Top story: Software as an industry of the future – is it possible in Germany?
Software and data are the modern shovels and tools of the gold rush, or rather the digitalization rush. No industry, no functional area can do without the optimization potential offered by digital helpers. At the same time, the demands on software providers are increasing: maximum performance, maximum security, end-to-end data permeability, optimal UX, AI-supported co-pilots, flexible billing models, location-independent availability – to name just the most important ones.
There are thousands of specialized software providers in Germany who have been active in their sub-sectors for decades. With in-depth industry expertise and long-standing customer relationships. The majority have experienced the major technological change from the mainframe era to client-server computing. It is not uncommon for the business to still consist of a mix of customized solutions with a high proportion of professional services business and standard applications with license and maintenance contracts. The transformation to a cloud-native SaaS provider is a considerable organizational, technical, cultural and financial feat. At the same time, VC-financed start-ups from all over the world are entering the markets and increasing the pressure to change.
The good news: Firstly, software development costs and times are significantly reduced by AI support – we know of examples of savings of over 50%. Secondly, the new business models with SaaS solutions and data monetization are significantly more profitable than the traditional licensing and maintenance model. Thirdly, the investor landscape for software companies has virtually exploded in the last 10 years. Fourthly, global political developments suggest a competitive advantage for intra-European solutions. In summary, the German software “industry” is a major source of hope against the much-cited “deindustrialization”.
We would be happy to support you in selecting your growth partner. Simply get in touch with us. You can easily arrange a non-binding, discreet initial meeting with Jan Pörschmann, our founding partner, here.
Criteria for investment decisions in software companies by type of investor
| Criterion | Venture capital | Growth investor | Private equity investor | Strategic investor | Software consolidator |
|---|---|---|---|---|---|
| Growth potential | High, exponential | High, but more stable | Medium, but stable | Medium to high | Medium to high |
| Team | Very important | Important | Moderate | Moderate to important | Less important |
| Market size | Large | Large to medium | Medium to large | Medium to large | Medium to large |
| Product-market fit | Important | Important | Moderate to important | Moderate to important | Less important |
| Scalability | Very important | Important | Moderate | Moderate to important | Important |
| Financial performance | Moderately important | Very important | Very important | Important | Important |
| Market positioning | Moderate | Very important | Very important | Important | Important |
| Expansion opportunities | Important | Very important | Important | Important | Moderate to important |
| Operational efficiency | Less important | Important | Very important | Important | Very important |
| Utilization of capital | Important | Very important | Important | Moderate | Less important |
| Stability and cash flow | Less important | Important | Very important | Important | Very important |
| Value appreciation potential | Medium to high | High | Very high | Medium to high | High |
| Debt capacity | Unimportant | Less important | Very important | Moderately important | Important |
| Market maturity | Less important | Important | Very important | Moderately important | Important |
| Synergies | Unimportant | Less important | Less important | Very important | Very important |
| Integration | Unimportant | Less important | Less important | Very important | Very important |
| Market access | Unimportant | Less important | Less important | Very important | Less important |
| Recurring income | Important | Very important | Very important | Important | Very important |
What are the advantages and disadvantages of the different types of investors?
| Investor type | Advantages | Disadvantages |
|---|---|---|
| Venture capital investor | - Access to significant growth capital - Strong support for scaling and market entry - Access to a large network | - High expectations of rapid growth - Potential pressure on management - High dilution of equity |
| Growth investor | - Support with expansion strategies - Substantial financial resources - Strategic advice | - Expectation of high growth rates - Possible influence on strategic decisions - High equity dilution |
| Private equity investor | - Focus on operational efficiency and profitability - Support with restructuring - Access to debt capital | - High debt can create pressure - Strong influence on management and strategy - Short to medium-term investment horizon |
| Strategic investor | - Synergy effects through integration - Long-term partnerships - Access to new markets and technologies | - Loss of entrepreneurial independence - Integration can lead to cultural challenges - Possible conflicts of interest |
| Software consolidator | - Opportunity to become part of a larger, established platform - Access to synergy effects and infrastructure | - Loss of independence - Focus on cost reduction and efficiency instead of innovation - Possible margin reduction through integration |
Selected investors by investor type – PDF Download
About atares
atares is the digital M&A boutique for technology-driven midcap companies in Germany and sees itself as a pioneer for the digitalization of the M&A industry. Founded in 2001, atares has advised more than 200 transactions in more than 20 years. The focus is on transaction volumes between EUR 10 and 100 million of mostly owner-managed companies. Since November 2023, the company formerly known as Proventis Partners, Munich, has been operating under the new company name atares GmbH. Atares has long-standing personal contacts with corporate and Private Equity investors and M&A advisors in Europe, North and South America and Asia. Highly specialized expertise for the market, empathy for people and passion make atares a sought-after M&A partner for the tech champions of tomorrow. More than 20 employees at atares in Munich and Düsseldorf manage their projects via the in-house developed digital M&A dealfloor (dealfloor.co) – for value-adding, efficient transactions with the best user experience.
Press Contact
Franziska Wolfgram
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