Sebastian Böhmer, founding partner of First Momentum Ventures, faces something of a dilemma. On the one hand, he is determined to dispel some of the myths about where Europe’s most exciting technology businesses are to be found; on the other, he doesn’t want to invite too much competition.
First Momentum, launched in 2019, focuses on opportunities in Germany, Austria and Switzerland, collectively known as the DACH region. “Capital is centralised but talent is not,” says Böhmer. “The DACH area has been something of a sleeping giant, but it has certainly woken up more recently.”
The region, he points out, is home to no fewer than three Nobel Prize winners and ranks fourth in the world on the number of patent applications its innovators file each year. Big-name businesses in the area include Celonis, Biontech, Personio, Curevac and Teamviewer. The DACH countries’ economies combined are worth more than that of the West Coast of the US, home to Silicon Valley. “All the ingredients are in place for founders to build game-changing companies,” Böhmer argues.
First Momentum wants to help them pull it off. The venture capital firm’s first fund, raised in 2019, picked up €5m of capital that was quickly deployed in 22 start-up businesses in the DACH region, with the fund typically acting as a co-investor. Three-quarters of those businesses have already received follow-on investment.
Böhmer is clear about First Momentum’s sweet spot. “We’re focused on pre-seed opportunities – we want to provide that first money in,” he explains. “Our three value pillars are fund-raising, business development and access to talent.”
High-tech businesses in the industrial engineering space are one focus. Germany’s famous “Mittelstand” companies – resilient small and medium-sized enterprises with a record of innovation over generation – provide a hugely valuable target market for technology start-ups, Böhmer argues. “There is a massive opportunity to help the Mittelstand digitalise,” he says.
“We are engineers at heart, but investors by choice,” explains Böhmer, whose academic background is in industrial engineering and mathematics. Two investments in particular stand out in this regard. First Momentum has backed Daedalus, which works with manufacturers to develop robotics for their plants, as well as Lightly, an artificial intelligence specialist that helps engineers decide which datasets to use in order to build the most effective training models.
Looking forward, Böhmer also sees huge potential for the digital health market, which is taking off in Germany as new regulation makes it easier for the sector to work with physicians and patients. “Medtech is now much more accessible,” Böhmer argues.
Not that First Momentum has it all its own way. International investors in Europe may be more focused on technology centres such as Berlin, or London, Cambridge and Oxford in the UK, as well as later-stage funding opportunities. But a growing number of investors are waking up to the opportunities that the DACH region offers, including at the earliest stage.
Indeed, venture capital investment in start-ups almost doubled to €2.4bn between the first and third quarters of last year. Investors are also taking note – DACH region-based venture capital firms secured €2bn of funding from investors over the same period.
However, Böhmer is convinced that First Momentum’s local knowledge can help the firm stay one step ahead. He has been investing in DACH businesses for the last four years, having launched First Momentum’s predecessor while still a student, and the firm has built a network of associates across the region. The company has close links to universities and other academic institutions, with a representative in every university city in the region, and can call on a broad group of financiers and investors.
That invariably gives the firm first-mover advantage. “With more than 50% of the businesses we meet, we are the first investors that the management team has spoken to,” Böhmer says.
He also makes the point that many venture capitalists remain nervous of technology risk. They want to invest in fast-growing technology businesses, but their focus tends to be on start-ups with proven technologies now seeking to operationalise. By contrast, First Momentum’s sector knowledge affords the firm more confidence about making its own judgements about the potential for a new innovation.
Having made such a success of its first fund, First Momentum is stepping up the pace, securing commitments for a second iteration. The new fund should have around €50m at its disposal – 10 times’ as much as its predecessor – but Böhmer is not concerned about the number of opportunities available. “There is so much potential in these sectors,” he says.
Second time around, and with more dry powder available, First Momentum is more likely to take the lead role in the funding rounds in which it participates. It is a challenge that Böhmer is relishing.
Forbes – Entrepreneurs