Landshut, Lippstadt, Hennef: Start-up boom hits provinces

Dusseldorf, Frankfurt The young technology company HiveMQ receives 40 million euros from international investors. It’s a message you often hear from the start-up scene in Berlin. However, the software provider for the Internet of Things (IoT) is not based in the capital, but in Landshut in Lower Bavaria. There he develops infrastructure software with which large corporations such as Audi, BMW and Honeywell connect their cars, machines and drones in real time.

HiveMQ has a chance to become “the world’s leading platform” for data exchange between IoT devices, said Christoph Hornung of British investor Molten Ventures, who is leading the financing round, on Wednesday. The state fund Mubadala from the United Arab Emirates and the Munich venture capital firms Earlybird and Senovo are also involved and financing the expansion to America.

Landshut, with a good 70,000 inhabitants, is better known for its medieval Trausnitz Castle than for a technological landscape. But it is becoming increasingly clear that venture capital companies are now looking for potential start-ups worth billions in the provinces as well.

Hendrik Brandis, founding partner of Earlybird, sees a “clear shift” in his portfolio: According to this, three quarters of Earlybird’s investments between 2009 and 2014 went to the nine largest European tech locations, including London, Berlin, Munich, Paris and Amsterdam. Between 2015 and 2021, the rate dropped to 56 percent.

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HiveMQ is just one example of this. A whole series of companies from small and medium-sized towns should become known all over the world with investor money. This is shown by a search in the commercial register. The analysis company Startupdetector searched this for the Handelsblatt for indications of larger financing rounds in communities with fewer than 100,000 inhabitants. The criteria: capital increases of 20 percent and more, at least two venture capitalists involved and a previously completed financing round.

New investor strategy: look away from the metropolises

The result is a list of 22 companies, some of which have been financed with amounts in the high millions since the beginning of last year. HiveMQ is not included yet.

Most of the companies come from near Munich. This includes Kewazo from Garching: With the 4.2 million euros from the second round of financing in September, the founding team around Artem Kuchukov and Ekaterina Grib want to further develop their construction robot technology.

The 19,000-inhabitant community Gilching even has a robotic unicorn with Agile Robots: The start-up was valued at more than one billion dollars in a 186 million euro financing round in September.

But investments are also being made elsewhere: in Hannoversch Münden in Lower Saxony, general practitioner and emergency physician Benjamin Gutermann has launched a platform for remote medical diagnosis. At the end of 2021, there were seven million euros to further develop the MetKitDoc software. Creapaper from Hennef near Bonn was able to raise 20 million euros to expand its CO2-saving grass paper for hygiene products, food packaging and bags.

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Two factors are driving the development. On the one hand, competition among venture capitalists is increasing. Since there are many new early-stage financiers, it is “a strategy for some investors to look for top start-ups away from the metropolises,” says investor Romy Schnelle from the High-Tech Gründerfonds.

On the other hand, the ongoing trend towards digital networking plays an important role, says Earlybird partner Brandis: In the past, start-up entrepreneurs were most likely to find their co-founders, investors, employees and consultants in start-up strongholds. Networking is now increasingly taking place virtually and independent of location.

“The critical size for innovations are always brilliant minds, 85 percent of which can be found in the regions,” says Brandis. Now they could use their potential through access to resources.

Benefits when looking for employees

In conversation with the entrepreneurs, reasons away from metropolises almost sound like an insider tip. “The Landshut location has never harmed us, but rather helped us,” says HiveMQ boss Christian Götz. His company benefits from the proximity to the University of Applied Sciences (HAW), where the three founders met while studying computer science. “In Landshut at the university, the competition for talent is significantly lower than in Munich.”

Philip Rürup, on the other hand, often finds employees at established companies. Your debt collection start-up Troy, founded in 2017, is based in Lippstadt, Westphalia. “We have a relatively large number of traditional debt collection companies in the area, and employees are always keen to switch to us,” says Rürup.

Christian Götz, Christoph Schäbel and Dominik Obermaier (from left):

The founders of HiveMQ met at the university in Landshut – and still find many of their employees there today.

(Photo: HiveMQ)

According to Troy, he currently handles debt collection processes for around 70 companies and advertises that “debt collection is a positive experience”. “Debt collection procedures often trigger a great deal of uncertainty,” says Rürup. Troy wants to show “openly and transparently” how the process of payment and non-payment continues. There is also support from psychologists. The approach apparently also convinces potential employees – and investors.

Most recently, Troy received more than ten million euros. The money goes into expansion: the company wants to act as a service provider for debt collection companies in other countries. The platform is to be used in South Africa and Australia in the future, with local partner companies handling the process.

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The location of the robotics start-up Coboworx is probably the most surprising. The company was founded in 2019 in the Rhineland-Palatinate wine-growing community of Osann-Monzel. Some start-ups in Berlin and Munich have more employees than there are residents in the 1,700-person community on the Moselle.

Nevertheless, investors have discovered the start-up that develops ready-to-use robotic cells and offers robotic solutions for small and medium-sized companies. An app helps to set up the robot for a palletizing task, for example. Last September, Picus Capital and the technology holding Team Global, among others, invested 4.5 million euros in the company.

Co-founder Olaf Gehrels is confident that his company, which currently has 25 employees, will not suffer as much from fluctuation as start-ups in major cities. Employee retention and loyalty are generally significantly higher in rural regions, as is the length of time they stay in the company.

External offices in Hamburg or Dresden

Whether HiveMQ in Landshut, Troy in Lippstadt or Coboworx in Osann-Monzel: The location history of the young start-ups also includes the fact that they have all now opened offices in large cities. “We realized that we can’t expect the best software developers in the world to come to Lippstadt,” says Philip Rürup. That’s why his company has set up a location in Hamburg, opened an office in Lemmer in the Netherlands and now enables remote work from anywhere.

Olaf Gehrels has had similar experiences at Coboworx with certain skilled workers: young talents are generally enthusiastic about moving to the region for an exciting task. But this is much more difficult for software engineers and experts for digital products such as UI designers, who are responsible for the visual design of user interfaces. Coboworx has offices in Dresden and Berlin for them.

HiveMQ boss Christian Götz is pragmatic. He wants to open new offices where he can find the employees who can advance his sales. The first is currently being set up in Munich, for the second he is thinking of North Rhine-Westphalia.

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