HIGH-TECH

GRÜNDERFONDS

Science for Life – FinancingWebinar

Dr. Marianne Mertens

2

Agenda

Mission of the HTGF funds

Financing options

1

2

3 DOs and DON‘Ts 3

3

Financing in the start-up phase – so far:The enthusiastic founder is often knocked back by the capital market

Too many ideas, not enough start-up capital?

...

Fantastic idea! Unfortunately we’ve

just provided financing for a similar firm

Interesting, but not our focus...

Great, but still no revenue?

A loan? What collateral do

you have then?

A lot of potential, but unfortunately too early

for us...

4

VC maturity fostered by HTGF investment

Founder(s)

Venture-capital firms

& Corporate investors Banks

IPO,

acquisition

Maturity

Expansion

Rapid growth

Market

entryPrototype

Launch

Cash flow

Time

5

Development of the seed market in Germany according to BVK*HTGF serves as a key pillar of the seed business, with approx. 40% market share

*Source: BVK = German Private Equity and Venture Capital Association

*Reference: BVK = Bundesverband deutscher Kapitalbeteiligungsgesellschaften

94

272

10395

28 26 20

6174

111

71

96

75 73 7561

77

0 0 0 0 0 0 4 52 40 42 34 46 44 43 38 46 40 320

50

100

150

200

250

300

19 9 9 2 0 0 0 2 0 01 2 0 0 2 2 0 0 3 2 0 0 4 2 0 0 5 2 0 0 6 2 0 07 2 0 0 8 2 0 0 9 2 010 2 011 2 012 2 013 2 014 2 015 2 016

Seed-Investments Total Thereof HTGF-Investments

Number of Seedinvestments

Year

As of: 01/03/2017

6

High-Tech Gründerfonds I and IIKey Facts

Founded

2005

Volume

€272 million

Investors

Founded

2011

Volume

€304 million

Investors

Term 6-year investment phase, 7-year divestment phase

Focus Innovative high-tech companies in the seed phase (operative start < 1 year)

Investment type Up to €2.0 million per company, thereof €0.6 million in the seed round

Value added Hands-on operational support provided by experts and networks,

as well as strategic support from investment managers

7

HTGF’s flexible financing models

• Up to €0.6 million in seed financing

• 15% company shares plus shareholder loan with subordination agreement and conversion right (as dilution protection) and deferred interest

• Reflection of the conditions of a co-lead investor

= Σ €0.8m = Σ €1.26m

Founders’ own funds in both scenarios is at least 10% based on HTGF investment

600 60 600 60 6000-200

High-Tech Gründerfonds

Founder(s) Side investor /seed fund

High-Tech Gründerfonds

Founder(s)Side investor/

seed fund

Standard model Pari-passu model

8

ResultsPortfolio - Follow-up financing & exits

75Exits (15 in Fund II)

Partial exits

(including two in Fund II)

Real

millionairesMillionaires

on paper

464 1,112technology firms

financed

Rounds of follow-up financing with an external

total volume of € 1.405 bn, comprising

€ 486,6 millionfrom foreign investors

in 126 firms

79%

Private capital

of capital invested

through HTGF (I & II)

€311million 51 104€ €

477%

HTGF as lead for exit

As of: 01/04/2017

9

19,5 35 22,9 22,5 36,7 32 30,7 12,521,9

14,3 23,451,5

69,149,7

128,7

30,511,415,4 25

40,9

33,640,5

56,7

15,8

614,7 10,8

26,318,7

16,5

74

3

13,114,9 9,9

7,75,7

5,4

5

1,816,7

15,9 16,4

2414,8

17,4

55,7

8,411,413,9 12,4

14,5 11,215,8

19,6

4,3100124,1 120,8

187,4 189,8177,3

370,4

76,3

0

50

100

150

200

250

300

350

400

2010 2011 2012 2013 2014 2015 2016 Mrz 17

M €

Year

Investmentvolume in € mil.

