bm|t newsletter Q1 2020
We strongly believe that the advantages of venture capital investing (certainly when compared to publicly-traded investing) become even more apparent in times of crisis primarily because of the explicit longer time horizon and the resulting implicit investment philosophy.
In this Newsletter
Venture Investing in the Time of Corona
An exogenous shock, and Covid-19 certainly is a large one, creates a high degree of unforeseen uncertainty for companies and investors alike. Investments that are continuously marked to market show sharp and extreme losses, and investors with potential liquidity are forced to think about the appearances of short-term performance. These investors often feel compelled to make decisions regarding their investments that are driven by factors that only weeks or months prior played no role in their investment thinking and may not be related to long-term performance optimization.
Of course, venture capital and private equity investors must not lull themselves into thinking that because their investments have not suffered visible price declines that there has not been an equal, or greater, value impact on their portfolios. Indeed there has been great value destruction for nearly all companies due to this exogenous event. Certainly, the vast majority of early-stage venture-backed companies have less financial cushion (on their own balance sheets) to weather longer storms than most publicly-traded companies. However, it is precisely because venture investors are focused on investments with at least a seven-year time horizon (and in many cases much longer), and generally have committed capital to invest, that they are able to maintain a strong focus on company- and industry-specific factors and on creating value over the long term.
This long-term investment philosophy permits a healthy level of calmness in the midst of storms, and enables venture investors to make important and necessary adjustments while maintaining a course designed to profit over years not months.
An extremely critical element for investors to traverse crises and to reap the benefits of long-term investing is having committed funding without the risk of limited partners (fund investors) reneging on their commitments. bm|t’s early stage funds (Thüringer Startup Fonds and Thüringer Wachstumsbeteiligung Fonds) are comprised of 80% funding from the European Union and 20% funding from the Free State of Thüringen, and are fully committed from these strong partners from day one of the funds´ existence.
bm|t’s funds do have conditions requiring private co-investment, which does reduce our ability to act alone. However, this condition has led to the establishment of a strong network of like-minded private co-investors that bring additional strength to support our Investee-Partners in difficult times.
The benefits of this extremely stable capital base and strong co-investor network have become starkly apparent in this time of crisis, as we have generally been able to maintain our funds’ philosophy and activity in these challenging times. Startupdector ranked bm|t’s early stage funds (Stiftung Thüringer Beteiligungskapital) as the third most active startup investor in Germany for Q1 2020.*
We aim to continue to be a reliable and transparent investor for our Investee-Partners at all times, but are especially pleased that we have been able to maintain our role and investment philosophy in these difficult times.
Wishing you health, strength and foresight in these trying times,
Your bm|t Team
Welcome to the Family
SpleenLab uses artificial intelligence to greatly improve the utility of aerial vehicles. The company´s tagline is: Safe Machine Learning Solutions. With drones and city air-taxis as key markets with current research collaborations in place, SpleenLab is poised to take off and help aerial vehicles reach level 5 – full route and flight automation. bm|t led this seven-figure round, and we were joined by another early-stage institutional investor, APEX Ventures based in Austria, and a business angel.
rooom AG offers the first complete solution for 3D, Augmented Reality (AR) and Virtual Reality (VR), with which companies and private individuals can easily and cost-effectively create, edit, and present individual 3D models online. With this award-winning solution, for example, e‑commerce shops can present their products in 3D and Augmented Reality without losing loading time; the real estate industry can visualize real estate conveniently; and museums can archive temporary exhibitions and make them permanently accessible. Market demand for rooom´s 3D solutions and products has increased substantially recently as showrooms have been closed and physical presentations are no longer possible. bm|t led this seven-figure investment round focused on further developing the company´s product portfolio and growing its sales and customer service organization, and we were joined by MBG Thüringen, Sparkasse Jena-Saale-Holzland and a group of angel investors.
Häcker Automation designs and produces phenomenally flexible machines for „mass-customized“ production of electronic components and systems. Impressively, approximately 60% of hearing aids globally are produced on Häcker Automation machines, which allow for intricate and delicate production work at a miniaturization level that very few companies, if any, worldwide can offer. Recently, the company has found strong demand in the high-growth areas of power modules and silicon photonics, receiving multiple large orders from top companies in these spaces. Our seven-figure investment is a growth and liquidity financing aimed at allowing the company to capitalize on its immediate sales opportunities.
As the number of IT-Endpoints grows rapidly, it can be extremely difficult for IT departments to maintain an overview of security, performance, and availability of all IT assets. Enginsight´s suite of cybersecurity tools works in a well-coordinated manner to monitor all IT-Endpoints in real time and precisely and succinctly display the results to IT staff. Whether it is servers, desktops, laptops, tablets, smartphones, or websites, Enginsight maintains a constant overview of an organization´s IT infrastructure. bm|t led this seven-figure investment round focused on scaling up marketing and customer service, and we were joined by Seed & Speed, HDI Group, and Smart Infrastructure Ventures.
Precipoint originally used its strengths in optics and electronics to develop hardness testing for materials, such as metals, but after a successful sale of that business, management discovered an exciting new application for its expertise: digital microscopy. Amazingly, today still approximately 95% of pathology slide analysis is performed analog – humans peering through the classic microscope, making an evaluation, and recording the data. Precipoint´s affordable digital microscope starts with high-resolution digital image capture, which opens many opportunities for additional value creation through algorithmic analysis and easy data transfer, thus breaking the restrictions of physical location for, at times life-saving, interpretation of the data. bm|t led this seven-figure investment and was joined by multiple family offices and business angels.
The Organ-on-a-Chip market is red hot, and Dynamic42 has developed many unique technologies to improve the results of studies involving synthetic organ systems to test drug toxicity and potency by better mimicking realistic human body conditions. The savings potential for pharma and biotech companies to test compounds in human-like conditions earlier and with significantly lower costs is enormous. bm|t led this seven-figure investment focused on furthering the company´s IP base, the development of additional organ models, as well as the deepening of projects with large pharma companies. We were joined by MBG Thüringen and Sparkasse Jena-Saale-Holzland.
Jenetric is a biometric company focused on digital fingerprint capture. It is the pioneer and one of few companies worldwide able to effectively employ TFT technology for fingerprint sensing on screens. The company´s core market is homeland and border security, and its mobile devices are highly innovative and have opened up many new use cases for mobile fingerprint-based security, such as police forces. Jenetric is also working to bring its technology to mobile phone screens and sees high potential for greatly improving mobile security and enhancing fingerprint-based functionality on mobile devices. bm|t led this seven-figure financing round and was joined by three business angels.
ifesca´s intelligent cloud service and prediction and optimization engines enable energy companies to better forecast demand for electricity, gas, or heat in near real time. The gained insights allow energy companies to make better decisions regarding their own generation operations and/or energy trading, creating substantial savings for customers. bm|t led this round focused on growing sales and customer service, and we were joined by a group of renowned private investors with significant software and energy industry experience.
Investor Days Thüringen Goes Digital
As it is clearly unadvisable to plan physical events with many participants in the near future, we have opted to turn Investor Days Thüringen into a digital pitch event this year. We will be sending more details through our channels in the coming weeks, and we hope that you will plan to join us to see an excellent cadre of growth companies and start-ups present their companies and visions.