Düsseldorf, Frankfurt The young technology company HiveMQ receives 40 million euros from international investors. It is a message that you often hear from the start-up scene in Berlin. However, the software provider for the Internet of Things (IoT) is not located in the capital, but in Landshut in Lower Bavaria. There he develops infrastructure software that large corporations such as Audi, BMW and Honeywell use to network their cars, machines and drones in real time.
HiveMQ has the chance to become “the world’s leading platform” for data exchange between IoT devices, Christoph Hornung of the British investor Molten Ventures, who is leading the financing round, said on Wednesday. The sovereign wealth fund Mubadala from the United Arab Emirates and the Munich venture capital firms Earlybird and Senovo are also participating and financing the expansion to America.
Landshut with its 70,000 inhabitants is more known for its medieval castle Trausnitz than for a technology landscape. But it is becoming increasingly clear that venture capital firms are now also looking for potential billion-dollar start-ups in the province.
Hendrik Brandis, founding partner of Earlybird, sees a “clear shift” in his portfolio: according to this, three quarters of Earlybird investments went to the nine largest European tech locations between 2009 and 2014, including London, Berlin, Munich, Paris and Amsterdam. Between 2015 and 2021, the rate fell to 56 percent.
HiveMQ is just one example. A whole series of companies from small and medium-sized cities are to become known all over the world with investor money. This is shown by a search in the commercial register. The analysis company Startupdetector has searched this for the Handelsblatt for information on larger financing rounds in municipalities with fewer than 100,000 inhabitants. The criteria: capital increases of 20 percent or more, at least two venture capitalists involved and a previously completed financing round.
New investor strategy: Looking beyond the metropolises
The result is a list of 22 companies, some of which have been financed with large amounts of millions since the beginning of last year. HiveMQ is not yet included.
The majority of the companies come from the vicinity of Munich. These include Kewazo from Garching: With the 4.2 million euros from the second round of financing in September, the founding team led by Artem Kuchukov and Ekaterina Grib wants to further develop its construction robot technology.
With Agile Robots, the 19,000-inhabitant municipality of Gilching even has a robotics unicorn to show for it: the start-up was valued at more than one billion dollars in a 186 million euro financing round in September.
But there is also investment elsewhere: in Hannoversch Münden in Lower Saxony, the general and emergency physician Benjamin Gutermann has launched a platform for remote medical diagnosis. At the end of 2021, there were seven million euros for the further development of the MetKitDoc software. Creapaper from Hennef near Bonn was able to raise 20 million euros to expand with its CO2-saving grass paper for hygiene products, food packaging and bags.
Two factors drive the development. On the one hand, competition among venture capitalists is increasing. Since there are many new early-stage financiers, it is “quite a strategy for some investors to look for top start-ups away from the metropolises,” says investor Romy Schnelle from High-Tech Gründerfonds.
On the other hand, the ongoing trend towards digital networking plays an important role, says Earlybird partner Brandis: In the past, start-up entrepreneurs were most likely to find their co-founders, investors, employees and consultants in start-up strongholds. Now networking is increasingly taking place virtually and regardless of location.
“The critical factor for innovation is always brilliant minds, of which 85 percent can be found in the regions,” says Brandis. Now they could use their potential by accessing resources.
Advantages of employee search
In conversation with the entrepreneurs, reasons away from metropolises almost sound like an insider tip. “The Landshut location has never harmed us, but rather helped us,” says HiveMQ CEO Christian Götz. His company benefits from the proximity to the University of Applied Sciences (HAW), where the three founders met during their computer science studies. “In Landshut at the university, the competition for talent is significantly lower than in Munich.“
Philip Rürup, in turn, often finds employees at established companies. Her debt collection start-up Troy, founded in 2017, is based in Lippstadt, Westphalia. “We have a relatively large number of traditional debt collection companies in the area, from which employees always want to switch to us,” says Rürup.
Christian Götz, Christoph Schäbel and Dominik Obermaier (from left):
The founders of HiveMQ got to know each other at the university in Landshut – and still find many of their employees there today.
Troy currently handles debt collection processes for about 70 companies and advertises to make “debt collection a positive experience”. “Debt collection procedures often cause great uncertainty,” says Rürup. Troy wanted to show “openly and transparently” how the process continues in the case of payment and non-payment. There is also support from psychologists. The approach also seems to convince potential employees – and investors.
Most recently, Troy has received more than ten million euros. The money flows into the expansion: the company wants to act as a service provider for debt collection companies in other countries. In the future, the platform will be used in South Africa and Australia, and partner companies will take over the processing on site.
The location of the robotics start-up Coboworx is probably the most surprising. The company was founded in 2019 in the Rhineland-Palatinate wine-growing community Osann-Monzel. Some start-ups in Berlin and Munich have more employees than residents living in the 1,700-strong community on the Moselle.
Nevertheless, investors have discovered the start-up that develops process-ready robot cells and offers robot solutions for small and medium-sized companies. An app helps to set up the robot for a palletizing task, for example. Last September, Picus Capital and the technology holding Team Global, among others, invested 4.5 million euros in the company.
Co-founder Olaf Gehrels is confident that his company with currently 25 employees will not suffer as much from fluctuation as start-ups in metropolises. Employee loyalty and loyalty are generally significantly higher in rural regions, as is the length of stay in the company.
Field offices in Hamburg or Dresden
Whether it’s HiveMQ in Landshut, Troy in Lippstadt or Coboworx in Osann-Monzel: The location history of the young start-ups also includes the fact that they have all now opened offices in major cities. “We have realized that we cannot expect the best software developers in the world to come to Lippstadt,” says Philip Rürup. That’s why his company has set up a location in Hamburg, opened an office in Lemmer in the Netherlands and now enables remote work from anywhere.
Olaf Gehrels has had similar experiences with certain specialists at Coboworx: although young talents were generally inspired to move to the region for an exciting task. However, this is much more difficult for software engineers and experts for digital products such as UI designers, who are responsible for the visual design of user interfaces, for example. Coboworx has offices in Dresden and Berlin for you.
HiveMQ CEO Christian Götz is pragmatic. He wants to open new offices where he can find the employees who can advance his sales. The first is currently being set up in Munich, the second he is thinking of North Rhine-Westphalia.