German VC foreign VC Business Angel Corporates KfW other public HTGF

Since 2012, private investors have been spending more in the HTGF portfolio than German VCs

As of: 01/03/2017

In 1,112 follow-up financing rounds, a total of approx. € 1.405 billion was raised from third-party

sources (without HTGF funds) for the portfolio companies.

10

1

2

1

6

7

6 6

14

13 13

0

2

4

6

8

10

12

14

16

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

75 exits successfully accomplished, including 17 from Fund IIaverage 2.5x – highest 7x

Yield Solutions

Swet Optics GmbH

As of: 01/01/2017

11

Transactions with private fund investors

(Exit)

(Exit)

(Exit)

12

Successful events for all network partners

1,400 pre-arranged one-on-one meetings with network partners

Over 700 arranged one-on-one meetings designed to facilitate business relations

Of these, 199 private investors have invested€188 million in the HTGF portfolio

239 industry decision-makers meet 90 portfolio companies

Exclusive HTGF network comprising 400 wealthy private investors

Family Day is Germany’s leading start-up conference, with

over 1,000 participants

13

Agenda

Mission of the HTGF funds

Financing options

1

2

3 DOs and DON‘Ts 3

14

VC model from various perspectives

• Venture capital for tech development, market

launch and growth

• Networking (e.g. experts, other portfolio firms,

customers and possibly strategists)

• Partners to bounce ideas off & advisers

• Improved access to follow-up investments

Technology company

• Stakes in companies with above-average market

prospects and high implementation risk

• Information rights & guarantees

• Co-determination and control rights

• Portfolio effects (diversification and synergies)

Investor

• Successful company

• Value of stakes increase

• Exit proceeds!

Common Goals

15

Maturity stages of high-tech start-ups and financing options

Stage

Duration 0.5-2 years1-2 years 3-5 years. 5-X years0.5-2 years

Start-upFounding

phase (seed)

Preparing for founding

phaseGrowth

Establishing

firm on the

market

Funding

sources (e.g.)

Goals Brainstorming

Concept

R&D

Patents

Business plan

(First draft)

Shaping company

structure

Staff

Business plan

Tech development

Proof of concept

Tech optimisation

Market preparation

Production stage

Studies

Key clients

Production

Sales

Market share

Cooperation

Licensing

Studies

Internationalisation

Consolidation

Diversification

Portfolio expansion

Acquisitions

Spin-offs

Bank loans

Stock market: IPO, capital increase, bonds, etc.

Strategic investors, cooperation partners

ERP programmes (e.g. start-up fund, fund of funds)

Venture capital (conventional VC, PIPE)

R&D subsidy programmes

High-Tech Gründerfonds

Regional seed funds

Business angels

Equity capital

Funding programmes offered by German

ministry for education and research, e.g.

EXIST founder grant & research transfer, GO-

Bio

16

Agenda

Mission of the HTGF funds

Financing options

1

2

3 DOs and DON‘Ts 3

17

Focus: Innovative, disruptive technology start-ups

“Small company” as defined by the EU with its

HQ or an independent unit in Germany

Start-up financing ideally suffices for proof of concept or

prototype phase

R&D-based start-up company with “incubated

technology”

Business activity: less than 1 year

Founders own technological expertise that is tapped by

the company

18

Transparent and efficient selection process

Submission of business plan /

pitch deck

Committee presentation

Approx. every 2 months

1. Pitch 2. Term sheet 3. Due diligence +

expert report 4. Pitch

4-6 weeks

Document review process

1 week

19

Search for capital (I)Who is the right investor?

• Commitment (financial & advisory)

• Risk-adjusted framework

• Trust

• Understanding of the industry

• Network

• Side and follow-up investors

• Customers & cooperation partners

• Experts & advisers

• Experts

• Track record & reputation

• Decision-making speed

• Availability (time & geographically)

20

Capital search (II) The path to the investor

• If possible, be WELL prepared:

• Formal criteria fulfilled (industry, maturity, HQ, etc.)?

