The Munich-based investment company Senovo was launched five years ago. Private investors had commissioned Frederick von Mallinckrodt and Alexander Buchberger to invest their capital. Markus Grundmann has since joined the two as an additional partner and recently let us know about the current course of the company.
Senovo has been active since 2011. In 2013, the investors sharpened their focus on the field of Software as a Service (SaaS). By bringing Markus Grundmann on board this year, the company now has a software expert and former associate of Target Partners on their team. The goal: growing Senovo to become a VC heavyweight. Will Senovo be more visible in the future? Are the investors moving in a new direction, or do the Munich-based businessmen plan to maintain their current growth strategy? We asked Senovo partner Markus Grundmann:
What was your initial objective? Why the change in strategy?
Our expansion is not a change in strategy, but rather an expansion of our operations. It will help improve how we deal with the challenges faced by investors, and will place important departments right near the partners, including sales, legal and tech.
By expanding the partnership, we are increasing our focus. We all have a B2B background and more than five years of experience in the B2B SaaS area, yet we also complement one another. Alex has a background in business administration, Frederick is a lawyer, and then you have me with experience in software development.
“The SaaS deal flow in Europe has quadrupled.”
Why are you focusing on SaaS?
On the one hand, we have our internal perspective that makes SaaS the standard business model for ambitious B2B startups. The unit economics of SaaS are fantastic, with low integration costs and a cash flow equivalent to the long-lasting customer relationships that are typical in an enterprise environment. SaaS also allows for a high level of product quality based on agile and data-driven development processes.
On the other hand, the SaaS business model is the one most heavily demanded by customers of B2B startups. Gartner recently commented on the topic, saying that in 2020, a “no-cloud” policy will be as rare as a “no-internet” policy is today. We are observing a major shift in the market, and we naturally want to be a part of it as B2B VCs.
B2B startups take a similar view. The SaaS deal flow in Europe has quadrupled over the last two to three years, while the previous four-fold growth spurt took roughly six years.
The SaaS startup market is gaining enormous momentum. Like all new business models and markets, there are specific formulas for success, including metrics, processes and tools. Our task as VCs is to manage our investments to make them state-of-the-art in every area, and to give them access to the most relevant investors in their sector.
We strongly believe that venture capital is a product for entrepreneurs, and they are the focal point of our activities. As investors, this focus helps us offer entrepreneurs the best “customer experience”.
Where do you currently see the most potential for your investments?
We have so many exciting companies in our portfolio. Our somewhat older investments are definitely the most visible, such as Veact, Shore and Riskmethods. It takes about seven years to implement a successful enterprise startup, and our average investment is only 1.4 years old. We expect that quite a few additional superstars will join the three mentioned above.
Before joining Senovo, I was with Target Partners for nearly five years. The situation is similar there: the success of the early investments in tado° and Falcon.io has become quite evident. Younger startups like Dedrone are also developing very well.
Location is important
Why is Munich a good location for VCs?
Munich is a superb location with great business angels, excellent VC funds, startups, and potential founders and employees. Munich is also home to a large number of established large companies, who ultimately are our startups’ customers. All of those elements create an exceptional ecosystem.
That being said, I do think it is important for a startup to choose a location that makes the most sense for their business model. If there is a startup that makes software for shipping companies, for instance, I would opt to situate them in Hamburg instead of Munich. In this respect, we are quite pragmatic as investors and are happy to consider every exciting startup — regardless of their location.