Berlin, March 16, 2020.
German medium-sized companies program first-class software, but are facing structural growth limits at the same time. To tackle this predicament, six entrepreneurs have now set up a fund of 120 million euros. The common goal: With their investments and know-how, they want to support promising software pioneers from German medium-sized companies to make full use of their potential and thus strengthen Germany as a digital location in the long run.
“There are numerous medium-sized Internet and software companies in Germany that have developed into real tech champions on their own in recent years. Without a business plan and risk capital. We want to support these tech pioneers once they reach structural growth limits. This means that a larger part of the tech added value remains in Germany”, say the two founding partners, Christoph Jost and Peter Waleczek.
There are 11,000 medium-sized software and Internet companies in Germany
Medium-sized companies have always been the backbone of German innovation: 99 percent of all companies in Germany are medium-sized and around 60 percent of all German employees work for them. Comparatively unknown is the fact that there are also 11,000 medium-sized software and Internet companies. This MitTECHstand generates a turnover of 152 billion euros, employs half a million people and is growing three times as fast as the rest of the middle-class companies. Many of these digital pioneers were already founded in the 1980s and 1990s and they have developed software solutions which are used today in process automation or Industry 4.0 applications.
“We mainly associate software solutions with young start-ups from Berlin or Munich. In fact, we also have enormous innovative strength in classic software from medium-sized companies. There are many tinkerers in Germany who have developed really good software solutions and brought them to market. We want to build a platform for these tech pioneers to make the next growth steps easier for them,” says Felix Haas, Bits & Pretzels organizer and FLEX founding partner.
Long-term investment horizon
FLEX Capital provides medium-sized software companies with capital and know-how so that they can better assert themselves in international competition and scale faster. For this purpose, FLEX Capital invests 5 to 25 million euros in majority shares – among other things in the context of succession arrangements – or in significant minority shares. As a rule, these companies generate between 5 and 30 million euros, grow steadily and operate profitably. In addition, FLEX Capital supports its portfolio companies in setting up professional structures, plus providing funds for promising growth projects and add-on acquisitions.
First portfolio company in the fund
FLEX Capital’s first portfolio company is a software world market leader from Bielefeld: Egoditor. The company operates internationally, generates 90 percent of its sales abroad and has 100,000 paying customers. Nils Drescher and Nils Engelking founded Egoditor in 2009. They developed the company without external capital into a pioneer and market leader for QR code marketing software with annual growth rates in the mid double-digit range. Together with FLEX Capital, the founders of Egoditor decided to take the next development step.
A fund for German tech pioneers
The six founders and partners of FLEX Capital are all successful software and internet entrepreneurs who have founded numerous MitTECHstand companies themselves, including Absolventa, Insparx, Enmacc, Ada, IDnow and Amiando. In addition, the team has made more than 130 tech investments (including Adyen, DeliveryHero, Buyer Portal, Thermondo, TIER Mobility, Ladenzeile, Sellics, Fitter Room). The majority of the investors are also German software and internet entrepreneurs who are familiar with the MitTECH stand and its challenges.