• Internet research, press releases

• Take a look at portfolio companies

• Take note of fund duration

• Business plan up to date?

• Presentation ready?

• Talk to investment managers at start-up forums, specialist conferences, VC meetings, pitch events

• Business plan competition

• Submit documents (referees?)

• Be brave!

21

The business plan from the investor’s point of view

DOs

• Clearly structured (Exec Sum)

• Complete business plan

• Competitive analysis that is in line with market outlook, evidence for assumptions made (!)

• Realistic planning & scenario calculations

• Self-critical analysis of weaknesses

• Summarising images & tables

DON‘Ts

• Rudimentary / incomplete business plan

• Prose-focussed

• Language mix (by chapter)

• Preliminary versions (unrequested)

22

Criteria for a positive investment decision

Negative Positive

• Rudimentary / incomplete business plan • Realistic planning & scenario calculations:

High level of innovation and strategic competitive

edge

• Competitive advantage not protected by IP nor a

development edge

• Sustainable USPs (IP!)

• Solutions in search of problems • Clearly visibly customer benefits

• Resistance to advice / Feelings of omnipotence

• No or very little financial commitment on the part

of the founders

• Founder personality/-ies with commitment

• Self-critical analysis of weaknesses

• Utopian revenue & earnings planning

• “Viral” marketing assumption, “Good products will

prevail”

• High-growth market with entry barriers for

competitors

23

“Red flags”: Early indicators of risk for existing investments

Ability to deliver/performance

• Key milestones are missed, orders considered secure are lost, agreed revenue targets are missed

• Reporting too late, incomplete

• Investor information requirements are not fulfilled (keeping quiet about difficulties, “differential” communication)

Harmony within the team

• Fluctuation or dispute among company management

• Continuously failing to fill key positions

Mindset/start-up mentality

• Side-project attitude

• Focus on external image & status symbols (premises, company cars, press appearances)

• Early attempt to push through complex corporate structures and/or high valuations

• Reluctance to share control of the company

24

A few general rules (not only) for founders

Rule 1: Self-employment involves you and a lot of hard work, all the time

Rule 2: “Fail to prepare, prepare to fail”

Rule 3: Don’t let greed dominate your thinking

Rule 4: “Keep your chin up!”

25

Hardware, Automation, Optical Technologies, Energy,

Ind. Software

Life Science, Materials Science, Healthcare, Chemical

Telecommunications,Software, Media,

Internet, e-CommerceControlling

Relationship Management, Marketing/Communication,

Office

Managing Directors

• Fund controlling: 6 employees

• Relationship management, PR:

4 employees

• Office: 5 employees

• Management: 2

Investment team 31 employees, 32% of whom are women

Experience: 45% founders | 183 years of investment experience | 317 years of professional experience

Professional background:

• 52% have a scientific background

• 41% have a commercial background

• 7% have a legal background

• 17 different degrees (incl. science, engineering, economics, law, humanities and many more)

A strong team – one goal – great potential

26

Illumination| Projection |

Audio

Virtual & Augmented Reality

Software TelCoIndustrial Softwarecloudplan

EcoIntense3/4

WeSustain3/4

CevotecCuciniale

SCHAD

4tiitoo

Gestigon

ImmerSight

Inreal

Enscape

Fodjan4

Sablono3

SimScale

Mobility

AutoaidComodule

FAZUAParkTAG3

T Dispatch3

CommSolid

Cubical

Eyefactive3

VIOSOAutomation Logistics

AccessBaimos | Cliqloc | FIDLOCK | Jenetric

Recycling

Additive Manufacturing

Robotics

Energy Management

Production

akvola Technologies | Saperatec4

ALL3DP3 | IQ evolution4 | Limata4 | Notion Systems4 | Print2Taste

ALS | Cevotec | Revobotic | Synapticon | Adlatus Robotics

Cuculus3 | enercast | Enexion3| NEXT Kraftwerke3 | NOVUM | Oneshore* | Permundo |

