Berlin Study Tour – GMBA10 – July 2017
Professors – Dr. Oren Zuckerman and Mrs. Michal Olmert Naishtein
Written by: Yonatan Nacht
Although I have never participated in an organized study tour before, I feel that I can safely say that our study tour was extremely successful and brought amends value to us, not only as business students but as mid-career business woman and men, entrepreneurs (current or in the future) and even simply as participants of our age’s “hyper-speed”, ever-growing economy and global market.
When I think about our experience during the few days in July 2017, in which our group – fourteen Global MBA students from the Herzliya Interdisciplinary Center, had the pleasure to be hosted by so many interesting people, from so many different parts of the entrepreneurial industry, I begin to understand why the analogy chosen to describe this industry had been (so rightfully) taken from the world of biology. the “Ecological-System” of these complementing services, businesses and institutions we met, indeed very much correspond and operate like symbiotic parts of one large “breathing” mechanism. Neither of which could have survived alone (or at the very least it would be much more difficult for them to do so), nor would the absence of any of them make the system any more efficient (i.e. there are very little, to no “free-riders”).
Learning about Berlin’s eco-system and how in operates via visits to the different parts of it and by experiencing immersive learning, such as visits to the public and private corporations like Berlin-Partner, which facilitate so many services for companies and help grow the industry, the Incubators and Accelerators which nourish the ventures and help them achieve their first meaningful steps, the different academic institutes (universities and colleges) which train the talents, employees, managers and entrepreneurs and the different investment funds which inject capital into the industry and with it bring experience, direction and opportunity to both the entrepreneurs and investors (and of course to the customers), allowed us as students, to achieve an “birds-eye” viewpoint while observing the industry and, as a result, to better comprehend how it operates, what is the nature of the relationship between the different parts, how they cooperate and most importantly – how they rely on each other and need one another. I believe that achieving this awareness and understanding a little bit more about the nature of the connections described herein, is simply impossible from within the walls of a classroom, no matter how successful the course is and how talented the professor may be.
Personally, one of the most meaningful meetings I enjoyed very much, was our meeting with Mr. Eran Davidson – Founder of Davidson Technology Growth Debt Fund. During the meeting, we had the opportunity not only to learn more about Mr. Davidson’s personal and professional history as a VC investor and a manager of 6 investment funds, who realized for his investors over € 1B in exits and sale of portfolio companies, but we also had the chance to learn a little about new and progressive tools he has chosen to use in his current debt fund, in order to reduce investors’ risk and create value for companies in need of capital during unique situations.
Perhaps the example of the Davidson Technology Growth Debt Fund can be a good place to start when describing the differences between the two eco-systems – Berlin and Tel-Aviv.
The simplest issue we can begin with is the going rate in which companies such as Davidson’s portfolio companies agree to borrow capital at. For the Berlin eco system, young companies which have no banks as creditors, but already have a steadily rising sales stream, may agree (evidently) to borrow funds in 10% ,11% and even 12% interest. This in turn, may imply that they are perhaps less bankable and riskier. However, in Israel a company which already has sales and its revenue stream is trending upwards with clear visibility (even if it is currently cash-flow negative) is unlikely to have no bank loans, and if it doesn’t – it will probably be considered a successful company (as it has created its value with little to no leverage) and will probably be able raise equity with a nice valuation, rather than take a first lien loan. In this sense, Davidson’s Fund allows for a small peek not only into success stories, but also into some of the difficulties that exist in the Berlin eco system.
Perhaps these difficulties, compiled with a great growth engine and all the other advantages that a strong startup sector can offer the state of Berlin (such as: creation of new work places, positive and educated immigration etc.), a city in post-trauma, still very much licking its own war and segregation wounds, can assist in explaining why does the public sector and institutional entities take such an active role to help young companies build their operations and try to help them succeed, achieve meaningful sales, show growth and eventually reach a stable state.
In Berlin, the majority of the VCs, incubators, accelerators and public entities we have met (such as Berlin Partner previously mentioned) seem to be much more involved in the micro decisions and day-to-day management of their startups. For example, we met hubs that assist their startups in a wide variety of matters, from HR issues such as obtaining visa for foreign employees, to locating and renting a suitable office, designing their products and much much more. This assistance is quite different from Tel-Aviv’s eco-system, where most of the VCs will prefer to remain in the position of a financial investor, hold one or more board seats and assist in business development. In Israel, VC funds will invest mostly based upon their trust in the venture and the ability of its management to implement its core business and monetize from it, by themselves.
Naturally, I was happy to discover during the tour that my personal line of business – investment banking, has a strong need in Berlin and that there are many opportunities for investment bankers to create a nice deal flow and many cross-border investments and transactions are feasible and appealing. There is a clear need for a strong Tel-Aviv-Berlin bridge that can assist both young growing startups as well as VC funds (and other investment entities) to find each other, build trust and facilitate investments in our journey to create a more sophisticated market for the benefit of all sides.
To summarize – I personally had a wonderful experience in Berlin and I highly recommend anyone, from students to industry experts, to visit this exciting city and learn first-hand about the different opportunities that the Berlin ecosystem holds!
Yoni Nacht | Investment Banker
Everest Investment Banking (www.everestib.com)