There is an inherent asymmetry between founders and venture investors: founders are singularly committed to their company; whereas, investors generally have diversified investments across multiple companies. This asymmetry understandably leads to different perspectives and approaches regarding building and growing a company.
One scenario arising from this innate difference that we periodically encounter in Germany, where smaller early-stage tickets for strong ideas are readily available but larger growth tickets are tougher to attract, is the temptation for founders to play ›not to lose‹ as opposed to ›playing to win‹. Playing not to lose can take many forms but it is essentially focusing on staying alive as opposed to focusing on creating large success. This approach is often characterized by prolonging the cash runway by saving costs and waiting before pushing the company through to the next stage of its development until investors have committed to a large investment.
Although we understand this mentality behind a more cautious approach to growth and corporate development, we believe that in many cases, especially with high-tech, highly-scalable ventures, caution is ultimately the much higher-risk strategy, as valuable windows of opportunity can be missed. In fact, boldness in growing a company and demonstrating strong business momentum at an early stage is probably the single most important factor for creating interest with venture investors.
The optimal way for founders to break through this dynamic, and to develop the trust that when they build a thriving company that investors will come with capital, is to engage with many investors from an early stage and to maintain an open dialogue with interested investors about the company´s progress. Founders and investors should openly discuss what milestones the company needs to achieve for the investor to invest in the company. In this way, founders can build an understanding of the variety of investors from whom they could attract capital and better estimate which elements of the company are important to those investors.
Professional venture investors have a strong appreciation that building a company is an extremely challenging endeavor and that it is impossible to determine the ideal path ahead of time. Thus, most institutional venture investors prefer to invest with founders who are willing to test the footprint of their company by experimenting with various growth and development initiatives, fully understanding that some efforts will not work. In early stage ventures there should be no fear of failed attempts rather a deep commitment to finding what works most effectively and with open communications throughout the process.
One key development which should make it easier for founders to adopt an experimentation and growth mindset is the massive increase in the amount of venture capital looking for companies that are creating strong business momentum, even at very early stages. This explosive growth in venture capital and the number of venture capital investors may make it somewhat more complicated to know where to start with fund raising, but it should greatly increase founders’ belief that good performance will be recognized and will attract investment. Build it and they will come!
bm|t’s Thüringen Startup Fund (TSF) is specifically designed to act at an early stage and to enable founders to develop the business momentum that will lead to further, larger-scale investment. So far 33 of the 35 Investee-Partners in which we have invested with the TSF fund have received additional investment, and the majority have raised larger subsequent rounds with additional institutional investors. We are proud that several of these companies and larger investment rounds are highlighted in our Q3 Follow-on Investments.
Your bm|t Team
In Q3 2020, bm|t and co-investors invested more capital in our Investee-Partners, including many seven-figure financing rounds, than in any of the previous six quarters. This strong capital commitment is an excellent confirmation of the strength of our Investee-Partners and a strong signal that the challenges of Covid-19 are not preventing significant progress.
SmartDyeLivery develops functionalized nanoparticles in which therapeutic compounds are enveloped and safely transported to specific organs, which the medicines are targeting. This patented platform delivery technology can be utilized in a wide range of therapeutic applications and also allows for a unique theranostic use case. Currently, the SmartDyeLivery team is focusing on a therapy for sepsis-induced liver failure with the goal of reducing the mortality rate of such cases by 90%. With this multi-million investment from bm|t, a renowned family office, the STIFT, and several savvy business angels, SmartDyeLivery is well positioned to take its unique nanotherapy through phase one clinical trials.
Preventicus´ original core technology uses pulse signals and additional biometric data to diagnose atrial fibrillation using smartphones and smartwatches. The company has further evolved into a more complete patient care company, using its core technology to identify high-risk patients and then managing those patients´ care with additional support, such as the provision of advanced hardware for deeper diagnosis and telehealth services. Privegest SA led this seven-figure investment focused on supporting the company´s patient care rollout; bm|t and several additional investors joined the round.
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 seven-figure second closing of an investment 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.
In Germany, hospitals are legally required to find placement in a nursing home for patients who are unable to safely return to their home after a hospital stay. The search for an available and appropriate nursing home placement is extremely time intensive for both hospitals and nursing homes. Pflegeplatzmanager has built a user-friendly and easy to operate cloud-based software platform that allows hospitals and nearby nursing homes to quickly identify available and appropriate facilities for patients. Pflegeplatzmanager reduces the average time required to match a patient to an appropriate nursing home bed from days to under two hours, thus avoiding much frustration for facilities and families and saving the system significant sums of money. With this seven-figure investment from bm|t, the MBG Thüringen, Treuenburg Group, and several experienced business angels, Pflegeplatzmanager has the resources it needs to further increase its customer density and create a powerful network effect.
Redwave Medical is focused on creating medical algorithms that improve patient care. The company´s first approved and marketed product is Antares, an algorithm that converts data gleaned from the measurement of peripheral blood pressure to a reliable estimate of central (aortic) blood pressure, which is much more relevant for a person´s health and treatment. In this field, Redwave has recently entered into multiple commercial partnerships with blood pressure monitoring companies. Redwave also possesses a compelling pipeline of further life-improving biometric algorithms. bm|t led this near seven-figure investment round focused on market expansion and further product development, and we were joined by the MBG Thüringen, Sparkasse Jena, the STIFT, and an experienced business angel.
oncgnostics’ GynTect test allows women who have tested positive for HPV to quickly gain valuable information regarding the degree of seriousness of their diagnosis. GynTect is able to detect even early stages of DNA methylation which are the first indicators of cancer development. Earlier detection of cancer development allows physicians to treat patients sooner, which can often be lifesaving. Additionally, and very importantly, most HPV infections resolve without progression to cervical cancer, meaning unnecessary operations, treatments, and mental stress can be avoided if it can be demonstrated that an HPV infection has not caused DNA methylation. This investment was a bridge financing for the purpose of finalizing the terms of a large equity round.
MasterPIM continues to gain traction with its sleek and cloud-based Product Information Management (PIM) software that allows manufacturers, traders, retailers, and marketplaces to efficiently manage complex product information datasets and effortlessly project the processed data into online shops and catalogues. Currently, over 90% of mid-sized manufactures do not have a PIM solution, so the market is largely a greenfield opportunity. bm|t joined multiple investors, including a highly satisfied customer, for this investment round focused on scaling up marketing and customer service.