Solandeo*

ALS | Böhner-EH | Cevotec | Compositence | eGym3 | Limata4 | Multiph. Optics |

Notion Systems | PicoLAS | Pulsar Photonics

SensornetworksSemiconductor Energy Generation| Storage

Optical MetrologyMetrology

Security

Micronet AutomationViamon

Extoll

Interposers4

Custom Cells Itzehoe2/4

Heliatek4

Smart Hydro Power

Subitec2/4

Luceo Technologies

Somonic4

ComnovoJenetric SciEngines

Multiph.Opt.4

SciEngines

Limata4

Cycle

Enoware

Fos4x

HiperScan

Italic Type = Double Entries; 2 = Life Sciences; 3 = Software; 4=Chemistry Seed - Early Start-up - Later Start-up = new in 2015/16

Soley SE.M.LABS

SOTA Solutions4

Yatta

Ap

plic

ati

on

sTe

ch /

Infr

ast

ruct

ure

Hardware | Automation | Optical Technologies |Energy | Industrial Software

27

* = new in since 2015

Energy & Cleantech

Bio-based

Economy

Agriculture

Processes &

Software

UrbanizationNew Materials related

Technologies

Energy-Generation / -Storage

Custom Cells Itzehoe | Heliatek

Enzymes-Plattforms & Specialtiesc-LEcta | evoxx

Waterakvola Technologies |

Dust Biosolutions*

EnablerEcoIntense | Hapila |

SOTA Solutions

Feed & NutritionCysal | Fodjan* |

PerformaNat*

Recyclingsaperatec | subitec

Surface-TechnologiesBubbles & beyond |

i3 Membranes |Notion Systems

Composite materials & fibers

compositence | Jenacell |WPX

Breeding- and Protection-SolutionsComputomics* | multiBIND | Oaklabs

3D-Printing / Lithography-Technologies

interposers | IQ evolution |Limata | MeCuris*| Multiphoton Optics

Sensors & SimulationBentekk* | somonic solutions | We Sustain

Animal healthPerformaNat*

Chemistry-related Portfolio

28

Ther

ap

yD

iagn

ost

ics

Too

ls/

Pla

tfo

rms

* = new since 2015

Cardiac DevicesCoramaze technologies | CryoTherapeutics | Middle Peak |

NovaPump

AestheticsGME | Natural Dental

Implants

NeuromodulationCorTec | EBS Technologies |

WISE

OrthopedicsMeCuris* |

Synoste

Emergency CarePentracor |

ReActive Robotics | Seiratherm

Patient MonitoringCapical | Dolosys | Humedics | Implandata |

Photonics Healthcare

Imaging & NavigationAmedo | Eyesight&Vision | Fiagon | medineering | micro-

dimensions | Scopis | SurgicEye | whitesonic

New MaterialsBubbles&Beyond | Heppe Medical | JeNaCell Medovent |

multiBIND

Personal Health & e-HealthAdvanova | Bomedus| connected-health| Desino |

Exelonix | HRTBT | Newsenselab* |

perora | PMS | Preventicus | Sonormed

Small Molecules, Peptides & ProteinsAdvanceCOR | Algiax | Atriva* | AudioCure | Immunic |

MYR | Omeicos | Zedira | HepaRegeniX*

Immuno- and Gene Therapy4 Animal Alsterscience | Amal Therapeutics | GeneQuine | Immunservice |

Protectimmun | Rigontec | SciMab* | TolerogenixX*

In-vitro DxAbviris* | KSK-Diagnostics* | Lophius | onCGnostics |

Predemtec | SeNostic*

R&D Tools, Biomarker Discovery, BiosensorsAyoxxa | Biametrics | Chromotek | CuneSoft | cytena |

