Innovations of new products or business models often appear as start-ups in the market. How do banks and investors see the issue of innovations?
In corporations, innovation projects undergo a hard prioritization process and face conflicts with the mindset on preserves and comfort zones in other parts of the firm. Do radical innovations have better chances of being embedded? Is it easier to get financing for radical projects of a game changing nature? How do you explain the rising popularity of crowdfunding and what can we learn from other markets?
These are the questions we posed to Andreas Lorenz, Chairman of the Board of Volksbank Karlsruhe, and to Thomas Andrae, Director 3M New Ventures. Their responses:
Andreas Lorenz: In my view, regional banks are the real promoters of innovation in Germany. They do not run a cherry picking business, but instead a traditional banking operation at their doorstep. Financing of start-ups is one of their key tasks. This is not a high margin business, but also not risk free. Yet, as a regional bank, we focus on the long-term: today’s founders will be our business customers tomorrow.
Crowdfunding is a sign of the times – the more unique our society becomes, the greater the need to belong in there somewhere. Moreover, people want to do something special with their money. They are not happy to just deposit it and get regular income. They see crowdfunding offering them the possibility to invest with calculable risks.
At least one or the other person probably also hopes to co-finance the next Facebook or Google and to naturally profit from that.
About the author:
Andreas Lorenz brings more than thirty years of experience in finance industry. In this time he worked in different positions at Volksbank Karlsruhe. After studying part-time, he was appointed to the Executive Board in 2002. Since July 2013 he is Chairman of the board at Volksbank Karlsruhe.
Thomas Andrae: VCs are a relevant part of the entire ecosystem. However, purely in terms of numbers, they play no real role in our country as innovation promoters. In Germany, ever increasing amounts of funds are released for early phase financing (family offices, public grants, business angels, state-run investment banks, etc.) Yet, we still lack funds for medium to high volume follow- up financing.
Compared to the US, we play a small subordinate role that we should really outgrow quickly and resolutely. Some early examples of this are Zalando, Soundcloud, and Wooga, which could serve as role models for gutsy, early phase investment financing – coupled with large follow-up financing for rapid growth. The crowdfunding phenomenon is flying primarily because of the curious nature and urge of humans to be a part of new ideas early on. The risk is limited, since possible platforms make it easy for individuals to easily and quickly hop on board. This allows enterprises to raise awareness of their own brand, quickly and almost risk free, and to try out new ideas on large groups of potential buyers.
We concern ourselves primarily with the people in the team and, in particular, their ability to execute the core idea. Furthermore, we are interested in the business model and the attendant degree of disruption of the market and/or the definition of new markets. Also crucial is the IP associated with the idea and the current stage of development, although we tend to be satisfied with a working prototype and initial pilot customers.
About the author:
Thomas Andrae brings almost twenty years of experience in consulting, strategic sales and marketing for major firms such as Andersen Consulting and Price Waterhouse. Mr. Andrae spent a significant amount of his career in North America and Asia, leading complex supply chain and IT implementation projects for major clients from the banking, automotive and telecommunications industry. After Price Waterhouse, Mr. Andrae held key positions at Ariba and Emptoris, where he was instrumental in directing the growth and success of the European operations of both companies. Subsequently, he joined CombineNet as Vice President and Managing Director, developing the firm to one the leading providers of eSourcing solutions in Europe. Prior to joining 3M, Mr. Andrae was Vice President at Siemens AG, heading their Global Procurement Operations based out of Zurich, Switzerland. As Director of 3M New Ventures EMEA, Mr. Andrae is responsible for all aspects of New Venture’s European operations.