1

www.frontline.vc

Startups & Venture Capital in GermanyTech emerges in Europes largest economy

A GLOBAL PERSPECTIVE BROUGHT TO YOU BY:

www.pointnine.vc

2

Many new venture funds have been raised in Germany

1Cash on Hand and Bank Balance, RKET Annual Report, Rocket ECP, Earlybird, Creathor, bmp, Target Partners, Lakestar, Coparion, Crunchbase: Global Founders Capital, Holtzbrinck, HTGF, Cherry Ventures, Dow Jones Venture Source, CBInsights, Estimates may sometimes include realisations, does not include funds HQ’d outside of Germany

Tota

l Fun

ds R

aise

d or

Sim

ilar (€1

,000

s) FUNDS RAISED IN 2016

Funds domiciled in Germany or primarily do business there

0

400

800

1,200

1,600Ro

cket

Inte

rnet

Rock

et R

ICP

Early

Bird

Hol

tzbr

ink

HTG

F

Acto

n

Lake

star

Targ

et P

artn

ers

Proj

ect A

Copa

rion

B-to

-V IBB

Cre

atho

r

Che

rry

Blue

Yar

d

Poin

t Nin

e

Spee

dinv

est

Paua

Capn

amic

4065100110120150180182200225290300

385470

576635

700

1,000

1,504

3

Which has lead to better upstream funding for startups

Seed Series A - B Late StageIncubators

Note: approximation, many investors participate across different stages

0

13

25

38

50

20%24%

35%37%

40%

48%

The highest level of international participation in Europe

4

London

Paris

Berlin

Stockholm

€0b €4.5b €9b €13.5b €18b

$2.3b

$5.8b

$3.7b

$11b

$1.8b

$1.3b

$9.6b

$17b

USD

Total Funds Raised

Total Funds Invested

TOTAL VC FUNDS RAISED VS INVESTED2VC BACKED WITH AN INTERNATIONAL INVESTOR1

1Crunchbase Pro (2013-2016), 2The numbers behind Europe's VC ecosystem [datagraphic] (2006-2016)

As funds globally position themselves to do more German deals

5

FUNDS ADD GERMAN DEAL MAKERS

RECENT TRANSACTIONS IN GERMANY

Series B

Series A

v

77% OF FUNDING ROUNDS IN BERLIN ARE LED BY NON-LOCALS

Berlin needs more VCs!

0

15

30

45

60

13%

29%

57% 60%

17%22%

Berlin Silicon Valley

Local Led rounds

Non-Local Domestic

International Led

Why Berlin Needs More Local VCs a Network Analysis

A boom in investment activity

6Crunchbase Pro, Gil Dibner Slideshare

# OF VC BACKED COMPANIES IN THE PAST 10 YEARS

50

140

230

320

410

500

Q3 2014

Q4 2014

Q1 2015

Q2 2015

Q3 2015

Q4 2015

Q1 2016

Q2 2016

Q3 2016

Q4 2016

QUARTERLY VC FUNDING EX-MEGA (€100m) ROUNDS IN GERMANY

Qua

rter

ly fu

nds r

aise

d ($

1m)

62% CAGR

0 350 700 1050 1400

139

157

165

417

607

1,203

$3.1b

€9b€2b

Is giving birth to the German startup ecosystem!!

7

€3.1b

€100m

€150m

€760m

€82m

$4b

€830m

$190m

€210m

Scout24 €3.2b

€210m

€150m

€100m

€215m

€950m€1b

€272m

€300m

Current or last valuations: Notable exits, companies with €50m+ in funding, other notable. Private market valuation, best estimate based on public data

€420m$700m

$700m

€480m

8

Investors

91See Appendix & FY 2015 Financial Statements and Rocket Internet Financial Statements and Capital Markets Day, 2Crunchbase, 3Rocket ECP, GFC vs. Rocket Internet Capital Partners: Wie passen Rockets Fonds zusammen? ,Rocket Internet Capital Partners fund closes at $1 billion 4

