Frankfurt: Goldman Sachs Group Inc is preparing to invest in more German financial startups at a time when the industry is seeing a record inflow of money as well as a wave of failures.
“Our investing pipeline in Berlin and Germany as a whole is very strong, ” said Rana Yared, a Goldman partner who is also a managing director in the lender’s Principal Strategic Investments group. She declined to name any future targets after the company took stakes in two Berlin-based fintech firms this year.
Investments in German fintech companies reached a record in 2018, topping 1bil (US$1.1bil) for the first time, according to data by Barkow Consulting. After the first six months of this year, investments already stand at around 900mil with the first quarter seeing the highest inflows ever. This could point to inflated asset prices, raising the stakes for Goldman.
Yared said her team is extremely cautious on valuations, not just in Germany.
“It is an existential challenge for companies if they raise money at a valuation that is too high for where they are, ” she said.
“You have the risk of a down-cycle happening and having to raise new money at a lower valuation, which has implications for your employees and their morale, and for clients.”
The team tends to shy away from companies that are “pre-revenue, pre-product, ” Yared added. On average, it keeps the investments for more than five years, she said.
“We invest amounts as small as US$10mil and as large as US$100mil.”
According to a study by PwC, a total of 34 German fintech firms folded in the first five months of this year – a record for the period.— Bloomberg