"We want to make founders an attractive offer"
Among founders, corporations have a bad reputation: entrepreneurs fear too many regulations, too little autonomy. But there are good reasons to sell your startup to a corporation. Stephan Thurm, head of digital at Funke Mediengruppe, has already accompanied many company integrations. In this interview with Christoph Jost, he talks about the Funke approach, the advantages of a parent group and gives founders tips for their exit decision.
Chief Digital Officer Funke Mediengruppe
Stephan Thurm has been working in the digital sector for more than 20 years. He has been the head of digital at the Funke Mediengruppe since 2014. He played a key role in developing and driving the company's digital strategy. Most recently, he was also involved in an investment to build a portfolio that will support organic corporate growth. Stephan Thurm and Christoph Jost met in 2014 when the Funke Mediengruppe acquired Christoph's company Absolventa.
Managing Partner of FLEX Capital
FLEX Capital is a private equity fund founded by Christoph Jost and other serial entrepreneurs that invests in profitable and growing companies from the German Internet and software medium-sized companies. Christoph Jost founded the online job exchange Absolventa and the online listing group Passion 4 Gästezimmer. He successfully sold both companies to the Funke Mediengruppe.
Stephan, we worked together intensively for three or four years when I sold my company to the Funke Mediengruppe. What I found very impressive during that time was your founder-friendly approach. How would you describe Funke's concept in terms of founder's integration? What is special compared to other companies?
Stephan: Funke is a corporation, but also a family business. We don't run after quarterly targets; we want to generate sustainable success and stay in the publishing sector. That is the mission that we have at Funke.
For us, it was and is important to win entrepreneurs as partners, even beyond the earn-out. Especially at the time when we were still learning a lot about digitization. It was always clear to us, however, that entrepreneurs do not like to be forced into a corset, that they want to be creative and contribute their own ideas. But in a corporation, there are of course lines that you have to move within.
We are therefore trying to find a good middle course and make founders an attractive offer, to present kind of a menu card to them. Because there are always areas in which we are better positioned as a group, for example we have our own legal department, which most startups do not have. And now during the Corona pandemic, our small digital holdings with ten employees could be vaccinated because we organized the process as the parent company. They couldn't have done it without us. It seems like a small thing, but it has huge effects. In general, in times like this, companies appreciate having a mother ship that can carry them through crises.
Christoph, you are a good example of how to continue working together beyond the earn-out and developing new projects. That is exactly our goal.
Christoph: What really helped me after the sale was the grace period. You presented your menu card, but we didn't have to change everything immediately. First, I was able to talk to other founders who had already done the integration. The team was also able to slowly find its way into the new structures. For some things, we decided according to the pull procedure: We don't have to do it yet, but we would like to. Other things were not enriching for us, but we had to implement them. But it was ok because the overall package of push and pull was right.
We don't run after quarterly targets; we want to generate sustainable success and stay in the publishing sector. That is the mission that we have at Funke.
How has your approach developed from the first acquisitions to today? Are you doing anything else at all?
Stephan: The basic philosophy has stayed the same. We just have more experience in integration. Funke has always done M&A, but in the publishing world. And it makes a difference whether we as Funke buy a newspaper or a digital startup with 20 employees. It has a completely different corporate culture. The understanding of the differences, that result for the integration, has grown. The integration work of bookkeeping, controlling, etc. also becomes easier in terms of craftsmanship if you have done it a few times. But it always remains a work in progress. You have to keep developing the process, and that's what we do with every deal.
What really helped me after the sale was the grace period. You presented your menu card, but we didn't have to change everything immediately. First, I was able to talk to other founders who had already done the integration. The team was also able to slowly find its way into the new structures.
As a PE fund, we naturally have a lot of contact with founders who want to sell their company. What would you tell them: What should you be prepared for when selling to a corporation and what can you expect at Funke?
Stephan: Whether a PE fund or a group is the better choice depends on the buyer's strategy. Funke is a strategic investor. We want to buy, develop and keep companies. PE is usually interested in reselling companies.
If you decide to work with a private equity fund, the advantage is that everyone agrees on the goals: You want a successful exit. It's extremely tough and you have tight timing. It is different with a strategic investor. He can support a lot and often has cluster expertise. With us it's the media area. But because it has a long-term perspective, another way of incentivizing management is needed. Because after the earn-out, the company will at some point be a normal digital company that makes a profit with certain margins. This is a different game. We have no time pressure. We sometimes also follow the buy and build approach and see which acquisitions can still make sense for a certain topic, but as PE, the incentive is a little easier.
Christoph: What I found interesting: When I left after about three years, most of the team stayed and to this day nobody has said a bad word about Funke. The retrospective showed us that we had found the right partner. Many managers, the CTO, the Head of Sales, were there from the beginning and then came to a phase of life with family and children in which the company was exactly the right environment. You no longer had to go up to speed every day but could give things the time they needed.
Whether a PE fund or a group is the better choice depends on the buyer's strategy. Funke is a strategic investor. We want to buy, develop and keep companies.