The Samwer brothers control vehicles with billions in combined assets1,2

Rocket participated in 16 out of 20 of Germanys largest funding rounds1

Rocket is largely an emerging markets and eCommerce investor1

Cash €1.5b1

RICP4 €1b

FOUNDED

2007

OFFICES

Berlin, London

FUNDS

2

RAISED

-

# OF INVESTMENTS

75+

EXITS

5+

101Holtzbrinck-Ventures.com, 2Crunchbase, 3Proprietary, 4Holtzbrinck Ventures etabliert 177 Mio. Early-Stage-Fonds mit HarbourVest Partners, 5Holtzbrinck Ventures Closes $331M Fund To Back More Consumer And E-Commerce Startups

Founded in 2000 as part of German publishing house Holtzbrinck

Track record of investment success: 150+ investments1, 16 acquisitions2 and 3 IPOs3

LPs include US based HarbourVest Partners and Georg Von Holtzbrinck4

Strong focus on consumer internet, eCommerce, transactional business models

AUM €635m

Consumer Internet

in EU

Fund VI €285m5

FOUNDED

2000

OFFICES

Munich

FUNDS

6

RAISED

€635

# OF INVESTMENTS

100+

EXITS

25+

111Tech.eu: Most Active Tech Investors In Europe (H1 2015)

SaaS and marketplace focused, Seed and early Series A

Created out of Team Europe, a network of Berlin-based entrepreneurs

One of the most active Tech Investors in EU1 with strong foothold in Berlin

American style VC, with international LPs (US, Israel, EU)

€55m Fund 3

SaaS Marketplaces

€40m Fund 2

FOUNDED

2011

OFFICES

Berlin

FUNDS

3

RAISED

€112

# OF INVESTMENTS

80+

EXITS

10+

121earlybird.com, 2Heilemann Ventures and Earlybird VC Join Forces

Founded in 1997, with €700m invested across 5 funds, invested in over 100 startups1

Earlybird is one of the oldest and most established funds in Germany

Invests €250k-10m across all stages1

Recently merged with Heilemann Ventures2

Technology

Eastern Europe

Healthcare

FOUNDED

1997

OFFICES

Berlin, Munich

FUNDS

3

RAISED

€112

# OF INVESTMENTS

120+

EXITS

25+

13

Who to knowMarc Samwer

Oliver Samwer Alexander Samwer

rocket-internet.com @RocketInternet

Pawel Chudzinski Christoph Janz

pointnine.vc @PointNineCap

Hendrik Brandis Christian Nagel

Fabian Heilemann

earlybird.com @EarlybirdVC

Daniel Glasner Christian Meerman

Filip Dames

cherry.vc @CherryVentures

Ciaran O’Leary Jason Whitemire

berlinvc.com @BlueYard

Uwe Horstmann Dr. Florian Heinemann

project-a.com @ProjectAcom

Jan Beckers

@FinLeap @HitFoxGroup

Klaus Hommels Mark Schmitz Nicolas Brand

lakestar.com

Will Prendergast Thomas Olszewski

frontline.vc @frontline

Corporate Investors

14

Funds Focus Areas

B2C consumer goods, retail and services

Manager of several corporate venture funds

IoT, smart home, digital customer access, big data

Direct-to-consumer or transaction oriented

SevenVentures, Redstone Digital, Vito Ventures, Vowerk

Digital Media & Publishing Tech

Consumer internet, marketplaces, and deep tech

Independent venture fund of Commerzbank

Accelerators

15

Accelerators % Stake Comments

6%

5%

6-8%

4-5%

Investment

€20k+100

€25k

€15k

-

Techstars Berlin, Axel Springer Plug & Play, Berlin Startup Academy, Startupbootcamp Smart Transportation & Energy

- - Diversified

Transportation and energy

Axel Springer

Diversified

Diversified

Negotiable Community focusedNegotiable

What to expect when you close a deal in Germany

16*Most traditional databases do not contain accurate valuation information, Techstars Berlin1

Incubated Companies Angel & Seed Deals

€1-3m €2-6m

Angel Round Seed Round

TractionInception

SaaS Funding Napkin, the mobile-friendly edition , Fundraising Framework for Marketplace Startups in 2016

