Venture Capital & Consulting

As one of Germany’s top internet and mobile venture capital and consulting firms we are your partner for starting and growing your business. We invest in software and service companies that make use of online and mobile technologies with disruptive business ideas and the potential to redefine established markets. We actively support our founding teams with resources and comprehensive knowledge as well as established companies in launching and spinning in internet and mobile technology business models.

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IS B2B THE NEXT BIG THING?

According to Morris, Pitt and Honeycutt, the huge growth that B2B marketing is experiencing is largely due to three “revolutions”

1. The Technological Revolution:

The internet and digital technology has changed our lives much more than we realize and the current generation of buyers have much more power in their decision making process. This is also true for the B2B industry, which involves digital interactions that are constantly increasing.

2. The Entrepreneurial Revolution

Over the last few years of macro-economic downturns, many companies are becoming leaner, by downsizing staff and trimming their budgets, as well as trying to reinvent themselves. Speed and innovation are key to standing above the competition, and B2B marketing is taking the lead in identifying new users for existing products, as well as new products to satisfy unmet needs.

3. The Marketing Revolution:

Customization is becoming the norm. The solution provided to every customer is being tailored to fit their needs, and gone are the days when “mass-market” was commonplace.

The internet, especially social media, has become one of the most important sources for B2B customers. On the seller’s side, the share of revenues from B2B sales through digital distribution channels has doubled over the last 10 years. This can be partly attributed to the fact that digital distribution channels have very low fixed costs. It also helps them acquire new consumer groups such as SMEs, while allowing them to modify their “Go-to-Market” approach.

Almost half the consumers in the B2B realm prefer less face-to-face sales time and more interactions over the internet, while also demanding more flexibility in the design of their product.

As a consequence, B2B marketing budgets are on the rise as well. Almost half of marketers in the B2B space have decided to increase their budgets for 2013. Specifically, 67.2% of marketers plan to increase their digital marketing spending, and 52.5% of content marketers will up their search marketing budgets [1].

Dell came up with the “Dell Social Media Command Centre” in 2010 that tracks all references to Dell in social media, in multiple languages. All the employees are trained at a “Social Media University” which allows them to represent Dell in social media and the blogosphere. This allows each department of Dell to use social media for representing its own part of the business.

Perhaps the golden age for B2B has arrived. What we are seeing today is a major shift in marketing trends, and to think that we are not moving forward would be wrong. Regardless of what era we find ourselves in, companies must keep up with the times or risk being left behind.

High valuations of Internet companies: Justified?

Facebook is currently valued at $100 Billion, while Forbes estimates that Twitter is valued at around $10 Billion. To some, this might be slightly reminiscent of 1999, the dreaded dotcom bubble. So what is it about internet companies that drive such high valuations?

To answer this question we need to delve deeper into the topic of why internet companies, including those that make no money (yet!), have “high” valuations. It can be due to a variety of reasons, such as:

  • A highly successful team
  • The space is buzzing with investors who compete to fund, and thus drive up the valuation.
  • High potential to be bought out by a bigger player like Google or Yahoo
  • The focus is on building the product/brand/user base, and monetization is not a priority at the moment

Valuation does not just denote the current performance of a company, but its potential for future growth.

Let us take the example of Dropbox, which has a $4 Billion+ valuation. As of 2011, Dropbox had revenues of about $240 Million, a user base of 50+ million (currently pegged at 100+ million) and only 4% of these users had paid account. Quite impressive at that time for a 4 year old company!

Juxtaposing the above points with Dropbox,

Team: Dropbox seems to have a great team and attracts a lot of smart talent from across the globe. The fact that the founders are still with the company says a lot.

The Space: A large majority of the users are yet to pay, and 2GB is hardly enough space these days. Besides, Cloud Computing has seen 50% plus growth rates in recent times and is a very lucrative sector to be a part of.

