DACH venture scene remains on top form

Diana Petrowicz
15 February 2012

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While the rest of Europe has suffered from a low deal volume in 2011, the DACH early-stage sector is going strong. Considering the well-established venture scene, it is not surprising that this region has dominated early-stage in Q4 2011.

The last quarter of 2011 saw 16 deals completed in the DACH region - the highest number of investments in Europe. The majority were recorded in Germany, while Austria saw just one, highlighting significant intra-regional differences.

Early bird catches the worm
Due to its economic landscape and size, Germany has by far the strongest impact on the DACH early-stage market. Last year, a total of 75 early-stage deals amounting to €267.6m took place in Germany. Meanwhile Austria and Switzerland recorded four investments each. With total deal value of €40.7m, Switzerland was slightly ahead of Austria, which only recorded a total of €34m worth of early-stage funding in 2011.

One of the deals that made it into the top 10 of early-stage investments with a disclosed value in Q4 2011 was biotechnology company Curetis. Based in Holzgerlingen, Germany, Curetis specialises in the development and commercialisation of in vitro products for the diagnosis of severe infectious diseases.

The business received €9.6m of funding from a consortium of investors consisting of Forbion Capital Partners, CD-Venture and Roche Venture Fund. Forbion, which led the funding, was first introduced to the company in 2009 but decided not to invest at that time, instead opting to wait and see how the company would develop.

In the meantime, Curetis received a seed funding round from Aeris Capital and a further €24.5m in two series-A rounds by Life Science Partners, Aeris Capital, KfW and BioMedPartner.

In June 2010, the venture provider continued talks over funding and started their due diligence. At this stage, Curetis was able to present a clearer commercial plan and the product testing phase was far more advanced. The company had also been collaborating with the FDA and amended its business plan according to the regulation. The developments convinced Forbion that the time was right for a further financing round.

The capital will enable the company to start its commercial launch and roll-out of the Unyvero product platform in 2012. It also gave Curetis the opportunity to expand its staff to 30 people.

Curetis's investors Life Sciences Partners and Forbion Capital Partners are based in the Netherlands and have offices in Germany. Foreign investors that have entered the DACH market are a common sight and demonstrate how the venture scene has become international over the years. "Many regional venture capital firms are out of business, have left the industry or have raised smaller funds than in the years before," says Holger Reithinger, a GP at Forbion.

Helping hand
To ensure funding for the launch of new companies and their further growth, the German government has launched a number of initiatives to aid funding. High-Tech Gründerfonds is one attempt to close the funding gap. The organisation provides seed funding for young companies operating in the high-tech sector and has been well established during the last years, showing a good track record of portfolio companies. Consequently, it recently closed a second fund at €288.5m. The new investment pot contains capital from companies such as Bosch, Daimler and Carl Zeiss, alongside state funding.

Sturdy foundations
High-Tech Gründerfonds and other regional seed funds provide a strong basis for the support of start-ups and compensate for the reductions in number of private venture capital investors since the financial crisis began. This has helped encourage the formation of enterprises, many of which spin-off from universities or private research departments and, in turn, develop the local venture market, potentially encouraging other investors to the DACH countries.

At the moment, competition between European venture investors in DACH is high and US investors have also been showing an interest in the region. With many promising young companies on the market, deal flow in the German-speaking countries is expected to remain high in 2012, as it has been in the last five years.

According to unquote" data, the number of deals has remained steady between 204 and 312 per year. A slight drop in volume can be seen in 2010, but a year later the number of deals was almost back to the recorded volume of 2009.

The consistent volume of venture investments, together with anecdotal reports of continuing high-quality dealflow, means the outlook for the DACH venture market in 2012 is very positive.