Dusseldorf The Berlin medium-sized business network Maschinenraum has joined forces with nine of the most important German venture capital companies. The network wants to offer a platform on which start-ups can exchange ideas even more closely with family businesses. At the same time, innovations in medium-sized companies should be promoted.
“It is extremely difficult for medium-sized companies to keep track of the start-up scene,” says Tobias Rappers, co-managing director of the machine room, the Handelsblatt. “The cooperation gives them easier access to good start-ups that are tailored to their needs.”
Partners in the cooperation are the venture capital (VC) companies Capnamic, Earlybird, Headline, High-Tech Gründerfonds, La Famiglia, Lakestar, Project A and VSquared, as the Handelsblatt learned in advance. Together they have stakes in more than 1,100 startups, including 40 unicorns, companies valued at more than $1 billion.
“Strong partnerships between German medium-sized companies and start-ups are an important lever for fully exploiting Germany’s growth opportunities and innovation potential,” emphasizes Mathias Haniel, Partner at Lakestar. “If we join forces, we can create a more robust and sustainable future for all,” hopes Christian Miele, General Partner at Headline.
The machine room was founded in 2019 on the initiative of heating engineer Viessmann. He runs a co-working space and innovation hub in an old shoe factory in Berlin’s Prenzlauer Berg district. There, the employees of what are now around 70 family businesses exchange ideas to support each other in the digital transformation.
Family businesses have high hopes for more interaction with venture capitalists and the start-ups in which they are involved. “We are delighted that this cooperation has come about,” says Matthias Friese, Managing Partner of Xpress Ventures, the Handelsblatt. Xpress Ventures is a subsidiary of the logistics company Fiege, which maintains contact with the start-up scene for the medium-sized company and builds new digital companies itself.
The head of XPress Ventures works closely with the machine room general manager.
(Photo: Xpress Ventures)
“Not every family business has the opportunity and the capital to organize contact with the venture capital companies themselves,” explains Friese, who used to be a serial founder himself. “For them, this cooperation is a huge added value.” Many medium-sized companies would not have the opportunity to invest in innovations as radically as needed.
The machine room not only offers co-working space, where several of the family companies involved have even housed their digital units. At the heart of the work are up to 200 virtual exchange formats per year, in which the employees of the partners can network at work level and share their experiences with digital conversion. “Many medium-sized companies follow a path similar to ours, and we can learn from each other,” said Viessmann junior boss Max Viessmann, describing the motive for founding the machine room.
Start-ups can have their ideas evaluated by medium-sized companies
With a strong focus on the exchange of experience between family businesses, the Maschinenraum differs from other similar centers, which are often primarily concerned with access to start-ups and the founding of young companies. The latest example of this is the “Family EntrepreneurTUM” business incubator, which the investor Susanne Klatten set up together with the non-profit UnternehmerTUM business incubator in Munich.
>> Read also: Susanne Klatten starts a start-up center for medium-sized companies
In the future, the VCs and their associated companies are to be integrated into the exchange formats of the machine room. “We know exactly what the problems of family businesses are, and we can approach venture capital companies in a very targeted manner to find out whether their associated companies have solutions that they can present in the machine room,” says Maschinenraum Managing Director Rappers. “We can then bring together the right people to talk to.”
For Jeanette zu Fürstenberg, founding partner of La Famiglia, the merger with the machine room is a “natural progression of our mission to promote innovation in German SMEs and beyond”. Building bridges between medium-sized companies and the start-up scene has always been part of La Famiglia’s DNA.
For company builder Friese it is even a “symbiosis”, as he emphasizes. In this triangle, start-ups could “help themselves in both worlds and use the advantages that close contacts to family businesses bring them and at the same time bring innovation to medium-sized companies”.
It is therefore also planned that the associated companies of the VCs can have their ideas evaluated by the family companies in the machine room. This gives them an earlier assessment of whether their new business models could actually prove themselves in practice.
Arranging investments in start-ups is also planned
Ideally, this should also lead to financial participation. “In the future, we could broker co-investments in start-ups that are interesting for the family businesses,” explains Maschinenraum Managing Director Rappers. It could also be interesting for venture capital companies to bring family businesses into a round of financing as strategic investors.
This also makes sense from the point of view of Fiege manager Friese. “With a minority stake, family businesses can get their foot in the door of interesting start-ups in the early stages,” he says. But this means a high risk that medium-sized companies often do not want to take. “Therefore, it makes sense to leave this risk assessment to the venture capital companies, which have a better view of it,” says Friese.
>> Read also: What makes Jeanette zu Fürstenberg Investor of the Year
Ultimately, everyone involved is also concerned with strengthening Germany as a location for innovation and thus perhaps offering a European alternative to tech clusters such as Silicon Valley. Because it is often the case that promising start-ups are taken over by foreign investors, either because their potential is recognized too late in Germany or because there is no capital available for them in Germany.
The nine VCs involved in the new cooperation together represent an investment volume of more than 7.5 billion euros. But together with the medium-sized companies, they could accompany the founders even better. “With their quick decision-making processes, family businesses are ideal partners for start-ups,” says Klaus Lehmann, partner at High-Tech Gründerfonds.
“It makes perfect sense to prevent other countries from investing in our markets with large capital and buying up models with great potential,” says company builder Friese. “In this way it may be possible to keep potential unicorns in Germany.”
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