Exit Potential: With major players in the industry such as Google and Microsoft, each with their own offerings in cloud storage, the competition is bound to intensify. There are high chances that one of them will attempt to buy Dropbox to hold a majority share of the market.

To address the question of high valuations for pre-revenue firms, let’s consider Quora, a Q&A website with a $1 Billion valuation.

Monetization:

The focus of the firm currently is to develop its user base and product offering. Despite not having developed a solid way of bringing in money, it has acquired millions in funding from VC firms.

This can be attributed to the fact that the market potential has been proven. Quora is a treasure trove of information and there are multiple B2B or B2C methods to use it. And of course, there is always advertising.

So…. are these astronomical numbers justified?

Internet and other tech stocks were overvalued in 1999 shortly before the dot-com bubble burst but the sector is not in the same kind of peril today. Wharton finance professor Jeremy Siegel notes that it is a “world of difference”. Back then, notably in April 1999, tech firms such as AOL were trading at around 700 times their Earnings per Share (EPS), and had close to 20 million subscribers. It is not the same case as today, where firms like Google and Microsoft are trading at about 18 times EPS, which can hardly be classified as overvalued when the Nasdaq index as a whole is trading at 15 times EPS (as of 22.03.2013). Besides, the number of internet users in 1999 was a meagre 250 million, compared to today’s 2.8+ Billion.

One anomaly is Facebook which is currently at close to 200 times EPS. In 1999, the uncertainty was centred on whether and how Internet companies would make money; it turned out a lot of them couldn’t, or at least not enough. This time around, talk of another tech bubble is focused on firms that have revenue streams and even profits. There are few doubts that seven-year-old Facebook is viable. The uncertainty is focused on what additional revenue streams it might leverage from the community it is amassing and how big those revenues can grow.

In the end, it is not a question of inflated numbers but whether each firm can live up to the expectations.

Ralph & Andreas being interviewed by Gründerszene

http://www.gruenderszene.de/interviews/catagonia-suchen-rohdiamanten

Catagonia Venture Lounge 2012

Catagonia Venture Lounge takes place as an annual networking event shortly before year end on the rooftops of Berlin. The objective is to unite investors, business angels, founders and people with an interest in venture capital in a cool and relaxed setting.

The 2012 edition gathered professionals from these different universes and we are proud to have brought them together under the motto ‘Building Bridges’.

We interviewed most of our attendees during the course of the evening and asked them a few questions including:

What is the biggest mistake that founders make?

What does ‘Mobile’ mean to you?

What are the hot topics for the future?

Watch the answers in our Videos below (In German), featuring among others Ferry Heilemann, founder of Daily Deal & Heilemann Ventures, Christoph Raethke, founder of Berlin Startup Academy, Christoph Walther, CEO of CNC, David Dean, Senior Partner at BCG, Bodo Thielmann, COO at Axel Springer and many more…!

What is the biggest mistake that founders make? - Interviews at Catagonia Venture Lounge 2012

What does ‘Mobile’ mean to you? - Interviews at Catagonia Venture Lounge 2012

What are the hot topics for the future? - Interviews at Catagonia Venture Lounge 2012

"Ist Berlin das neue Silicon Valley?" - Interviews auf der Catagonia Venture Lounge

Die Catagonia Venture Lounge findet als jährliches Networkingevent kurz vor Jahresende über den Dächern von Berlin statt und hat zum Ziel, Investoren, Business Angels, Gründer und Venture Capital-Interessierte in lockerer Atmosphäre zum ungezwungenen Gedankenaustausch zusammenzubringen. Der Spaß steht dabei im Vordergrund und führt oft zu den besten Ideen und Konstellationen aus einer angeregten Diskussion. Wir fragten die Teilnehmer:

a) Was zeichnet Berlin für Gründer, Investoren und Menschen mit Ideen aus?
b) Wird Berlin das neue Silicon Valley und was begünstigt diese Entwicklung?
c) Was ist bei einem Start up in Berlin zu beachten?

