Q&A: Partech's Gabriel Matuschka

Before joining Partech International as senior associate in Berlin, you founded and worked at a number of start-ups, including brands4friends and TripHunter. What do you think are the advantages of coming from a founder background?

I think it helps if you have tested the product before you offer it to others. Back then, we raised venture capital ourselves and proposed business strategies to numerous investors. You get a feeling for how the founders feel. And you get a feeling for what are sometimes misjudgements on the side of the venture investor, for example, how much time the start-ups expect to spend at the investors' disposal – which is an enormous amount of time. Usually, the investors understand time is precious for start-ups but sometimes it slips their mind. One could try to be just a little bit more efficient.

It is very valuable to know how it feels to be a start-up founder. That they may think: ‘If I don't get another funding round in two months, I'll run out of money and have to dismiss staff.' It is a lot better if you, as an investor, can communicate that.

There are enough venture investors in Europe and in the US that do not come from an entrepreneurial background. However, I think it is more useful to employ a mixture of people with a diverse range of backgrounds. I am not a fan of venture firms that employ only McKinsey advisers.

In Germany and in Europe in general, there is a lack of venture investors who have experienced both sides of the coin.

Why do you think Germany's venture market is still less prosperous than other European countries?

It is surprisingly difficult for a German venture fund to raise capital in Germany. In general, there is a lot of money in Germany; we have many institutional investors for example. But the venture market has been underperforming in Germany for a long time, especially five or six years ago. So, the German LPs now tend to try their luck outside Germany rather than nationally. It is significantly more difficult to raise money in Germany than it is in France or the UK.

What do you think of the reproach that Germany is full of start-ups but there are hardly any German venture firms that invest in later-stage deals such as series-B funding rounds?

That is completely true; there are hardly any venture investors. But I do not think this is much of a problem as there are only few start-ups in Germany that reach the point of looking into internationalisation and expansion.

If you look at series-B or C funding rounds and the responsible venture investors in German deals, you see there are hardly any German investors involved. But that does not really matter, as the start-ups at that stage do not need any local partners any more.

In even later-stage deals, you will find many German private equity firms again. There are many ‘early-phase private equity' firms, as well as international ones based in Germany.

The bigger problem is series-A funding rounds, as this is where local investors are needed.

Ignoring the fact that start-ups ready for series-B or C investments do not necessarily need a local investor, why do you think Germany sees so little of these funding rounds?

The number of German venture firms that raise funds of €75m or more is very small. If there are limited funds of that size, it is, of course, more difficult for the start-up founders to find somebody to pitch a business plan to. If there were more investors of that kind there would be more series-B or C funding rounds.

It has always been complex to raise a venture fund in Germany. German LPs are still suspicious of the German venture market, making the entire situation rather problematic.

Do you think German venture firms are too focused on quick returns and less prepared to take risks to foster start-ups in later stages?

In my opinion, this was the case for a very long time but not any more. There are a lot of differences on a firm-to-firm basis. If you look at Earlybird in Germany, you do not have the impression that they do only risk-free deals. However, if you look at other German venture firms, then this is very much the case.

Many venture players are also investing according to more precise strategies. For a long time – and this was one of the biggest disadvantages of the venture capital market in Europe – many funds said: "We will just do anything we can." This is changing slowly.

But it is surely still more difficult for a crazy consumer internet-themed company to raise capital in Germany than it would be from non-German investors.

What would you change about the German venture market?

What would be good for Germany and for venture capital as a whole is if we could find ways to increase the amount of investable resources for the venture market. That would be desirable for founders as well as investors. Second, there is a need for more professionalism and an improvement of venture funds' performance. Third, we have to find more start-ups that develop into pan-European success stories.

You can tell venture deals in Germany happen on a more professional level than they did years ago. It is a general learning of how the venture model works.

Start-up-founder-turned-venture capitalist Gabriel Matuschka on the German venture market

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