The capital to move forward
Interview with Niklas Hebborn, Partner, Freigeist Capital IV GmbH
One of the greatest struggles of any entrepreneur is finding the capital to turn their ideas into reality. Innovations require a financial boost to thrust them to the fore, but it also takes an investor with a vision to take the risk. Freigeist Capital IV GmbH based in Bonn is this investor for the tech sector. The firm supports health, e-mobility, green energy and a host of startups in new technologies in their dreams of creating a brighter future. European Business spoke with Niklas Hebborn, Partner at Freigeist, to find out what makes the investment firm more than just money.
European Business: How does Freigeist set itself apart from other investment companies?
Niklas Hebborn: Our model is very few investments, highly focused, doing things with our own team. The six of us partners make our own capital available to startups, making just two or three investments a year. While other funds make five, ten or more investments per year, we prefer to remain really focused on a few companies in order to provide our best support to the founders. We all have experience in the day-to-day operations of running our own businesses, and in the early stages, there are a lot of operational and strategic topics, from HR to the product to communications, that are really important in building up the company. The startups stay in our portfolio, but we turn our attention then to other companies to get them off on the right foot. It’s a business model that’s worked very successfully for a number of years now.
European Business: You were a startup founder yourself, weren’t you?
Niklas Hebborn: I studied economics and then joined my father’s company in the construction industry. I transitioned to Freigeist as someone who knew the struggles of starting a business combined with my experience in operations to become an investor in startups. The early stages of smaller companies – the ones with only five or ten employees – that’s where I feel really comfortable, where I feel I can have a greater impact, working closely with the founders and the management.
European Business: Freigeist has a staff of 15, including six partners. How do you all work together?
Niklas Hebborn: As partners, we’re relatively independent because we’re working with different startups. We’re each responsible for a few companies from our portfolio of roughly 20 companies, some of which are more mature than others and therefore require less involvement on our part. But there are five or seven other companies that are in their first years, and they have a lot of building up to do. We have an investment team that procures new deals for us. We have a support team, for example with an HR expert to help the startups with recruitment, a communication team to get the startup’s name out into the world, and a software developer. A good 50 to 60% of our job involves working closely with the companies. That can mean some “hand-holding” for everyday business or major strategic decisions to take the company to the next level of growth. We even take on interim positions within some of the companies. For example, one of our partners has extensive operational experience, and a company in our portfolio needed that managerial expertise to take the next step, so he stepped in as interim CEO. We allow ourselves to make that commitment for a few months in companies where we see a lot of potential. We’re very hands-on about helping our portfolio companies reach the next milestone.
European Business: Can you give us some examples of investments where Freigeist really cracked the potential of the company?
Niklas Hebborn: Wunderlist and MyTaxi were among the first fruits of our labour. Then, of course, when our cofounder Frank Thelen was on “Höhle der Löwen” [the German equivalent of “Shark Tank”], he had some highly lucrative investments in food companies, like Little Lunch and YFood. In the last six years, we’ve honed in on the technology sector. Xentral achieved a significant gain in value. Our goal is to be able to sell a startup or have an IPO. We’ve had a number of successes that really validate our work.
European Business: Would you say that food and technology are your primary fields?
Niklas Hebborn: In terms of new investments, it’s only technology. We continue to support the food companies because they’re part of our portfolio. Although I have to say, food can also be a technology topic. What will we eat in the future? Will artificially produced food, such as some vegan foods, be an issue? These are topics for future markets that are really driven by technology. Another example is AirUp, a bottle that uses scented air to give water flavour. We consider it to be food tech because the technology was developed in the food sector. So that’s a field that we still have an eye on.
European Business: What’s next for Freigeist?
Niklas Hebborn: We chose the name Freigeist because we wanted to do things differently – like a free spirit. Our model is different. Any investor would tell you that diversification is key, but we’re not diversified at all. We focus on fewer deals. We aspire to invest in free-spirited things. We invested in Lilium, which is one of the most free-spirited things out there. The founders may have been a little naïve regarding the long-term possibilities, but you have to be when you’re a free spirit. Life is too short to think about all the things that won’t work out. What could happen if it does work? In Germany, we need to think more about how great it could be.
Hopefully there will be more funds in the future that do things that way. There are a lot of good funds in Germany and Europe that want to work that way, but the real shift hasn’t happened yet. Germany tends to think very negatively and doesn’t dream big, so in the next five or ten years, we may be surprised by all the investments that aren’t made. At Freigeist, we try to do our part to buck tradition, but there’s a huge system surrounding us.