Für alle Interessierten gibt es hier nochmal die Einzelbeiträge der Befragten in voller Länge als Downloadlink.

Viel Spaß beim Anschauen!

"Is Berlin the European Silicon Valley?" - Interview at Catagonia Venture Lounge

Catagonia Venture Lounge takes place as an annual networking event shortly before year end on the rooftops of Berlin. The objective is to unite investors, business angels, founders and people with an interest in venture capital in a cool and relaxed setting. We asked Eran Davidson, Managing Partner and CEO of Hasso Plattner Ventures a) What makes Berlin exciting for founders, investors and people with ideas? and b) Will Berlin be the next Silicon Valley and what accelerates this development?

Enjoy watching!

Where do you see Berlin’s start-up scene going?

Anne is a French intern at Catagonia. Here’s a snapshot of her Berliner experience. 


The one thing I learned about Berlin, after having lived there for the past year, is that it’s a city full of contrasts and contradictions: Berlin is a mecca for bohemian lifestyle seekers and penniless artists craving for inspiration, but it is also the capital of one of the world’s strongest economies. Berlin has one of the highest unemployment rates in Germany (14,2%), but at the same time attracts numerous people who want to set up their own business.

A lot of my friends found jobs in trendy Berlin start-ups. Zalando, Brands4friends, Mister Spex, Aupeo, eDarling, Wooga, etc. – some of the most exciting new German companies are founded here. Others, like the Swedish start-up Soundcloud, on purpose moved from Stockholm to Berlin. Yet, in this context of entrepreneurial effervescence, some major criticism has been made to Berlin over and over. Berlin, which is the cradle of creativity, oddly seemed to show more interest in establishing German copycats of successful US firms (StudiVZ for Facebook, My City Deal for Groupon, 9flats for Airbnb) than creating something brand new.

I personally wanted to work in Venture Capital and stay in Berlin. Surprisingly not such a good combination. Indeed, I rapidly discovered that if Berlin truly is Europe’s new hottest tech hub for start-ups, the main VCs are based in Munich, Frankfurt or Hamburg. You would think: where you find start-ups, you’ll find VCs. As in the Silicon Valley, where the coexistence between founders and investors creates a stimulating synergy. But it’s not the case in Berlin. 

A city full of promising start-ups, but only a few VCs. A city driven by creativity, but only backing copycats. Just further contradictions. What has been described to me as the new Silicon Valley suddenly seemed to present huge drawbacks.

But after observing the local entrepreneurial scene and working at Catagonia for the last 3 months, I have to admit I’m no longer concerned about Berlin’s future as Europe’s new tech hub. There might be copycats. However, what strikes me the most, are all the exciting projects flourishing over the city. The fun one, like EyeEm, a new smart camera App. The mysterious one, like Amen, a stealth-mode start-up who already caught the eyes of a few big investors in the US. As for Berlin-based VCs, it’s a fact: more and more funds are considering settling in Berlin. The Munich team of EarlyBird recently set the example by opening a new office in the German capital.

In addition the city offers strong incentives. No need to dwell on the attractive cost of living. Even if they’re steadily getting higher, everyone knows you still find some of the cheapest rents in Europe. It’s an undeniable perk to attract young companies and freshly out of college job seekers. After a year of study in Berlin, an overwhelming majority of my classmates wanted to stay in the city for their internship, badly. Even if the salaries were lower than the ones in Frankfurt or Munich, people were willing to work for less due to the vibrancy of the city’s cultural offer. Even if Berlin doesn’t offer a lot of opportunity for business school post-graduates like us, people were willing to widen their job-hunting perimeter due to the fascination for the city’s nightlife.

No, I’m not worried about Berlin. With its army of talented founders and its geographical proximity to all the emerging markets, the city definitely is a fertile ground for high-tech start-ups. And if you look at the next 15 years, I would bet Berlin to be the world’s leading start-up hub.

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