Expectations can very dramatically

Business with some traction, first customers

Can include companies from accelerator

Typically raising at above market valuations

Management owns 0-70% of equity

Part of the capital raised may go to the incubator

17

Opportunities

18

Strengths

Top class engineering and business universities

Berlin is an attractive place to live for a lot of young

talented people

Easier immigration policies then elsewhere in Europe

Largest EU economy in terms of GDP and

population

Higher capital efficiency as a result of lower salaries and

cost of rent

Optimism surrounding Berlin and the prospects of

the ecosystem

Berlin

19

Population 3.5m

1 Bedroom Flat €500-1,0001

Beer €31

Avg Salary €40,0002

Avg Software Engineer Salary €50,0003

Berlin named most 'fun' city in the world - telegraph.co.uk

1Berlin named most 'fun' city in the world - telegraph.co.uk, 2Salary Survey in Berlin, 3Berlin Software Engineer Average Salary

20

Growing Pains

21

Challenges

1Think We're the Most Entrepreneurial Country In the World? Not So Fast

Difficult to retain top talent with lower salaries vs other

EU cities

Victim of its own success? Rent and cost of living are

increasing

Culture of risk aversion and slower adoption of new

productsEnglish & German are used

Lower levels of entrepreneurship vs rest of

Europe1

Relatively small talent pool of software developers in

some sectors

22

Incubated startups, management equity participation

Incubator 50%

New Investors 30%

Management 20%

A Letter to German Entrepreneurs, Index Ventures

“

”

In some cases, part of the 2nd round of funding is used to pay for services

A startling number of German startups that we have spoken to have ownership structures which put them at a real disadvantage when raising their first venture round. In many cases we have observed, the founders have given away too much equity to their first investors - typically angels and family offices, who have little experience with the fast-growing startups or the venture capital funding model.

‘Incubated’ companies allocate a relatively small equity stake to management teams

EXAMPLE SEED STAGE INCUBATOR CAP TABLE

23

Winning sectors

FinTech

• Credit related and consumer business

• Large market for consumer finance

• Population which travels a great deal

Four sectors where German startups have succeeded

24

eCommerce

• Fashion, auctions, and food delivery

• Largest market for fashion in Europe

• Lean and cost competitive, low margin

Leisure

• E-sports, gaming, travel, and music

• Travel culturally important

• Large number of consumers

AdTech

• Big data, data analytics, data mgmt, SEO

• E-commerce companies as customers

• High small- & mid-cap M&A-activity

25

FinTech

Founder Alexander Graubner-Müller Formerly Groupon, Rocket Internet University of St. Gallen

Founder Valentin Stalf Formerly Paymill, Rocket Internet University of St. Gallen

Pawn LoansPayday

Credit CardsBank Loans

Better credit for customers with

no or poor access to credit

The mobile bank

Linkedin Information, Crunchbase

26

AdTech

FounderAndreas BodczekFormerly Telefonica, Bertelsmann Ludwig-Maximilians Universität

Mobile in-app ad monetisation platform, incl. ad mediation & marketplace.

Founder & CTOMarcus ToberFormerly Ecards, Idealo Internet Technische Fachhochschule Berlin

Acquired for $190m

Linkedin Information, Crunchbase

SEO SaaS platform

27

FounderHakan KoçFormerly Home24, Rocket Internet, Zalando, DailyDeal

FounderDavid SchneiderFormerly Compara Tarifas, Unibicate, Roland Berger San Andrés, Singapore, WHU

Trouble Selling Grandma’s Cars Led to $1 Billion Startup, LinkedIn Information, Crunchbase

eCommerce

Designer shopping online

IPO at €5.3b

valuation

B2B marketplace for used car

dealers

28

Leisure

Alexander LjungFormerly Trustmojo.com, Jung Studios, SF Anytime Stockholm University

Rolf SchroemgensFormerly ciao.com Leipzig Graduate School of Management

Online travel booking Social Music

Samwer brothers

Trivago, auf leisen Sohlen, LinkedIn Information, Crunchbase

Christian Vollmann

Dr. Florian Heinemann

IPO at $4b valuation

Internet Exits

29

€6.5b (at IPO)€5.3b (at IPO)

€100m

€150m

€272m

€82mTrivago $4b

(40%)

