Dr. Ingo Dahm, CEO of capacura explains how digitisation of young startups reduces costs, enables a growth rate of 20% p.a. and makes investments possible starting at $1,000
Investing in young startups is considered a risky, complex, and expensive process. Despite a temptingly low company valuation, many funds refrain from investing in this asset class and leave it mainly to business angels and incubators. Consequently, the market is fragmented, and the development of startups is very heterogeneous. The failure rate of young companies is correspondingly high, which could be avoided by a thorough examination. This is complex, as there is little measurable data available, and the process is expensive – especially in relation to the capital invested.
What if not just a small club but everyone could participate in early-stage startups? This question has occupied the German FinTech capacura since its inception. But while direct participation is out of the question for many people due to the associated time-consuming duties of a shareholder, there is also criticism of crowd-investing platforms: They simply have a different set of interests than investors. If enough crowd investors are found, a deal is struck, and the platform earns – regardless of how the startup develops afterwards.
This so-called “principal-agent problem” is one of the keys to the considerable but slow success of so-called crowd investment. And this is precisely where capacura is changing the rules of the game:
All Investments Are Pre-Financed with Own Money
An investment in a young company is a question of trust. Small investors therefore appreciate it very much when the person recommending an investment shares the risk with his or her own capital. In the trade jargon, this approach is called “skin in the game”.
Capacura wants to enable everyone to participate in the success of sustainable startups. To this end, the German fintech first invests its own capital in attractive companies in the health, education and environment sectors and then gives other people the chance to participate in the economic success of these startups in the form of co-investments.
Within a certain timeframe, the purchase price is passed on without surcharges and all co-investors participate proportionally in the costs incurred by capacura for the selection and development of the startups. All this happens transparently and fairly. Co-investors do not even have to give up voting rights and proceeds are distributed in full.
Outside this time window, a fixed interest rate is due that considers the startup development for the period since the last capital increase.
Prerequisite for this is a sophisticated IT solution that maps all processes in conformity with the specifications of the regulatory supervisory authorities and effectively helps the individual investors to manage their respective assets.
Thus, capacura offers an amazing unique selling proposition, because unlike traditional funds, co-investors can select each investment individually and even build entire portfolios according to their own strategy. This works in volumes of professional investors (some million US dollars) but also, from as little as $1,000.
All Startups Are Vetted with Artificial Intelligence Tools
The examination of young startups in the early-stage phases has so far been time-consuming, and thus also expensive. For while on the one hand relatively small amounts of money flow into the target companies, on the other hand there are hardly any standardised procedures for evaluating such startups, which may not even have been able to record their first regular revenues.
It is even the case that the valuation of a young company using two different – scientifically established – methods such as discounted cash flow (DCF) or revenue multiples (MRR) can differ by a factor of 100. This makes these methods for determining risk and value simply useless when examining early-stage startups.
The German digital investment firm capacura is therefore taking a new approach. Here, companies are selected and evaluated using artificial intelligence algorithms. The smart software not only uses relevant databases, but also collects information about the founder team, market trends, patents, and brands in social media and on the internet. It analyses submitted business plans and the startup’s capital needs as well as the data of relevant platforms such as Amazon, Google, trade register or the Apple Appstore.
Moreover, capacura analyses data on tens of thousands of successful and failed companies, searches for competitors, market companions and exit candidates. In this way, even in the super early seed phase, an extremely comprehensive data set is created from which the probability of success and failure can be derived.
Within 39 seconds, an exposé and a company valuation are created and made available to the respective startup free of charge. In this way, each entrepreneurial team – even in the case of rejection – effectively receives feedback. However, only the top 2% of all evaluated companies are manually reviewed and given a final check by the investment board. In this way, the company saves considerable costs, continuously ensures a high-quality deal flow and can make decisions at lightning speed. Meanwhile, the accuracy of the process is – depending on the sector – up to 85%.
According to its own information, capacura has analysed nearly 100,000 companies and used the results to train an evaluation procedure that is now able to mark exactly those startups that are less well suited to the company or, in the worst case, even have a high chance of failing.
This super-fast and accurate assessment offers the company and its co-investors a considerable time and cost advantage.
Exclusive Focus on European Deep Impact Startups
With its focus on health, education, and environment, capacura invests in the three most heavily funded goals of the United Nations’ Sustainable Development Goals (SDGs). This targeting is well received by leading investors because it is extremely robust in the face of crises and (almost) everyone understands the importance for their own community: all parents want their children and grandchildren to receive the best education, everyone wants to age self-determined and healthy, every society needs a healthy and sustainably managed planet to survive.
Because of this growing demand, the smart selection process and an outstanding portfolio management, the value of the capacura portfolio increased by more than 20% p.a.
But the return on investment is only one side of the coin: 670,000 people with better access to excellent healthcare, over 35,000 children who got the possibility to receive a modern digital education, and an offset of almost 2,000 tons of CO2 – this is also part of the balance sheet of the capacura portfolio.
Investors love to be part of the movement where impact is no longer seen as “low yield but reasonable”, but simply the better investment in all aspects.
Capacura is about to significantly improve the conditions for innovative impact startups in Europe. With its novel approach, capacura aims to inspire 100,000 new investors and activate 1 billion € in early-stage capital.
Capacura is actively investing in fast-growing startups that innovate the important sectors health, education and the environment. In doing so, the investor strives for a concrete and measurable improvement of the United Nations’ Sustainable Development goals (UN SDGs).
The focus is on “Health and Wellbeing” (3), “Good Education” (4), and “Climate Action” (13) – i.e. an active reduction of greenhouse gas emissions through technical innovations. So capacura does not only exclude companies from its portfolio, but actively seeks startups that act in a particularly sustainable manner.
Through a sophisticated technology, suitable startups are recognized very quickly in the selection process, which reduces costs and does not unnecessarily steal time from the founders. In addition to professional investors – who can invest in such companies anyway – capacura also offers small investors the opportunity to participate in the economic success of startups.In doing so, the company has chosen a particularly innovative approach that ensures that investors and capacura have a high level of coverage of their interests. This leads to an elevated level of trust and an active commitment to more impact-oriented startups in Europe
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This article is also featured in our Climate Change review, available to view here