Jürgen Zabel: Public venture capital leads to new successes

A successful businessman arrives constantly at points that are strategically crucial for him. How can I move into new markets? Are any changes in the partners coming up? Has the matter of company succession been settled? Is it a good idea to plan a targeted out­­sourcing? Each of these cases requires farsightedness. Often the decision to go a good part of the way with a strong part­­ner leads to the de­­sired success. IB H Beteiligungs-Manage­­ment­gesell­schaft Hessen mbH (BM H) acts as a temporary partner to provide business­­people in Hessen confronted by new commercial challenges with new financial perspectives.

For several years, IB H Beteiligungs-Managementgesellschaft Hessen mbH (BM H) has successfully managed the affairs of several company investment funds. Through the Wirtschafts- und Infra­­strukturbank Hessen it is part of the business promotion corporation of the state of Hessen. The funds it manages lend capital and give advice to high-growth medium-sized companies in Hessen. Man­­agement of the funds by a single manager has the advantage of being able to offer the investor needs-based investment models and assisting with investments in a range of financing rounds. BM H works on a partnership basis with public and private banks as well as with external consultants. It also cooperates with the transfer centres at universities and tech­­nology service pro­­vider and with technol­­ogy service providers and is thus able to offer partner companies individual advice and assist­­ance. BM H looks after five active funds:

MBG H Mittelständische Beteiligungs­­gesellschaft Hessen mbH. MBG H provides small and medium-sized com­­panies in Hessen with capital in the form of silent partnerships of between 130,000 euros and 1.5 million euros. While the investment strategy of classical venture capital companies focuses on high-growth potential and an exit perspective, the MBG H makes it its goal to help smaller companies to obtain more business – something they are grateful to MBG H for. MBG H uses its investment services to assist mainly those companies which wish to retain their independence during the period of the silent partnership.

MBG H invests as a silent partner in small and medium-sized companies in many sectors in Hessen over the long term. Its conditions are company-friendly. Com­mercial-industrial projects in almost all sectors can receive assistance with spe­­cific investment projects for innovation and growth but also to assist with company successions if these look as though they will be successful from a management point of view.
In such cases the MBG H is backed by guarantees from the Bürgschaftsbank Hessen (Hessen Sureties Bank), the state of Hessen and Germany’s federal govern­­ment. MBG H’s aim is to broaden the busi­­ness capital base through the long-term supply of investment capital. This provides its target groups with alternative sources of external financing. The use of investment capital entails no secu­­rity requirements.

Technologie-Finanzierungsfonds Hessen GmbH. BM H also manages Technologie-Finan­zierungsfonds Hessen GmbH – TF H, which assists young – and established – medium-sized high-growth companies with prom­­ising technology and strong competitive position. The fund’s purpose is to comple­­ment the financing form of silent partner­­ship of MBG H by providing medium-sized companies in Hessen with funding in the form of open shareholdings. This type of company financing is useful for young technology companies with high growth-potential in particular. The aim is to imple­­ment a profitable exit through the (partial) sale of the company or via a profitable public listing after an appropriate invest­­ment period. Currently the company’s fund of nine million euros is already complete­­ly committed. The fund has made a total of 15 investments and four have been sold to date. The fund is secured by a 50-per-cent guarantee by the state of Hessen.
Hessen Kapital GmbH. Hessen Kapital consists of two independ­­ent funds – Hessen Kapital I GmbH and Hessen Kapi­­tal II GmbH. The fundamental diffe­­rences between the two are in their diffe­­rent refi­­nancing and in the size of the companies that can be financed by these funds.

Hessen Kapital I GmbH has funds to the value of up to 50 million euros and is co-financed by the state of Hessen (50 per cent) and by the European Regional Development Fund, a structure fund of the European Union. Hessen Kapital I GmbH uses its funds to assist companies with no more than 250 employees, less than 50 million euros is turnover and a balance sheet total of less than 43 million euros via silent partnerships. There is a segment for open partnerships through the acquisition of shares for young and in­­no­­vative companies.
Hessen Kapital II GmbH has funds worth up to 25 million euros. The refinancing of this fund is carried out via the Wirtschafts- und Infrastrukturbank Hessen and from the budget of Hessen’s state government. This fund supports companies which usu­­ally employ up to 500 people and can show turnover of no more than 50 million euros (in exceptional cases 75 million euros).

Mittelhessenfonds GmbH. Mittelhessen­­fonds is a financing offer from the Hessen state government to medium-sized com­­panies located in the catchment area of the Gießen county to reinforce their equity capital base.

The funds, totalling ten million euros, are used in particular to finance developments in medical technology.
It also finances the development of existing technology clusters such as the precision engineering and optical industries; however, other sectors can also receive funding.

Assistance consists of providing financing similar to equity capital – mainly in the form of silent partnerships – but there are some open partnerships as well. In particular, financing is offered to innovation and growth projects in medium-sized companies at all stages of growth, including the formation stage.

RegioMIT – Regionalfonds Mittel­hessen GmbH. The Regionalfonds Mittelhessen was formed in March 2005 to assist struc­­tural change in the areas of the cities of Gießen and Wetzlar and the county of Gießen and to create and preserve sustainable, skilled jobs. It is intended to close the existing gap in assistance to innovative and/or technology-oriented company start-ups and compa­nies at their initial development stage and to improve the start-up climate in the Cen­­tral Hessen region. For this purpose, the RegioMIT grants investment capital in the form of mainly silent – but sometimes open – investments. The fund’s partners are the state of Hessen, the cities of Gießen and Wetzlar, the county of Gießen, the Wetzlar Savings Bank, the Gießen Savings Bank, Central Hessen Cooper­ative Bank, the Laubach-Hungen Savings Bank, the Grünberg Savings Bank and the Heuchelheim Cooperative Bank.

Application for investment usually means that the BM H examines a business plan prepared by the initiator or the company before any personal first contact takes place. If the concept appears to make sense and is feasible, more searching questions are then asked and additional information in respect of the concept is requested in an initial interview. Providing the plausibility examination shows no neg­­ative indications, a due diligence exami­nation is then started. Based on the results of the examination, the mentor then pre­­pares a decision paper for the independent investment committee for each fund; the fund alone then decides on whether to invest or not. The investment committee is made up of experts from the commercial world and representatives of the “public purse”.

Jürgen-ZabelThe author was born in Limburg in 1962. He completed a degree in business ad­­min­­istration in 1984 and started his career as a management assistant at the former Investitionsbank Hessen (IB H) in 1985. After working in a range of positions there, he moved to the bank’s investments de­­part­­ment in 1999. He has been managing director of the BM H since 2007 and of all the investment funds it looks after.