On Speedboats and Supertankers

Markus, first things first – what’s the story behind DB1 Ventures?

“DB1” is the ticker symbol of Deutsche Börse AG. Back in 2016, Deutsche Börse Group was looking to streamline and structure all its venture investments. And so DB1 Ventures was created and equipped with a new capital stock of €400 million. As Deutsche Börse Group’s Corporate Venture Capital arm, it was to invest into startups in the capital market infrastructure space that fit to the Group’s strategic priorities - and this worked out so far, as DB1 Ventures is now well established and known in the relevant startup realms.

More and more corporates are using Corporate Venture Capital as an investment form to create also strategic value. In your role as Head of DB1 Ventures, how do you perceive this trend?

It makes sense, of course. Given the rapid pace of technological change and stronger global competition, Corporate Venture Capital investments have become a great way to seize strategic growth options and gain early access to new business models or emerging technologies, while also being attractive from a financial return perspective. At DB1 Ventures, we invest in companies that create innovative business models with a high degree of technology and, therefore, scalability. For us, these startups are like speedboats – their hands-on founders are incentivized to innovate, optimize, and grow quickly.  On the other end, Deutsche Börse Group is like a supertanker. It is big, established, renowned, and can provide startups with an excellent perception in the markets, extensive experience, and a large internal and external network – all attributes that are oftentimes even more valuable than the pure cash injection from us.

How many investments has DB1 Ventures made so far?

Over the past eight years, DB1 Ventures has made over 50 investments, both new and follow-on, although we are very selective in the companies we invest in and my team of six is currently actively managing 20+ investments. So far, we have had two unicorns, with more to come hopefully soon, and a couple of exits as well. Most notably, we had a strategic exit to Deutsche Börse Group in January 2024 by acquiring our former portfolio company FundsDLT. This is, of course, the “royal road” for any company in a CVC portfolio, but it still needs to make sense from a financial and strategic perspective. We were happy that it worked out in this case.

How do you invest? Which KPIs do you want to see? What are your investment themes?

We typically focus on startups in Series A/B stage that have more than €2 million of revenue. We deploy €5-25 million per investment ticket for a favoured ownership stake in the range of 10-20%. For this amount, it is natural that we take a board member and observer seat and carry out an active role in the subsequent cooperation with the startups to add the strategic value, mentioned earlier, with our network and experience. Next to that, a strong conviction and a strategic fit of at least one of the Group’s business units are really essential to us. Without a strong support, we would execute an investment only in very exceptional cases. This might sound quite restrictive but is explained by the broad and diversified portfolio of our Group along the entire process chain of financial market transactions. The Group is active in software, data and index businesses, operates trading venues for equities, derivatives, energy and commodities, currencies and crypto assets, including some clearing houses, and provides a full range of securities and fund services. DB1 Ventures’ investment themes are accordingly oriented towards these businesses - broadly categorised in “Pre-Trade”, “Trading & Clearing” and “Post-Trade”, alongside the two technology rails “Data/AI/Algorithms” and “Blockchain/DLT/Crypto”.

What geographies are interesting for you?

DB1 Ventures has a global mandate. Many of our investments are in the US and in the UK/London, as these are the still the most important global financial centres, and we continue to scout for startups there. Luxembourg is also very interesting for all topics around fund servicing and distribution. We do not have any investment in Asia yet, but we are very open to change this in the future. In general, we are completely agnostic when it comes to the location of the startup as long as there is a strong strategic match between its value proposition and Deutsche Börse Group’s business activities.

What’s the most recent investment DB1 Ventures has made?

It was London-based Primary Portal. The company offers a digital platform that aggregates and digitises equity capital market processes for banks and asset managers. We found their value proposition very attractive and saw that the founding team had an excellent record in that area. That’s why we lead their Series A round which is something we generally like to do, although it doesn’t always have to be the case.

Let's look ahead: What’s next?

Stay tuned and be excited! DB1 Ventures has sufficient capital left for new investments - so companies should feel free to approach us in case they are building an innovative business model in the capital market infrastructure space and are looking for (co-)investors. There is definitely more news to come.