Hamburg Venture capitalist Klaus Hommels criticizes government aid for listed companies such as Tui and Adidas. The state subsidized the corporations “with a loan, although they could simply make a capital increase, in which the mostly foreign existing investors would have to invest,” he told the Handelsblatt. “We protect foreign investors in listed companies. This is where money comes in without old investors reinvesting. “
Hommels supports the European start-up lobby United Tech of Europe. “We want to protect start-ups, not venture capitalists. Therefore, a promotional measure makes sense in which the venture capitalists refill their own money, which is then replenished by the state, ”said the founder of the venture capitalist Lakestar.
But not all young companies could survive: “I think some startups will die that were only kept artificially alive anyway. For this you concentrate on the promising ones. If the government increases such rounds, even more money could flow into better projects in the crisis. ”
Hommels calls for government co-investments in collaboration with the industry. “Therefore, we also need a relevant advocacy group in Brussels with its own ethics, which in itself ensures that no free riders appear,” he said. However, individual European venture capitalists tried to take advantage of the situation. “Some are behaving impossible. We want to counteract this at the association level. It is not about winning the crisis, ”said the 53-year-old.
He sees the crisis as an opportunity for founders to concentrate on real problems. This could help Europe to become more independent of the United States in critical infrastructure. “We cannot rely on Americans for all system-related things. Think about it: The Americans could turn off the credit card infrastructure for us at any time, ”warns Hommels.
“Wouldn’t the biotech company Curevac be from Germans like that? SAP-Funded with founder Dietmar Hopp, the Americans would have snatched this vaccine developer out of our hands. This is a realization that is finally pervading: We have to finance our economy ourselves. ”
Read the entire interview here:
Mr. Hommels, have you postponed or canceled investment rounds yourself because of the crisis?
The most important rule for me is: A promise, also verbally, has to be kept. This is a cultural asset because we come from the land of good merchants. We continue to look at new opportunities as normal.
There is no hesitation?
Well, a no-go is when founders arrive with documents from pre-crisis times that they have not adapted to the new times. In addition, there is now a screening process for everyone: A few months ago, funding was less critical. Now there is a harder selection.
Is it bad?
On the contrary: that brings clarity. This is always the case in difficult times. In the financial crisis, for example, some of today’s very big companies were built – like Zalando, Uber and Airbnb. Why? Because their ideas are based on real needs, which are much more obvious in tough times. More modest means are then sufficient for such ideas.
In your opinion, what are these real needs at the moment?
The topic of helping – something like Nebenan.de. In addition, delivery services go through the roof. Above all, venture capitalists are given a new role. If the biotech company Curevac had not been financed by Germans like SAP co-founder Dietmar Hopp, the Americans would have snatched this vaccine developer out of our hands. This is a realization that is finally pervading: We have to finance our economy ourselves.
Do we not have to count on fewer rounds of financing from overseas simply because travel is currently hardly possible?
On the other hand, the acceptance of video calls has increased. Before Corona, I would have said that you should have met in person first – that’s always better because you get a feel for whether it fits on a human level. In the meantime, however, it is totally accepted to only meet virtually.
Would you make a deal if you only knew people by video?
They have brought together start-up associations from several European countries – probably also via video calls – and are calling for more coordination on the current rescue plans. Why?
Many small associations are not heard in Brussels, so we have to speak with one voice there.
Isn’t your industry lobbying much better than in previous crises? In Germany in particular, start-ups were included in the rescue packages very early on.
Yes that’s true. Through the start-up association, we led Christian Miele with Jörg Kukies, Secretary of State for Finance, Thomas Jarzombek, Digital Representative, and KfW Capital’s Chief, Dr. Jörg Goschin, ideas exchanged. The three do a great job in this difficult situation. However, aid for start-ups is basically not government programs, but is based on initiatives by individuals. Just like Kukies and Jarzombek in Germany, individual politicians are doing this in other European countries. As associations at European level, we want to provide you with an overview and contacts.
