In demand

So popular among investors was the new fund that is doubled its original target size, reaching E300m by the time it finally closed this week.

The German venture capital firm – which focuses its investments exclusively on IT and biotechnology companies – has attracted big-name investors from the US and Asia, as well as from its traditional German and Swiss base.

Friedrich Bornikoel, responsible for information and communications technology investments at TVM, spoke exclusively to PrivateEquityOnline about why the new fund was so attractive to investors and about management's plans for it.

PEO Why do you think there was such strong demand for the new fund?

FB First of all, we showed in our portfolio that we have a good balance in terms of life sciences and IT. And we have focussed on companies that have become international players as far as possible. I think that is an important thing. That we are not focussed only on one country, and have launched successful public companies which, for example, began in Germany, went public on NASDAQ, and had operations in Singapore and India. And shown that we can handle that.

The other thing is that we were able to recruit top people to both our IT and life sciences' teams, and also in our public relations. And in today's competitive market, with so many businesses starting, it is not easy to expand on a global basis and find top quality people to help you do that.

PEO Will volatile stockmarkets make it more difficult to successfully exit investments?

FB It may take a little more time to bring companies public. Certainly there have been major corrections, in B2C [business-to-consumer] for example, but we were always very careful there. There were some exceptions where we thought the management was really experienced and the company had good positioning.

It is not as easy anymore to bring “concept” companies public. If you look at our portfolio you will see that many of our companies have a negative position. It may take another round of financing before they go public. In one case, I was having a discussion with an investment banker who felt that it may be better to wait [to IPO] until just before the company breaks even, which equals a delay of a half a year. So I don't think it changes the picture very much if you deliver quality.

PEO Are you skeptical about the viability of many Internet business models?

FB We have invested in dot.com businesses, but these are all business models which are much closer to profitabilty. I think that is the key issue here. Maybe we are more selective than others.

PEO Most of your current investments are in German, US and even Swiss companies. Will you use your new fund to expand into different markets, in particular within Europe?

FB We have already put the processes in place to invest more in, for example, France and Scandanavia. We think Scandinavia is a very attractive place.

[In terms of Asia] our new investors include the Government of Singapore, which is really a confirmation of our good relationships with both the government and companies active there.

I believe it is important today for investors in IT, and also life sciences, that you are able to help these companies go into these interesting regions as fast as possible. In many cases, you also have to be in Asia as fast as possible.

Most of our companies are already active in the UK, France and Spain. They may have a major operation in Germany, but they are basically European companies. Our whole team, our infrastructure and network, is put together to help companies on an international basis.

PEO Are you optimistic about the environment for new companies in Germany?

FB I think we have the best new market in the Neuer Markt. The reason for this is that in Germany there was a very good pipeline. And some of that was because of direct and indirect support from the government.

The second thing is that in the last three years we have seen a major shift in the mindset here. We see today top quality teams starting companies. And you can see young people wanting to get involved.

I think we are just at the beginning of the best seven years here.