The IBB Beteiligungsgesellschaft (IBB Bet) is one of the most important VC investment firms in the German capital. Since 1997 it provides VC to young Berlin-based companies in the fields of ICT, Life Sciences, Industrial Technologies and Creative Industries. In general, that means seed or Series A financing in the order of 200,000 euros up to 1 million in the early-stage phase of a company. In subsequent rounds, the sums are even higher – the so-called tickets are greater.
Two funds for the region
Since its foundation, IBB Bet has created several funds and invested € 250 million in almost 80 young companies. To accommodate the current start-up boom in and around Berlin, IBB Bet currently has two funds with fresh money invested: the Tech Fund II (€ 60 million) and the Creative Fund II (€ 40 million). Both are equipped with public money paid in half by the parent company Investment Bank Berlin (IBB) and the state of Berlin, taken from the European Regional Development Fund (ERDF) of the European Union.
IBB Bet aims to make profits with its investments while at the same time promoting the regional economy. Therefore, IBB Bet invests only in young companies from Berlin to help developing the region and creating new jobs. It doesn’t matter where the founders are from as long as the company was founded in Berlin and has its headquarters there.
Investment strategy
The 17-member team implements an active investment strategy, with the IBB Bet being either lead, co-lead or co-investor. That’s why there always has to be at least one other private investor on board. Depending on its own investor role and the entrepreneurial experience level of the founding team, the IBB Bet also supports the latter in strategic decisions and during the preparation of further financing rounds.
Moreover, the IBB Bet can tap into its network knowledge to support the founders. Every once in a while, different teams face similar challenges. For example, when the CFO of one company could share relevant knowledge with the CFO of another company, the IBB Bet tries to create synergies here.
When investments are made
When asked about the appropriate time for a pitch, IBB Bet Business Analyst Benjamin Sekowski answers with a differentiation: "If young tech companies already have a strong competitive edge in terms of technology that is capable of being protected, investments are possible at an early stage already, for example to finance a prototype, even if the company doesn’t have customers yet. In areas such as Software as a Service (Saas), however, the young company would have to show some traction – rapidly growing number of users – and a coherent concept of monetizing."
Investment criteria
First, the IBB Bet always questions the relevance of the product or service: does a market potential really exist? Does the company solve a common problem? Does the solution make sense and is it user-friendly? Are there substitute solutions?
Team is another key criterion: how much industry experience do the founders have? And founding experience? How realistic are their estimates of the market potential? If the founders have previously failed with another entrepreneurial project, this can be seen as an advantage – depending on the learning curve and level of reflection on behalf of the founders.
The IBB Bet also looks at applying founders through the eyes of the customer: how authentic do the founder personalities come across? Can they enthuse customers?
Intro, pitch deck, business plan
Certainly it’s a good move to get an IBB Bet Investment Manager interested in conversation, for example, during an event. When putting the application documents together the question of form arises: pitch deck or business plan? For the first contact in writing, Business Analyst Sekowski recommends a short exposé or a consistent pitch deck with around 8–15 slides explaining succinctly the business model.
A full business plan is not considered mandatory, but it may help to explain complexity. Here, the Executive Summary should by all means make a professional impression. But also the figures, writing style and layout have to be convincing from the first page to the last. Sekowski: "Pitch deck and business plan are the business card of a young company. They are often the first and last thing we get to see from a company."
Duration of the financing round
Between the first contact and the possible involvement of the IBB Bet at least two or three months pass. Yet the founding teams should have twice as much time, says Sekowski, because in practice it often takes time to gather all information needed and to arrange things with all parties concerned. Sometimes co-investors jump off, which may delay the process of participation in addition. Founding teams should in any case be prepared for an intensive assessment during a financing round.
Exit
After an average of three to seven years, the IBB Beteiligungsgesellschaft aims at the exit. In German-speaking countries, IPOs are rather an exception than commonplace. That’s why the exit is often made as a trade sale to a strategic investor.
[December 2015]