How do you start?
First we put an overview of the respective national programs online. We don’t want to evaluate, we want to enable a comparison and exchange of ideas.
Why is it needed?
We need it to prevent deadweight effects. Otherwise no politician can assess what the relevant demands are. That is why we also need a relevant advocacy group in Brussels with its own ethics, which in itself ensures that no free riders appear.
Do you see black sheep in the industry?
Yes, there are also venture capitalists in Germany who no longer stick to existing, written financing commitments in the crisis. Some are behaving impossible. We want to counteract this at the association level. We are not concerned with being crisis winners. Therefore, the aid programs also take some time, because it is very complicated to prevent deadweight effects.
Nevertheless, there is criticism of state aid for start-up financiers. After all, there is already the word risk in the risk capital asset class – and every investor should expect to lose his entire stake.
At first glance this is understandable, but actually pure polemic. Have a look who really should receive billions of state aid: the listed companies Adidas and Tui. But there are hardly any German shareholders behind it. The state supports this with a loan, although they could simply make a capital increase, in which the mostly foreign existing investors would have to invest. In the case of listed companies, we protect foreign investors. This is where money comes in without old investors reinvesting. However, we want to protect start-ups, not venture capitalists. Therefore, a promotional measure makes sense, in which the venture capitalists refill their own money, which is then replenished by the state.
Couldn’t venture capitalists simply inject enough own money, which is still available in most funds?
We plan with different scenarios when we finance start-ups. A reserve is always calculated. But such a lockdown case, in which sales are zero for months, is of course not factored in, so we technically don’t have the money at our disposal. The start-ups therefore need state aid in order to survive a break of several months unscathed – for this special situation alone.
Doesn’t that help you as a venture capitalist?
No, it’s about the survival of innovative start-ups. I myself could just sit back and relax. But we go in full, help the companies, do 1000 things. We are even considering helping KfW Capital with personnel. It’s actually nice that we can now do something together with colleagues like Holtzbrinck Ventures and Eventures. It is a clean event.
They have long advocated that European start-ups should be less dependent on money from the United States and Asia. Do you think that the renationalization tendencies in the corona crisis, for example with closed borders, bring the topic more into the general consciousness?
Yes, because we are now seeing what such a sell-out means: If we could not independently support start-ups in Europe, America could have stolen the German vaccine invention from Curevac. This concerns us all and certainly contributes to the general awareness of the need for action.
The Americans deny that. And wouldn’t that be an exception that occurs every 100 years anyway?
No, that also applies to artificial intelligence, climate issues and many other systemically relevant fields. Do we want to fight the pandemic of movement data from Google and Apple be dependent? We cannot rely on Americans for all system-related matters. Think about it: The Americans could turn off the credit card infrastructure for us at any time.
Does the crisis raise awareness of this?
If we do nothing there, we cannot act autonomously and become technically dependent. That mustn’t happen.
The idea of economic self-sufficiency has long since been a thing of the past in times of globalization, and many corporations operate globally without discrimination. Why should it be different in the start-up area?
I am not concerned with start-ups, but with system-relevant infrastructures. However, these are also developed by start-ups.
The alternative would be an even stronger anchoring of free trade, so that national egotisms are excluded – for example a new edition of the failed transatlantic free trade agreement TTIP.
I would have agreed with you when the President was still called Barack Obama. But at the moment, the politics of the Americans are not reliable.
Do you think that the crisis can lead to a stronger European response, for example in the area of start-up financing?
In any case. There is now a chance to make the voice of start-ups audible in Brussels and explain what kind of regulation we need after the crisis.
How fast do you think the situation will return to normal?
I can’t say that – at the moment everything depends on how quickly we get a vaccination.
Do you dare to predict how severe the slump will be?
I think some startups will die that were only kept artificially alive anyway. For this you concentrate on the promising ones. If the government increases such rounds, even more money could flow into better projects in the crisis.
Mr. Hommels, thank you for the interview.
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