European firm Btov aims to take leading position in industrial tech

By Alex Derber, VCJ Correspondent

Of the many routes to forming a VC firm, perhaps none is so outlandish as launching one from a TV show.

Yet that was considered by Btov Partners (originally Brains to Venture Partners), which was set up in 2000 by students with a vision to bring venture capital to the masses.

The students started a show in which reps for each of two startups had 30 seconds to pitch their ideas. The reps took questions from a jury and then an investing angel would choose the better of the two. The angel often also invested in the winner.

Ultimately, Btov’s founders opted to build a private investor network to raise their initial capital, and by 2007 this strategy had proved successful enough to enable the firm to launch its first institutional fund.

The firm, with offices in St Gallen, Switzerland, and Munich, recently reached an €80 million ($86 million) second close for its maiden fund dedicated to industrial technology.

Having split its investment focus in 2015, Btov also plans to launch a second digital technology fund in the second half. This will target €100 million to €150 million ($107 million to $162 million), up to twice the size of its 2015-vintage predecessor.

The hard cap for the new industrial technology fund is €120 million ($130 million), with at least a €100 million ($107 million) final close planned for mid-2019.

LPs in the new fund include European and national investment agencies, three banks, foundations and family offices, some corporates and elements of the firm’s private investor network.

“There is a lot of expertise and experience in the private investor network, and we try to put that to the benefit of the fund. And that works even better if they are invested in the fund,” says Partner Robert Gallenberger, who heads up Industrial Technologies I.

Other significant investors are Btov’s managers, who together with the firm have committed more than 4 percent of the fund.

Their confidence in Europe’s industrial-tech opportunities stems from several factors:

  • Europe’s market-leading incumbents in industrial automation;
  • a faster innovation cycle, since corporates are speeding their investments in startups, and
  • deal flow gushing from Europe’s technical universities and numerous accelerator and incubation programs.

Gallenberger, who has worked in car production as a mechanical engineer and on the investment side with Gimv, Belgium’s leading VC, says Europe’s big manufacturers have awakened to innovation investment.

“When I was working at BMW, a startup could have been knocking for five years on the door of the plant and nobody would have opened,” he said. “It’s very different now.”

He also notes a broader range of opportunities in Europe, where valuations are lower than in the U.S. and more varied ideas have funding potential.

“On the West Coast there are the hype topics which are defined by a very small number of people … and as a startup you need to address a huge market or no one will pay attention,” said Gallenberger.

He adds: “Here we can start with smaller things and maybe discover there is something huge behind it.”

Btov tends to invest €1 million to €3 million initially at the pre-Series A stage and has completed one investment from the new fund, in Dyemansion, the Munich specialist in post-processing for 3D-printed parts.

The firm invests across Europe, though a majority of any fund typically goes into German-speaking countries.

It’s also well-versed in syndicating rounds with corporate investors, who are a major part of industrial-technology investment in Europe, according to Gallenberger.

He praises the knowledge corporates bring to the table, as well as their ability to provide quicker proof points for startup innovation, while noting that care must be taken when investing alongside them:

“The corporate world ticks in two-to-three-year rotations, and our investment horizons are four to eight years, which means we can see four different representatives from the corporate at the board table.”

He also cites the need not to give corporates specific rights in exits, of which Btov has completed several in the past years.

Recent realizations include Alibaba’s 2019 purchase of the Berlin big-data company Data Artisans for $103 million and last year’s €284 million purchase of fintech business Finanzcheck by Scout24.

Btov was founded by Nicole Herzog, Philip Schnedler, Jan Bomholt, Florian Schweitzer and Arnold Hermann. Only Florian is still operationally active and is CEO of Btov and partner of the digital tech fund.

Alex Derber is a U.K.-based contributor. He can be reached at alex@derbereditorial.com.