Why some startups are getting through the crisis better

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Hamburg Johannes Reck is bursting with motivation. “Work in the corona crisis is“ more productive and lively than ever ”, the founder of GetYourGuide reported a few days ago at a virtual start-up meeting. GetYourGuide has been hit as hard by the corona crisis as hardly any other major German start-up.

The Berliners convey travel experiences – a business that has almost completely come to a standstill with the worldwide border closings. But GetYourGuide apparently copes with the situation thanks to a well-filled cash register.

The company founded in 2009 is not an isolated case. There is now some evidence that the German start-up scene and its financiers are coming out of the crisis faster and more gently than many other sectors of the economy – despite the initially large and loudly voiced concerns.

On the one hand, contrary to what was originally feared, new financing rounds and venture capital funds have demonstrably not been completely discontinued in recent weeks. On the other hand, the promised state start-up aid is now getting going without triggering a big rush.

The GetYourGuide case shows almost ideally why innovative and growth-oriented start-ups can better adapt to the corona crisis than established companies. Unlike traditional travel companies such as Tui and Condor, which quickly got staggered, GetYourGuide does not finance its day-to-day business to a large extent from its daily sales, but from its own cash reserve.

Founder Reck received an impressive $ 484 million from investors like Softbank just a year ago. Most of the money is used to get GetYourGuide ready for an IPO. Reck can now simply drag this plan out.

Originally it should be ready in about 18 months – now Reck plans with a delay of two to three years. These would have to be “bridged as productively and cost-effectively as possible,” he says. In the acute crisis, as with established companies, short-time work helps. At the same time, Reck can save on marketing.

The development work continues: His team is improving the search function and trip planning. With this, GetYourGuide can come out of the crisis stronger, Reck hopes. In any case, the money will last until 2023, he says. No corona crisis scenario lasts longer.

New normalcy after the hype

Reck even works as a donor on the side. Despite the crisis, he put private money into the Ingolstadt start-up Arculus, which is currently working on replacing the assembly line in car factories with self-driving robots. 16 million euros will flow from various investors to the young company, which wants to help the car industry save in the recession.

A number of founders are reporting similar rounds despite the crisis. There are still no hard numbers from the usual statistics providers such as Dealroom.co and EY, but so far only the very large financing rounds have apparently failed to materialize. “The situation is less dramatic than initially thought – but there is still a short-term need for help,” says Yoram Wijngaarde, head of the market researcher Dealroom.co.

Although the number of financing rounds remained stable until the end of April, valuations could drop in the coming months. However, this could also be a healing correction in the start-up market that had overheated before the crisis. 6.7 billion euros of venture capital flowed to German start-ups in 2019 alone – a record amount.

Mega deals like GetYourGuide in 2019 mostly involve Americans and Asians as investors, who are currently unable to inspect the founders personally because of the travel warnings and therefore do not make any money. However, the initial concern of the German scene is that overseas investors will withdraw from Europe as they once did after the New Market burst.

After all, the ecosystem in Berlin, Munich and London has so far come through the crisis well. And contrary to what was initially expected, the Corona pandemic does not affect Europe any worse than the United States. On the contrary, Germany is currently considered a corona model country in parts of the USA. As soon as the intercontinental flights start again regularly, investors should come back.

In Germany, even in the crisis, new funds are starting up: In May, the Japanese financial group SBI announced that it wanted to launch a 200 million euro fund for industrial start-ups in Berlin. In Munich, the new venture capitalist Vsquared wants to invest 65 million euros in deep tech, ie in young companies that focus on the technology itself: “The market was overheated before the crisis. Now he is preparing for a new normal, ”says Peter Lennartz, partner at the consultant EY. Less money is likely to flow, especially from companies and wealthy families. This means that venture capital funds have to pay more attention to the quality of the founders and that the recently inflated valuations drop to a normal level.

This could offer new opportunities for German business angels who have recently been unable to keep up financially. “The hype is out – but many find it not that bad. The mood is turning positive again, ”says Lennartz.

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