Sebastian Böhmer, founding associate of First Momentum Ventures, faces one thing of a dilemma. On the one hand, he’s decided to dispel a few of the myths about the place Europe’s most fun expertise companies are to be discovered; on the opposite, he doesn’t need to invite an excessive amount of competitors.
First Momentum, launched in 2019, focuses on alternatives in Germany, Austria and Switzerland, collectively generally known as the DACH area. “Capital is centralised however expertise is just not,” says Böhmer. “The DACH space has been one thing of a sleeping large, nevertheless it has actually woken up extra lately.”
The area, he factors out, is dwelling to no fewer than three Nobel Prize winners and ranks fourth on this planet on the variety of patent purposes its innovators file every year. Large-name companies within the space embody Celonis, Biontech, Personio, Curevac and Teamviewer. The DACH nations’ economies mixed are value greater than that of the West Coast of the US, dwelling to Silicon Valley. “All of the substances are in place for founders to construct game-changing corporations,” Böhmer argues.
First Momentum needs to assist them pull it off. The enterprise capital agency’s first fund, raised in 2019, picked up €5m of capital that was shortly deployed in 22 start-up companies within the DACH area, with the fund sometimes appearing as a co-investor. Three-quarters of these companies have already acquired follow-on funding.
Böhmer is obvious about First Momentum’s candy spot. “We’re targeted on pre-seed alternatives – we need to present that first cash in,” he explains. “Our three worth pillars are fund-raising, enterprise improvement and entry to expertise.”
Excessive-tech companies within the industrial engineering house are one focus. Germany’s well-known “Mittelstand” corporations – resilient small and medium-sized enterprises with a document of innovation over era – present a vastly worthwhile goal marketplace for expertise start-ups, Böhmer argues. “There’s a large alternative to assist the Mittelstand digitalise,” he says.
“We’re engineers at coronary heart, however buyers by selection,” explains Böhmer, whose educational background is in industrial engineering and arithmetic. Two investments specifically stand out on this regard. First Momentum has backed Daedalus, which works with producers to develop robotics for his or her crops, in addition to Evenly, a man-made intelligence specialist that helps engineers determine which datasets to make use of to be able to construct the best coaching fashions.
Trying ahead, Böhmer additionally sees large potential for the digital well being market, which is taking off in Germany as new regulation makes it simpler for the sector to work with physicians and sufferers. “Medtech is now far more accessible,” Böhmer argues.
Not that First Momentum has all of it its personal means. Worldwide buyers in Europe could also be extra targeted on expertise centres corresponding to Berlin, or London, Cambridge and Oxford within the UK, in addition to later-stage funding alternatives. However a rising variety of buyers are waking as much as the alternatives that the DACH area gives, together with on the earliest stage.
Certainly, enterprise capital funding in start-ups nearly doubled to €2.4bn between the primary and third quarters of final 12 months. Buyers are additionally taking be aware – DACH region-based enterprise capital corporations secured €2bn of funding from buyers over the identical interval.
Nonetheless, Böhmer is satisfied that First Momentum’s native information will help the agency keep one step forward. He has been investing in DACH companies for the final 4 years, having launched First Momentum’s predecessor whereas nonetheless a scholar, and the agency has constructed a community of associates throughout the area. The corporate has shut hyperlinks to universities and different educational establishments, with a consultant in each college metropolis within the area, and might name on a broad group of financiers and buyers.
That invariably offers the agency first-mover benefit. “With greater than 50% of the companies we meet, we’re the primary buyers that the administration crew has spoken to,” Böhmer says.
He additionally makes the purpose that many enterprise capitalists stay nervous of expertise danger. They need to put money into fast-growing expertise companies, however their focus tends to be on start-ups with confirmed applied sciences now in search of to operationalise. In contrast, First Momentum’s sector information affords the agency extra confidence about making its personal judgements concerning the potential for a brand new innovation.
Having made so successful of its first fund, First Momentum is stepping up the tempo, securing commitments for a second iteration. The brand new fund ought to have round €50m at its disposal – 10 occasions’ as a lot as its predecessor – however Böhmer is just not involved concerning the variety of alternatives accessible. “There may be a lot potential in these sectors,” he says.
Second time round, and with extra dry powder accessible, First Momentum is extra prone to take the lead position within the funding rounds wherein it participates. It’s a problem that Böhmer is relishing.