Guy Selbherr talks to TRANSFER about the role played by Bürgschaftsbank Baden-Württemberg and Mittelständische Beteiligungsgesellschaft Baden-Württemberg (MBG) in helping to finance small and medium-sized enterprises who lack financial security. He also looks at whether there really is too little funding for innovation or whether other factors play a role.
Herr Selbherr, when it comes to funding, MBG and Bürgschaftsbank are now important partners to small and medium-sized enterprises in the state of Baden-Württemberg. What led to this success?
We’ve been closely linked to economic development in the state for over 40 years. We know the key players in the state and they know us. Communication is quick when it comes to partner searches. If you lack financial security, Bürgschaftsbank makes it possible to find financing, and we’re an important enabler for the financial institutions and businesses in the state. The MBG is a funding partner that’s interested in long-term partnerships. We work with companies during different stages of business development from inception to business growth and even succession planning. As well as providing money, we offer knowhow and a valuable network that can help companies open doors.
You hear and read time and again about there being too little money available for innovation. Is it really about a lack of money or are other things getting in the way?
It definitely makes things easier if you have more choice, but that in itself that doesn’t fuel innovation. Of course the question is, what exactly is an innovation? We pore over lots of concepts and not all of the ideas we see have the right market potential, so this makes them uninteresting for venture capital. That being said, investors don’t just look for growth potential, they also want to know about exit value. If they can’t see the potential, they don’t invest. But that’s just one side of the coin. The other is that big companies in Baden-Württemberg invest major sums of money in R&D. They’re highly innovative and have enough internal funds to finance innovation. Because lots of young and talented people work for these big companies, and also because of the strong employment market at the moment, they’re “missed” – for want of a better word – by the entrepreneur scene.
One important target group for venture capital (VC) comprises entrepreneurs and new companies. MBG is the management company of “VC Fonds Baden-Württemberg,” which offers VC to innovative and rapidly expanding companies in the state. What motivated your organization to manage this highly specific investment fund?
We were appointed by the investors to manage the fund. Why? Firstly, because we have a wealth of experience in this area and we’re also the central point of contact for particularly interesting concepts – in other words our “deal flow” is appealing. Secondly, we can also offer other funding through MBG Baden-Württemberg, either through the network or in collaboration with a high street bank and the guarantee bank if the VC fund simply isn’t a good fit.
This year is just getting underway, but it’s already becoming obvious that it won’t just be the opportunities and challenges presented by changes in society that will dictate business for companies, but digital transformation and technology convergence. What do you hope will happen, for the companies and your own institutions?
Companies won’t stand still. Our perception is that they’re always moving forward and are willing to change. They’re open to new technologies, and at the moment, they building a bridge between the old world and information and communication technology – something they know as Industry 4.0. The last financial and economic crisis also went hand in hand with a huge leap in productivity and innovation. We sense that the pressure that digital change is having on business models isn’t being underestimated, so the companies are not going to ease up – even if things are going extremely well in some sectors.
As for Bürgschaftsbank and MBG Baden-Württemberg, I’m certain that we’ll succeed in profiting even more from digital change, although that doesn’t mean there will be funding via smartphone apps one day. Despite this, we all need to be more courageous and be pioneers. As in other areas, our customers have high expectations. They want quick channels of communication, direct contacts, and rapid decision-making to know if funding will work or not. I believe that this all works well if we work together as partners in the state, as we have until now – this pools strengths and know-how.
Guy Selbherr is managing director of Bürgschaftsbank Baden-Württemberg and managing director of MBG Mittelständische Beteiligungsgesellschaft Baden-Württemberg. MBG often invests across different sectors of industry, typically as a dormant partner offering long-term, “business-friendly” terms to small and medium-sized enterprises in the state of Baden- Württemberg. Its financing models are similar to equity capital options, creating new room for additional funding. If required, Bürgschaftsbank can provide this alongside a bank guarantee. The benefit to companies of this approach is that it is holistic. Guy Selbherr will be a speaker at the Steinbeis Financing Arena in the Stuttgart Hospitalhof on April 7.
MBG Mittelständische Beteiligungsgesellschaft Baden-Württemberg GmbH (Stuttgart)