview of the venture capital firms in Munich. 5 relevant players (with a slight bias towards technology-focused funds) are presented in more depth.

5 highlighted venture capital firms from Munich

Earlybird
With more than one billion Euro assets under management, Earlybird Venture Capital is one of the heavyweights among European VC funds. The reknown firm is running a number of funds targeting different regions from offices in Munich, Berlin, and Istanbul. For example, their $130M “Digital East Fund” is dedicated to funding startups in Central and Eastern Europe and Turkey, regions that receive little coverage by established VCs. A result of these efforts was an investment in now-unicorn UiPath from Romania. Also in Germany, Earlybird proves to have an eye for winners as their early investment in the digital bank N26 shows. This summer, Earlybird announced a strategic partnership with the market-listed VC firm Draper Esprit from London. The two companies intend to share dealflow, expertise and, hopefully, they will make great co-investments.

Speedinvest
Although not headquartered in Munich, Speedinvest’s Munich office is a valuable addition to the local VC landscape. Hailing from Vienna, Austria, Speedinvest is making headlines for its vertical-specific fund strategy. It recently launched Speedinvest f, a €50M Fintech growth fund, and Speedinvest x, a €25M fund focused on network effects, for which marketplace guru Mathias Ockenfels was brought onboard. In times of increasing competition among venture capital investors, Speedinvest’s approach is a bold step to differentiate by building teams and investment vehicles around different categories.

Target Partners
A purist technology fund, Target Partners has played a vital role in supporting technological founders in the DACH region for almost two decades. It is one of the oldest continuously operating firms in the country and has certainly earned some pedigree with founders. For instance, Target was an investor in the mapping software Gate5 (acquired by Nokia in 2006), one of the first breakthrough tech companies from Berlin. Today, their portfolio comprises companies such as Instana, a developer of AI-powered application and infrastructure monitoring, and tado°, a company offering smart heating solutions for the connected home. Target Partners has more than €300M assets under management and primarily invest in companies at the seed and series A stage with ticket sizes ranging from €1M to €3M.

UVC Partners
No post about startups in Munich would be complete without mentioning the incredible work that was done at Technical University Munich (TUM) to jumpstart the local startup scene. The university-based entrepreneurship center UnternehmerTUM provides a complete ecosystem to start and grow tech companies. In a matter of just a few years, this has turned TUM into the best university for founders in Germany producing companies such as Flixbus. UVC Partners is the early-stage venture capital firm linked to the TUM network. Although operating independently, there is a close cooperation between UVC partners and UnternehmerTUM. UVC Partners has a €82M fund that is focused on B2B industry companies in the segments industrial technologies, enterprise software, and mobility. They write tickets between €0.5M and €3M, typically at the seed and early stage for companies in Germany, Switzerland, and Austria. Notably, UVC Partners is also an investor in the aforementioned IoT company KONUX.

Vito Ventures
Vito Ventures, being a focused tech investor, is another valuable addition to the German VC landscape. Started in 2015, this firm invests globally in startups at all stages. What matters for Vito Ventures is the technological value-add. They are backed by an industrial investor base and offer access to extensive resources like R&D facilities and mass production capabilities through their network. Being the youngest firm in this shortlist, Vito Ventures embodies many of the characteristics that have made Munich such a great place for startups in recent years. In my view (along the lines of my post on young VC funds), Vito Ventures is a great representative of the changes that the German venture capital landscape is undergoing.

Speed-dating 16 additional VC funds from Munich

Listed below are 16 additional venture capital funds from Bavaria’s capital with a short description of each:

• 42Cap: new seed fund with a preference for data-driven companies, managed by the founders of eCircle
• Acton Capital Partners: well-established late-stage fund for consumer internet companies
• Alstin: growth investment fund of the Maschmeyer Group providing support in sales, marketing and management
• Digital+ Partners: growth equity fund with offices in Frankfurt and Munich and a focus on B2B technology companies
• General Atlantic: American late-stage, growth equity firm with decades of experience — Not a VC but a valuable addition to this investor landscape
• HV Holtzbrinck: one of Germany’s oldest VC firms with over €1B capital and a traditional preference for consumer internet companies
• HW Capital: fintech-focused VC firm run by the founders of interhyp
• Global Founders Capital (GFC): €150M VC fund of Rocket Internet investing in promising founders across the globe at all stages
• La Famiglia: Fairly new early-stage investor backed by some of Germany’s richest industrial families (featured in this post)
• Munich Venture Partners: cleantech-focused VC firm with a close cooperation with research institute Fraunhofer-Gesellschaft
• TA Capital: €100M VC fund with offices in Houston, TX and Munich, investing in digital companies across all stages
• Tiburon: German-American seed fund investing sector-agnostically across Europe
• Wellington Partners: prestigious venture capital firm with dedicated funds for technology and life sciences companies
• Seed + Speed: early-stage fund of the Maschmeyer Group branded as the ‘Sales VC’ providing active support (featured in this post)
• Star Ventures: one of the oldest VC funds in Munich (founded in 1992) with lots of investments in medical technology
• Vito One: seed investor with little public information and a strong preference for deep-tech investments

n.b. This list is not exhaustive. Corporate VCs and pure life sciences VCs (investing in drug development) are deliberately excluded. Please let me know if you feel that a relevant player is missing.

Final Words: Will Munich become Germany’s new startup capital?

Despite all of the hype, I don’t think so. Unlike many of its European neighbors, Germany is a highly decentralised country. Its institutions, its corporations, and its universities are distributed across the country. As founding a startup becomes a more common career choice and obtaining early funding is easier than ever before, I believe that we will see the startup scene become increasingly decentralised as well. The next unicorn can come from any city, really. Although its entertaining to draw an image of fierce competition between two hubs like Berlin and Munich, a probable alternative is that the startup scene will be growing all across the country without a particular dominance of one region. Nonetheless, the ideal economic infrastructure, the presence of a world-class technical university and the apparent abundance of VC investors give Munich an edge that few cities in Europe have.

Some technical remarks

All the information in this article can be found in public sources on the web, most of it on the funds’ websites and Crunchbase. When reporting the fund size, I used the currency communicated by the fund itself or, if not available, the USD amount on Crunchbase. The funds are listed in alphabetical order.

If I am missing any funds on the list or some of the information is inaccurate, please let me know. This article will be edited for improvements.