German tech stars unite for ‘deep tech’ venture capital fund

A group of prominent German tech entrepreneurs has raised €170m to set up a “deep tech” focused venture capital firm, which will invest in early-stage start-ups in an effort to bridge the innovation gap between Europe and the US.

Former Rocket Internet executives Alexander Kudlich and Ludwig Ensthaler, and California-based Airbnb and Twitter alumnus Florian Leibert, secured the funds over the past couple of months despite the economic uncertainty caused by the Covid-19 pandemic.

The firm, which will be called 468 Capital, has already supported a “handful” of European start-ups, they said, and plans to back approximately 25 companies in total, focusing on machine learning, open-source and automation. 

“We really see Europe taking a much, much bigger role in the global economy,” Mr Leibert told the Financial Times.

But Mr Ensthaler emphasised that the fund would attempt to ensure that its investments crossed the Atlantic. “If you have a global business model, and want relevance at that scale, you need to also be in the United States,” he said.

Ludwig Ensthaler: ‘If you have a global business model, and want relevance at that scale, you need to also be in the United States’

Early investments by 468 include Vectornator, a Karlsruhe-based graphic design program attempting to take on Adobe’s Illustrator, and Frequenz, which optimises energy consumption.

The fund has also supported Bardeen, a German-Hungarian start-up specialising in robotic process automation.

The trio said their backers included partners of some of the world’s leading venture capitalists, and were spread across the US, Europe and Asia, as well as hedge funds and private equity groups.

They added that they were able to close the fund without including public money from the European Investment Fund, or the German state-owned development bank KfW.

The fund 468 will be among the 15 largest operating in Germany, according to data from PitchBook, but still a fraction of the size of the country’s largest single VC fund — Rocket Internet’s €850m Capital Partners SCS.

Alexander Kudlich: ‘We increasingly see [tier-two German cities] as the breeding grounds for great technology businesses

Mr Kudlich sits on the board of Rocket Internet, Germany’s most successful tech incubator, which has invested in more than 200 start-ups, including the fashion retailer Zalando and the food delivery service Delivery Hero.

At Global Founders Capital, Rocket Internet’s investment arm, Mr Ensthaler was behind bets on luggage specialist Away and messaging service Slack.

Mr Leibert, who also backed Away as an angel investor, founded cloud software company Mesosphere, now called D2iQ, which was supported by Andressen Horowitz.

“We are not only part of the European ecosystem — we built it,” 468’s deck reads.

The founders claim they are ideally placed to discover local investment opportunities in tier-two cities around Germany, particularly places such as Karlsruhe, Aachen and Tübingen, which contain technical universities and large research centres.

“We increasingly see [such cities] as the breeding grounds for great technology businesses,” Mr Kudlich said. “We have very deep roots in those communities.”

In April, the German government announced a €2bn support package for struggling start-ups.