At the end of Q2 Berlin startups reported over $460M USD in funding, bringing the total capital raised in the first half of the year to $1.33B, easily surpassing the $1.1B raised in 2014.
For comparison, 2014 investment was 140% over 2013, and the numbers just keep growing. This has cemented Berlin’s status as a top tech hub outside of the US. In fact, during Q1, Berlin outraised London by $184M. I have not yet seen a London Q2 funding analysis.
In the last quarter, we saw slightly fewer reported rounds than Q1 (43 vs 49), and slightly smaller rounds across seed and venture deals, though still significantly higher totals than 2014. On the other hand, Q2 also brought interesting international investors, plus a highly publicized acquisition of 6wunderkinder, an IPO announcement, and a great deal of future IPO speculation. Let’s recap the highlights of Q2 Berlin startup funding and look at companies to watch during the second half of the year:
Q2 Berlin Funding Roundup
As in previous quarters, Ecommerce (37%), followed by software startups (18.6%), are receiving the most funding. Fintech, which I predicted would grow this year, accounted for 11% of all investments, as did Mobile. Edtech and Green/Energy companies accounts for 4.7% each. We saw one investment in biotech and one in gaming.
Average funding for Q2 2015, dropped slightly (less mega-rounds than in Q1) but 2015 average funding for every size of round continues to be higher than 2014, with the exception of seed rounds which are neck and neck at about $1M.
The ten startups that raised the most funding in Q2 include some of the usual suspects: Home24, Rocket Internet’s answer to Ikea, announced Series D funding of $131M. UK investment firm Baillie Gifford led the round with an investment of $98.5M, securing about 9.55% of the shares in Home24. $32.8M were invested by existing shareholders including Rocket Internet SE.
In June, Delivery Hero announced a $110M investment from pre-IPO investors which valued the company at $3.1B. I wrote about this extensively, and why they should IPO in the US on TechCrunch last month.
Foodpanda, Rocket Internet’s food delivery marketplace, announced a $100M funding round led by Goldman Sachs. Existing investors, including Rocket Internet, also participated. Foodpanda has raised over $310M since its launch in 2012.
Lendico, Rocket Internet’s P2P Lending Service, raised $21.9M from Rocket Internet, Access Industries, HV Holtzbrinck Ventures and a new investor.
Berlin’s photo marketplace EyeEm announced an $18M investment led by Thiel’s New York-based Valar Ventures. EyeEm’s previous investors Earlybird Ventures, Passion Capital, Wellington Partners, Atlantic Labs and Open Ocean Capital, also participated in the round.
Smava, a peer-to-peer lending platform, raised $16M led by Phenomen Ventures, along with current investors Earlybird and Neuhaus Partners.
Atheneum Partners reported a $10.8M round led by Vogel Business Media, who paid approximately $7M for one-third of the company. They were joined by Jens Odewald who acquired 2% of the outstanding shares.
Number26, the third Fintech company to make the top ten list this quarter raised a $10.6M Series A round led by Peter Thiel’s Valar Ventures, Swiss entrepreneur Daniel S. Aegerter, and previous investors Earlybird and Redalpine.
Omeicos Therapeutics, a biopharmaceutical company developing first-in-class small molecule therapeutics, announced a $6.57M Series A round. Participating in the round were Vesalius Biocapital, VC Fonds Technologie Berlin, Hightech Gruenderfonds, and KfW Group.
Thermondo, which sells heaters and has developed software that displays every step in the installation process, announced a $6.4M Series B round. Rocket Internet and Holtzbrinck Venture are joining as new investors, together with previous investors Grey Crop, IBB Beteiligungsgesellschaft, and the power company E.ON.
US Investors of Interest
With higher rounds, we are seeing more American investors entering the Berlin startup scene.
I’m most excited about the interest from Peter Thiel and Goldman Sachs. If you’ve read this blog before, you know that I cite Mr. Thiel’s talks in Berlin as insightful observations of our ecosystem needs. In 2013, he shared that Berlin needed some big exits to establish itself as viable on the international stage. A year later Rocket and Zalando lived up to that prediction by successfully going public on the Frankfurt Stock Exchange. In 2014, on a book tour, he told the Financial Times that investors prefer to invest in London companies because people “just work harder . . . They just work less hard in Berlin.” Europe, he said, was a “slacker with low expectations”. Thiel has invested in two London startups (Transferwise and Deepmind) and appears to have changed his mind about underachieving Berlin. In Q2, his Valar Ventures invested $10M into EyeEm’s $18M round and led a $10.6M investment round for Berlin’s Number26.
Goldman Sachs has been heavily investing in startups for years. Between 2009 and 2013, Goldman participated in 63 disclosed investment deals worth nearly $4B, Inc.com reports. Goldman Sachs is interesting for Berlin because the bank prefers late-stage (large) investments, which everyone can agree are difficult to find here. So far this year, Goldman Sachs led a $40M funding round for Mister Spex and also FoodPanda’s $110M round in Q2. These higher, later stage rounds just might be a game changer for the Berlin ecosystem. I look forward to reporting still more Berlin investments from them in future posts.
The Acquisition of 6Wunderkinder
While there were several acquisitions in Q2, Microsoft’s purchase of 6Wunderkinder was definitely the most exciting from a press standpoint. The Wall Street Journal reported the deal in the range between $100M and $200M.
Why is this one so special? This is neither the largest nor the most surprising acquisition we’ve seen. Several recent exits hovered in the hundreds of millions of dollars territory, including Sociomantic’s $200M exit to dunnhumby Ltd. and Quandoo’s $219M acquisition by Japan’s Recruit Holdings. 6Wunderkinder was one of the first Berlin startups to attract US press, talent, and investor attention. It was Sequoia Capital’s first (and as far as I know only) Berlin investment, and was picked up by the NYT, the WSJ, and Bloomberg. They acquisition helps to discredit Thiel’s slacker portrayal of Berlin and install our city on the radar of even more serious international players.
Other acquisitions worth noting include ProSiebenSat.1’s purchase of Adtech startup RapidApe and Rocket Internet’s acquisition of Classpass clone Somuchmore. The terms of both deals remain undisclosed.
An Announced IPO and then a No Go
One positive effect of finishing this quarter’s report a bit late: Yesterday, Berlin’s sole pending startup IPO was cancelled.
In June, German Startups Group began pre-marketing a $79M Frankfurt Entry Standard IPO. The main comparison was Rocket Internet, although German Startups is considerably smaller. The company aimed for $79M in primary proceeds, which would be used to purchase equity in start-ups. There was a greenshoe provision, size yet to be decided, which will be a combination of primary and secondary from shareholders. The deal is Reg S and was expected to follow a two-plus-two schedule, with the lack of a US roadshow offering greater flexibility for accelerating. A two-plus-two approach would have put the beginning of roadshows at around July 1 and pricing at around July 15.
Reuters reports that GSG places the blame on market volatility. “In light of this environment, the management sees no chance of listing the company on the stock exchange at a fair price and generating the desired oversubscription.”
Stay tuned for an entire post on the topic tomorrow.
Where to Watch in Q3
In addition to Delivery Hero’s announcement of a pre-IPO round, Bloomberg reported that HelloFresh, a food delivery startup backed by Rocket Internet SE and Insight Venture Partners, is considering an initial public offering this year.
Investments, companies, funders, volatility. All are growing including the forecast for even bigger deals and strong investment winds blowing toward the other side of the Atlantic.
We’ve already set records in the first half of the year. Look for the next two quarters to quicken the pace.