Dusseldorf, Frankfurt The Berlin financial technology company Topi collects 45 million US dollars from investors. It is true that the start-up sector is getting more and more into a crisis in the context of the Ukraine war, inflation and interest rate hikes. But the case of the founders Charlotte Pallua and Estelle Merle shows that it does not threaten all companies equally.
On the contrary: Experts assume that a few companies could even benefit. On the one hand, this applies to very young companies such as Topi, which was only founded in 2021. On the other hand, for older companies that are now the winners of a quick selection of the best.
Topi offers dealers a platform through which they can offer their products for rent. The first partnership was recently concluded with the electronics retailer Gravis.
For example, medium-sized companies could equip themselves with new computers, smartphones or printers – without high one-off costs, the fintech advertises: “Especially in times of crisis like these, this is a relief for companies,” says Topi co-founder Charlotte Pallua of the Handelsblatt.
The rental contracts run for between twelve and 36 months, after which customers can decide whether they want to buy the products, exchange them for new ones, or return them. Topi also checks the creditworthiness of end customers for its customers. A business model that also works in the crisis. “We are a young company and are still experiencing a very high level of demand from investors,” says Topi co-founder Pallua.
Around 150 investors have contacted them since their first round of financing in December 2021. Back then, Topi had raised about five million dollars.
“We believe that some top companies will emerge from the current economic climate – just as it has been in previous crises,” says Jan Hammer, who invested in Topi with Index Ventures. The best companies in their category, which mastered this phase well and were able to continue to attract and retain skilled workers, would continue to receive money.
Christina Meermann from the Berlin early-stage investor Cherry Ventures makes a similar statement: “The best companies are founded in times of downturn,” he says, referring to the online retailer Zalando, the taxi service Uber and the holiday apartment portal Airbnb. These companies were founded during the 2008 and 2009 financial crisis.
Trending young startups
Many other young companies that recently announced their first or second round of financing are offering solutions to overcome the current major problems in the economy, such as the lack of energy and disrupted supply chains.
The energy start-ups Reverion from Munich and Node Energy from Frankfurt were each able to collect seven million euros. Reverion is working on a technology that will make power generation from biogas more efficient. Node Energy develops software for the management of solar and wind power plants.
Luminovo from Munich, which is developing software for the electronics value chain, also has its finger on the pulse of the times. According to the company, it should help to avoid errors that “can lead to billions of electronic waste” and thus increase productivity. The start-up recently won an investment of eleven million euros for this.
>> Read about this: Luminovo: fresh money for software against the lack of chips
Tradelink, also from Munich, wants to automate the documentation of truck loads and was able to collect twelve million euros for this. A response to the increasingly dramatic shortage of truck drivers.
Early-stage investor Meermann was involved in Luminovo’s financing round with Cherry Ventures. As before the crisis, his company continues to invest “in the best founders in large markets”. Because for the young companies, possible IPOs are usually five to seven years in the future. By this point in time, which is crucial for returns, the market could have turned around long ago.
However, he observes that the financing rounds for young start-ups are somewhat smaller again. The ratings, which are often kept secret at this stage, have also fallen compared to the previous year. This means that the companies are now valued lower by investors based on their sales.
Large start-ups often still manage to attract new financiers.
(Photo: Celonis)
Meermann has already observed the slump in Series A financing. This is usually the first major financing round involving several institutional investors.
In the past year, typically 10 to 15 million euros were paid. And valuations would have mostly been 50 million “pre-money”. This corresponds to the company valuation without the additional money raised. Now it tends to be between eight and ten million and a “pre-money valuation” of 30 to 40 million, says Meermann.
However, these are only observed mean values. Significant upward deviations – see Topi – are still possible. The Berlin fintech is still keeping a low profile when it comes to valuation.
Unicorns can also score with investors
But financing rounds are not limited to young companies in these times. Several of the currently 35 German “unicorns”, which are already valued at billions, have also been able to report large financings in the past three months and in some cases even increase their valuations. For example:
Large financing is not synonymous with “keep it up”. At Sumup, the announcement of a financing round of several hundred million euros coincided closely with the news of a larger round of layoffs. Trade Republic also parted with some employees. In view of the crisis, there must obviously be a clear change of course.
Nevertheless, one thing is clear: Investors have become more selective, in the summer of 2022 there will be significantly fewer deals than in the previous year: Index’s Jan Hammer speaks of a “flight to quality”. This primarily includes business models that require comparatively little capital. This often applies to software solutions for companies.
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In addition to the Celonis investment, a 600 million dollar financing for Contentsquare recently stood out. The Munich-based company offers analysis software that companies can use to better understand the experiences of their customers.
No more money for marketing battles
And the two-year-old Berlin company Charles wants to use its newly raised 20 million dollars to further develop online trading software: This should enable retailers to process sales via the WhatsApp messenger service.
Express suppliers, on the other hand, are currently having a hard time. Companies that deliver purchases to their homes within minutes need hundreds of millions to run advertising campaigns. And they can be quickly knocked out by competitors who have been able to raise even more capital in the marketing battle for customers. The Berlin start-up Gorillas, for example, has been looking for investors for months – so far without success.
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Topi doesn’t have these worries. By the end of next year, the Berlin fintech intends to double its current workforce of 35. In addition, the two founders, Pallua and Merle, are aiming to expand into other countries in the medium term.
More: Layoffs at Trade Republic and Co.: Fintechs are under pressure