”We invest in disruptive companies“

Olivier Schuepbach from venture capital company Partech Ventures about far-sighted investments, opportunities for young entrepreneurs, the courage to fail and the cooperation with KfW.

About Mr Schuepbach
Olivier Schuepbach from Partech

Olivier Schuepbach, 40, is a general partner at the venture capital company Partech Ventures. Founded in Silicon Valley in 1982, the investment company is now globally active with offices in San Francisco, Paris and Berlin. The company specialises in financing young and fast-growing start-ups in the technology sector. Chronext, Auxmoney, Lesara, Qype and brands4friends are among the most well-known German investments. KfW has invested EUR 25 million in the Partech Growth Fund since 2015; the fund has a total volume of EUR 400 million. Mr Schuepbach, who is from Switzerland, is head of Partech Ventures' Berlin office.

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Mr Schuepbach, you speak with dozens of young entrepreneurs every month. What are you looking for?

We are globally active and invest in companies both during their early-stage phases and also later during their growth phases. Many aspects come into play in this process: creating a company from nothing demands different abilities than managing an expansion from 400 to 1000 employees. In the beginning, for example, solidarity within the team is particularly important because the companies constantly change and continually have to readjust – this is only possible if the entrepreneurs have the ability to do this. On the other hand, when we talk about start-ups that have already achieved initial success, we take a closer look at how fast the business is growing and whether the company has what it takes to become a global market leader in its segment.

Smaller successes don't count? Everyone has to be able to conquer the world?

Today, digitalisation has seized all areas of the economy and knows no limits. The opportunities to tap into new markets are huge – as are the chances to establish globally successful titans in the process. This is why we make sure that the companies we invest in are disruptive, that their goal is radical change. At the same time, the entrepreneurs have to have the ambition of never being satisfied with what they have already achieved. They have to challenge the status quo and tirelessly strive for more.

When compared to Silicon Valley stars like Airbnb and Uber, which have declared war on entire industries, European entrepreneurs seem a little tame.

I take a different view. As entrepreneurial culture becomes increasingly established in Europe, the trend of rethinking traditional concepts, challenging established companies and developing brand new business models is gaining strength here, too.

Why do we continue to lack success stories like Facebook or Google?

Silicon Valley has a decades-long head start. The ecosystem of business founders, investors and new talent from universities is a well-oiled machine. Many of these things are still evolving in Europe. On top of everything, we have to deal with different regions, countries and cultures, while American start-ups have a homogeneous market on their doorstep. Nonetheless, in Europe too, we see an increasing number of success stories generating positivity, thus inspiring young people to create start-ups.

What examples are you thinking of?

It's hard to highlight just a few because there are so many now. Look at Zalando, brands4friends, FlixBus, Spotify, Sigfox, or Skype: they are all top-notch companies that cover a broad spectrum of business sectors.

Where do you see the greatest opportunities for entrepreneurs to capture new markets?

We think there are several areas that stand out, like artificial intelligence, financial technology, the Internet of Things, and anything concerning big data and the automation of production processes – the field often referred to as Industry 4.0. That is also where many of the strengths of local start-ups lie. The German economy is traditionally very much driven by the SME sector and engineering. This is also reflected in many innovative solutions in industrial digitalisation.

Many say that the pace of digitalisation in Germany is too slow. Do you agree?

Innovation demands more than just internal change; it also requires the willingness to work together with external partners. Many companies understand this, especially the big ones. And we play an important role in this as investors: we see ourselves as a connector, an agent between the traditional forces and the new ones. Our task is to connect these two worlds to further advance the transformation at an even faster pace. After all, being innovative and leaving it at that is not enough for today's world. Digital disruption knows no rest. Anyone who wants to be ready for the future must constantly think ahead and question their own business over and over again.

Not every start-up can be successful. How do you prevent miscalculations?

Firstly, we do this by distributing risk and by looking at every company we invest in very closely. But of course, there are many reasons why even the most promising start-ups fail – because the timing wasn't right, the market situation changes or other factors converge. This is normal and it's par for the course. The size of the risks also depends on the point in development at which the start-up received the investment: early investment means a larger risk of losses; on the other hand, the reward is greater if the company is successful.

KfW Capital

Partech is a private VC fund in which KfW has been investing since 2015 already. The subsidiary KfW Capital has taken over this investment.

How does this willingness to take risk, which is an aspect of your business, relate to your partnership with KfW – a public bank?

I think that both sides benefit greatly from this cooperation. Of course, being associated with a respected institution like KfW helps us. In return, we contribute a great deal of expertise when it comes to innovation and developing new companies. Because Partech Ventures was founded all the way back in 1982, we have a wealth of experience and contacts. In addition, we have an international setup with our offices in Berlin, Paris and San Francisco, so we can be active on both sides of the Atlantic and across Europe. We see this as one of our key advantages.

How does the German start-up landscape compare in an international context?

A very strong pan-European ecosystem for entrepreneurs has developed in Berlin. Up to now, costs for start-ups are comparatively low while the high quality of life helps attract qualified employees. Many entrepreneurs move to Berlin from other parts of Germany and then move back, saying: "We showed what we can do in Berlin – now we want more!"

So, will all of Germany become a republic of start-ups?

At the moment, Berlin is still very much the heart of the entrepreneurial scene. But the innovative energy is distributed across many regions. Bavaria, North Rhine-Westphalia and Baden-Wuerttemberg are just a few examples of this. The ecosystem is growing, and its intensity continues to increase. This helps the start-up-scene expand – throughout the whole country and across many economic sectors.

Is the fact that founders can't always attain great success becoming more accepted? A cultural shift?

It's true that, in Europe, failure has long been seen as a flaw. But that's changing, too. As investors, we know that entrepreneurs can gain valuable experience when something doesn't work. Then it's time to get up, rally the forces and try something new. The path to success is seldom a straight line – it usually winds past many obstacles and failed attempts. What's important is that entrepreneurs learn from those experiences and find out what they can do better to ultimately achieve their goals.

Published on KfW Stories: Thursday, 22 June 2017