TeamViewer €830m

$190m

€210m

2004 Onward: 16 Biggest German Exits So Far, Tech.eu: Scout24, Windeln Successfully Completes IPO, Das denkt die Szene über den 6Wunderkinder-Exit

€3.2b

€210m

€150

€100m

€215m

eCommerce

Gaming

Travel

Enterprise

AdTech

Social

€150m (at IPO) $150m

FinTech

€108m

joulex €108m

€124m

Early stage companies to watch in 2017

30

Data driven publishing house

Bus travel platform

Large scale data analysis Video game coaching

Video sharing network

App retargeting

Home cooking mail service

API based CMS

Bank of banks

OKR

Banking for freelancers

Flying cars

SME Lending

App for your tax returnOffice management software Cloud banking platform

Authors choice

31

Outlook

32

2017 Predictions

Fewer new EU funds will enter the market

Expect larger deals from Rocket after a 6 month lull

Brexit will continue to accelerate ecosystem growth in Germany

Great companies will come from all over Germany!

Seed & Series A valuations will level off

Interest from non-EU VCs in the German ecosystem will

continue to increase

33

2017 Predictions

Large incubators will shift towards VC investing

After 5 years of B2C growth, B2B startups emerge

IPOs of Delivery Hero, Home24, will continue to

fuel the ecosystem

Global VCs will continue to hire Germans to target the

region

Zalando will become Germany’s first “decacorn”

Germany to surpass the UK in total VC funding

34

Twitter Medium

Mathias

Twitter Medium Quora

35

Additional Slides

Rocket participates in 16 out of 20 of the largest rounds since 2012

36

Rocket Participates in 80% of €50+ funding rounds

FY 2015 Financial Statements and Rocket Internet Financial Statements and Capital Markets Day

37

Nine new funds in 2016

DB1 VENTURES

TRUMPF STRATEGIC

Germany’s 11 New VCs launched in 2016

0

225

450

675

900

Q3 2014 Q4 2014 Q1 2015 Q2 2015 Q3 2015 Q4 2015 Q1 2016 Q2 2016 Q3 2016 Q4 2016

180

284

719

437

621

444

892

543 555

487

180

267

389

209

379339 333

388

461 463

29

163118

232279

225

281

355 361

443

74123

89112

140

84

140113

194224

Sweden France Germany UK

Funding Trends (ex-mega rounds)

38Europe & Isreal 2016 VC Year in Review, Gil Dibner

Mill

ions

of E

uro’

s

Online Content:

Rocket Internet Financial Statements Germany’s FinTech Ecosystem: A Wheel in the European Innovation Machine

Venture Capital and Startups in Germany 2015, E&Y 16 Biggest German Exits So Far

Trouble Selling Grandma’s Cars Led to $1 Billion Startup Salary Survey in Berlin & Berlin Software Engineer Average Salary

Berlin named most 'fun' city in the world - telegraph.co.uk A Letter to German Entrprenuers, Index Ventures

Think We're the Most Entrepreneurial Country In the World? Not So Fast Heilemann Ventures and Earlybird VC Join Forces

GP Bullhound 2015 Unicorn Report, GP Bullhound 2016 Unicorn Report Germany’s 11 New VCs launched in 2016

Data Services:

CBInsights Dow Jones Venture Source

Crunchbase LinkedIn

39

Source Links

Slide 2 - Venture funds in Germany Funds domiciled in Germany or that primarily do business there

Does not include corporates, funds without official ‘funds raised’, or non-internet funds Rocket is a publicly traded company with €1.5b of cash and cash equivalents

Slide 3 - Fund participation by stage Notable participants by stage, discretionary selection

Slide 4- International participation Data from Crunchbase Pro

Pitchbook data

Slide 6 - A boom in activity Data from Crunchbase Pro

Gil Dibner Startups and VC in Isreal

Slide 6 - Selection of successful companies Companies with over €30m funds raised

Authors choice

Slides 9-15 - Notable players Discretionary selection of well known investors

Slide 16 - Valuations Estimates based on experience

Slides 24-30 - Successful startups Many startups have multiple co-founders that are not included here

Authors Choice

Slide 28 - Exits Notable internet exits since 2004

Slide 30- Early stage companies to watch Authors choice

40

Methodology