2020 was a record year for Germany’s venture capital scene and reached second place in European funding after the UK. The largest 100 tech startups received $13.7 billion funding in 2020, up 37 percent from the previous year.
The number of deals in the tech sector increased from 791 in 2019 to 820 in 2020. Most funding went to mobility startups, followed by e-commerce and fin-tech startups.
This development inevitably brings up the question: What exactly has been leading to the maturation of the German VC industry in the last few years?
We sat down with Martin Weber, General Partner at HV Capital, to find out. Martin has more than 25 years of early-stage VC experience: He has focused on many consumer internet companies that became category leaders. His current focus is on special financing situations for portfolio companies and HV Capital’s fundraising efforts as well as HV Capital’s own ongoing “rejuvenation”.
General Partner at HV Capital, one of Germany’s biggest VC
Focus: special financing situations for portfolio companies, fundraising, and HV Capital’s “rejuvenation”
Martin, what got you into venture capital?
“My journey started 25 years ago. At that time, I was working in a bank as a trainee, where I worked in corporate finance and equity-related instruments. I got addicted to high-growth companies, their speed of innovation, and the way these companies changed the ecosystem. I started to look for an environment with flat structures, fast decision-making, and risk-taking attitude - something co-entrepreneurial. Naturally, I checked out the VC landscape.
Then, I considered to work as an analyst at that time, a top-notch international VC. But a very entrepreneurial manager, leading a small team in a not well-known Corporate VC, convinced me to work with him – in a much more co-entrepreneurial environment, not just as a checkbook writing financial investor. Interestingly, this set-up was part of a bank which, of course, is not known as particularly entrepreneurial.
You see, it was the mindset of a single individual and his team that - at that stage of my early career - was more important than anything else. Brand and reputation did not play a role at all. It is the people that are most relevant. I had a great mentor.”
You have been in the scene for a long time - how would you summarize the changes you’ve seen in the past 20 years in the entrepreneurship scene?
“The whole ecosystem has changed – really everything. First of all, today, young talent is attracted by startups. Innovation and change are key components for their career path, not size and security. Second, professional capital is available: we may still have a lack of growth capital in the market, but today there are many early established investors who know how successfully backing entrepreneurs works. It’s about support, not control. That is essential for entrepreneurship. In the early years, this was different. Back then, we talked about representations and warranties, rules of procedures, about setting limits, etc., rather supporting visionaries & executors.
20 years ago, this was different. Today, people see that risk is rewarded. Both investors and young talent have many proof points that working in startups and VCs can be financially interesting. I think with companies like Zalando, Parship, Brands4Friends, BOL, etc., we could show young talent that it’s worth the effort. In our territory, you can build something relevant that matters - faster than ever. Now, if I look at HV’s portfolio, it is really astonishing what our founders have built. From SumUp to Sennder, from Flixbus to Depop, companies are changing their industries - in a good way.”
Is now really a golden age for European Tech?
“We at HV Capital believe that in the coming years there will be an acceleration of technological innovation driven by many developments, from AI to unbundling. This evolution just started, and it comes alongside substantial capital available to build better companies. We are certain that private entrepreneurship is finally becoming more relevant in our society, which has not always been the case. And last but not least, the corporate world is increasingly willing to collaborate with startups much earlier now.”
What role does sustainability play for you and at HV?
“To be honest, for a long time, it did not play a big enough role on a company level - not the simple things, nor the more complex investment side of the business. Privately, many of our team members got much earlier into the topic but not the company itself.
Change started with an external push from the team of LFCA (Leaders for Climate Action).
We started with the easy stuff: changing suppliers, a different way of travelling and commuting, and CO2 compensation. In 2020, we went one step further into ESG (Environmental Social Governance), and today we have an ESG policy integrated in our core business of investing. It starts with new investment criteria and emphasizes monitoring and supporting entrepreneurs on their sustainability journey. We are doing much better now, but it is just the beginning.”
Why has it become more important for VCs?
“I hope that ESG compliance becomes the new normal and, in a few years, we don’t talk about policies anymore because it’s the status quo of doing business. Until then we need to drive the change by being transparent, measurable, and accountable.
Everything cannot be changed in one day, but I am 100% sure that we are on the right path – step by step. In the end, I think the change comes from consumer demand and the entrepreneurs themselves. We help, support, challenge, request - and do our homework ourselves.”