PEPperPRINT | PreOmics* | Sierra Sensors | Venneos |

Signatope*

Enzymes & Manufacturingc-LEcta | Cysal | evoxx |

Hapila |m2p-labs

Green BiotechOaklabs | Subitec |

Computomics*

Drug DeliveryLipocalyx | Rodos |

Sirion| Thermosome*

BiotechnologyMedical Technology

Life Sciences | Healthcare

29

UrgeIO (Versus) | SEMKNOX | everybag

99chairs

JUNIQE

Makerist

Codetrails | coModule

Fruux | Graylog

Iplytics

ParkTag | pidoco

Skive

Veodin

virtualQ | Yatta | userlane

| Filestage Incapptic

Connect

Casavi | Conceptboard

Coredinate | cubical

EcoIntense | make.tv

propertybase |flowtify

Bookingkit

Customer Alliance

eWings

HQ Plus

Travel

ALL3DP

3D Printing

Bitwala

FundFlow

Figo

Payever

Mobilversichert

Fintec

Bettzeit

Inventorum

Mister Spex

Outfittery

StyleRemains

Yorxs

Shops

Grandcentrix

gravit

Locr

Pressmatrix

Pylba

PublishingHuman Resources

Recruiting

Jobleads

MoBerries

MobileJobs

Altruja

FamPlus

Social

MarketplacesSupport

Clickworker

Loopline

Maxment

Mobile InteractionAsanayoga | FooBoo | Opentabs

Skoove | Yeti Learning | evalu

AdTec

Search

Marketing

Communication

Simplaex| linkbird | Mbaas (Applanga, embraase) | Semasio | AdTriba

Crossvertise | Stocard| Trackscale | uberMetrics

CommSolid1 | NFON | Smoope

ToolsIT-Security

baimos

Hornetsecurity

ondeso

Protected Networks

SciEngines

SSP Europe | VMRay

CloudIT-Infrastructure

cloudplan1

Collinor | eddyson

Gridscale | Quobyte

Sablono | T Dispatch

Tixel | tocario

tracekey | WeSustain

RAIDBOXES

Big DataAltusInsight

ConWeaver

Datavirtuality

enercast

Analytics

metoda | itembase

minubo | POSpulse|

Implisense | wetransform

Italic Type = Double Entries; 1 = Hardware; 3 = Software Seed - Early Start-up - Later Start-up = new in 2015/16

Ap

plic

ati

on

sTe

ch /

Infr

ast

ruct

ure

Software | Media | Internet |E-commerce

30

Over 1,000 stakeholders invested in HTGF portfolio

As of: 01/04/2017

0

200

400

600

800

1000

1200

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

NUMBER OF INVES TORS

Business Angels, Private Inv. Venture Capitalists Corporates & Corp. VC Public Investors

31

Deal flow

38143499

315

315 0 0 268

47

0

50

100

150

200

250

300

0

500

1000

1500

2000

2500

3000

3500

Total Deal

Flow

Rejected /on-

hold

Active Deals Filtered

Proposals

Evaluation

ongoing / DD

Contracts Closing failed

Filtered deal flowTotal deal flow

32

Commitments by technology field

As of: 01/04/2017

0,8%

2,4%

2,8%

2,8%

3,2%

3,6%

3,6%

4,0%

4,8%

5,6%

6,0%

6,4%

6,8%

8,8%

11,2%

12,4%

14,5%

communication technology

energy

media

diagnostics

chemistry/ material Science

Healthcare & Services

optical technology

biotechnology

plant construction

e-commerce

electrical engineering

industrial software

pharmacy

internet solutions

medical technology

application software

Software as a Service (SaaS)

Commitments in %

33

HTGF plans to launch €300 million Fund III in March 2017

Investors

Public-private partnership, with 30% private share from target group:

> 50% BMWi

> 15% KFW

> 30% large and medium-sized innovative firms

Founding

2017

Planned target volume

€300 million

Operating time 6-year investment phase, 7-year divestment phase

Focus Innovative high-tech firms in the seed stage (< 1-3 years old)

Investment type Up to €3-5 million per company, comprising €0.2-1.0 million in the seed round

Value added Hands-on operational support provided by experts and networks and strategic

support from investment managers