Ecosystem Pulse is a new periodical section, in which we will invite key stakeholders from the Frankfurt Rhein-Main Startup ecosystem to give their highlights, analysis, inputs, comments, predictions, and share their expertise on relevant industry topics.
To launch the section we invited Philipp Weber, Senior Partner at FPS Law, a well known and experienced corporate and M&A lawyer with a strong national and international expertise, particularly in the banking, tech, private equity, and venture capital sector.
2020 caught us unprepared, nevertheless, the startup ecosystem in the region and country gave a good response, don´t you think?
Of course, it has helped a lot that in the past five years a strong start-up ecosystem has developed in the Frankfurt region and Hessen. Founders and start-ups have certainly benefited from existing networks and institutions. The ecosystem quickly adapted to the new situation and many events were offered online. Also, early-stage and mentoring programs, like Founder Institute and the TechTalents program by TechQuartier, were offered online.
Government financial assistance programs were helpful as well. And finally, existing tools like short-time work helped start-ups to cut their expenses and to extend their cash run rate.
Do you think there were particular actions, players that supported this response?
From my perspective, all players in the ecosystem played an important role as they continued to support and back local start-ups and entrepreneurs. Most investors and business angels continued to back their start-ups, for example by way of bridge financing rounds. It was also important that the Hessen funds managed by BM H Beteiligungs-Managementgesellschaft mbH continued to invest in new start-ups and new rounds of financing.
Our law firm FPS did immediately set-up a COVID-19 task force and we provided short briefings and webinars regarding all legal aspects of the COVID-19 crises to our clients. In April I have organized the online-event “COVID-19 and the Rhein-Main-Neckar Start-up Ecosystem” with more than 20 speakers and 200 participants to support the region free of charge for all participants and supporters.
You and FPS were particularly busy advising and working closely with startups and cases that we reported, like Framen, Pedilay Care, TraFinScout, Wingcopter, Tec4Med, just to mention. Looking back one year, would you say that the activity was impacted?
Well as a lawyer I can’t give you insights into the business of my clients. In my view and generally speaking, the impact of the COVID-19 crises on start-ups has been very different.
On the one hand, there are industries, like travel and stationary entertainment, which have been hit hard. On the other hand, there are industries and business models which have benefited from the crises. For example, the local start-up Tec4Med offers innovative transport boxes for pharmaceutical logistics with a tracking and cooling solution which can be used to deliver COVID-19 vaccines. Moreover, the growth of e-commerce and e-commerce logistics is certainly a boost for drone-delivery. The local drone start-up WINGCOPTER, which is one of the leading manufactures of delivery drones, will obviously benefit from such a rise in demand. Moreover, WINGCOPTER was announced as one of the winners of the German Government´s EUR 24 million COVID-19 hackathons.
Do you want to highlight any particular success story?
Despite the COVID-19 crisis, I’ve worked with my team on 27 Venture Capital and Tech- M&A transactions all over Germany in 2021. Therefore, I could tell you about plenty of success stories. However, one of the greatest success stories for the region and the local start-up ecosystem is, from my perspective, Axel Springer´s acquisition of a majority stake in the digital-out-of-home (DOOH) start-up FRAMEN. Leading a start-up to a successful exit within just two years after the first financing round was an extremely strong performance of the founders Dimitri Gärtner, Magdalena Pusch, Alexander Gärtner, and Sveatoslav Podobinschi.
It is always very interesting and great fun to work with such an ambitious founder team.
As a mentor of Goethe Unibator, TQ, and Main Sponsor of Founder Institute Frankfurt, do you feel that early-stage founders were the most affected ones when compared to later-stage ones?
In my view, there is still more money in the market than great ideas and founder teams.
Therefore, I think that only from a logistical point of view early-stage rounds of financing have been affected negatively. For example, it takes a bit longer to build trust when you can’t meet in person. Early-stage investing has a lot to do with trust in the founders.
How do you, your partners, and stakeholders look into 2021? Is it possible to make predictions?
Generally speaking, much will simply depend on whether an effective vaccine will be available in sufficient quantities by mid-2021. If the number of corona infections does not decrease significantly during Q1 2021 and restrictions still need to be maintained in place, then we will see a sharp increase in insolvencies starting in Q2 2021. However, since the actual development cannot be reliably predicted, start-ups should play it safe and keep an eye on their costs. It is always important to have a plan B that allows you to defer fundraising to Q3/Q4 2021 or even Q1 2022 if needed.
Personally, as a partner of FPS, I’m very optimistic because of our resilient business model based on a full-service approach (including insolvency and restructuring law) and reasonable fees. And finally, as soon as a realistic end
to the COVID-19 crisis is in sight, we might see a strong and fast recovery of the economy.