bm|t newsletter Q4 2022
Most founders are accustomed to hearing venture investors repeat the phrase “Time is Money”, but there are periods when understanding that Money is Time is also important for all parties. With the understandable decrease in investor risk appetite in the current tragic geopolitical and challenging macroeconomic environment, now is clearly a period for increased focus on capital efficiency and runway prolongation.
In this Newsletter
Money is Time
Venture investment in the start-up world is generally raised and deployed in order to “(blitz)scale the organization”, “capitalize on a market window”, “accelerate time to market”, “grab market share”, and conduct many other activities where the oft-used saying that Time is Money, meaning if one acts quickly, one can generate large returns, is absolutely applicable. However, in the current environment, terms like “securing the next milestone”, “achieving breakeven”, “increasing time-of-flight”, etc. have quickly reemerged in investors’ and founders’ lexicon. All parties understand that ensuring survival in order to be able to pursue big value-creating opportunities, albeit with a delay, is of paramount importance.
This rapid transition from a Time-is-Money mentality to a Money-is-Time mentality requires a high degree of mental agility and corporate flexibility. Exemplar companies are trimming fat and quickly resetting priorities, with initiatives that have shorter payback periods and higher returns on investment taking precedence. Long-term, strategic goals have to be temporarily relinquished for shorter-term, must-accomplish objectives.
In Thüringen, we are not immune from this abrupt transition; however, due to our focus on B2B and deeper tech, where market protection arises more from intellectual property and unique know-how rather than from speed-to-market and first-mover advantages, we believe that the adjustments we and our Investee-Partners must make are less radical than in other parts of the venture world. Of course, everything is relative in the sense that if a company already has a high degree of capital efficiency and is on a tight budget, even a slight decrease in access to capital can be impactful.
Certainly, we are not suggesting companies should idly wait out the clock and hope that an overall recovery will lead to easier funding – that is not a viable strategy. We are emphasizing that having an absolute focus on achieving (with optimal capital efficiency) the milestones that will trigger or motivate further investment is essential; because with a smaller investment budget at hand, investors will prioritize the most meaningful progress.
We do not want to sound overly alarmist; however, we believe it is correct to draw attention to the reality of the current environment and to plan and act accordingly. In response to this environment we have redoubled our efforts to raise awareness of the compelling investment opportunities we have in Thüringen. These efforts are bearing fruit: we are progressing well on closing multiple sizeable investment rounds at the moment. We remain optimistic that we are also benefitting from a secular growth trend (Thüringen is being discovered by many more investors), which helps counter the effects of the current general downturn.
Although this downturn will remove some market excesses, a significant amount of investment capital remains ready to be deployed in value-creating companies as soon as the headwinds ease. Good fortune will come to those who are well prepared and well positioned to capitalize on the opportunities that can quickly reemerge. Throughout 2022, we and our Investee-Partners have become more resilient and remain poised to make large leaps forward.
Your bm|t Team
Only 21 months after our initial investment, Polytives developed so strongly that our corporate co-investor, the Bremen-based Diersch & Schröder group, decided it wanted to increase its shareholding in the highly-innovative polymer-based additive company. In a highly-successful exit for bm|t, we sold our shares to Diersch & Schröder, knowing that the match with Polytives and Diersch & Schröder is a great one and that Polytives’ future will be even brighter with the increased commitment from its strong corporate investor. We are grateful for our time as an investor in Polytives and as a co-investor with Diersch & Schröder and look forward to following the company’s impressive and impactful innovations that are revolutionizing the world of plastics processing.
Weinert Industries consummated its management-led buyout of Leoni’s fiber optics cable business in May of this year. A carve-out of this size and complexity (multiple locations across continents) is, of course, a major undertaking. The smoothness of the transaction and operational transition as well as Weinert’s strong customer growth in this challenging environment exceeded even our most optimistic expectations. To support the strong growth of the business and Weinert’s further international ambitions, bm|t increased our investment with a seven-figure amount. With Weinert Industries, a global champion from Thüringen is quickly emerging, and we are extremely pleased to play an instrumental role in the company’s impressive development.
Investor Days Thüringen – Save the Date!
June 14th and 15th, Investor Days Thüringen (IDT), the premier early- and growth-stage pitch event in middle Germany, will welcome over 500 participants, with approximately 60 start-ups presenting their innovations and visions. After last year´s energetic return to a live event, we are again excited to offer our guests great live pitches, beers & brats and much more! Mark your calendars – we will see you in June!