Technically I shouldn't be writing this. "Old Boy's Networks" aren't things you write about, especially if you're part of one. At the same time, I really don't have much to fear in Germany. You just don't have much in this regard. The Valley sure does and we're constantly going to be compared to or comparing ourselves to them. Like it or not, that's not the point of this post. One thing though which works wonders in the Valley is the "network" of connections you have there amongst VC's. There are very clearly cliques of funds which tend to work together on a regular basis and there are multiple such cliques. Further, you have an intertwined mesh of VC's sitting on boards of large, tech companies feeding deals back and forth amongst their networks. Dive just a layer or two deeper into large VC financings or exits of venture-backed firms to the large players and see who is connected with whom via board seats.
I know, I know, you're already probably reeling at this and thinking how could one possibly want "collussion" and "a bunch of priviledged, old, white men" running the show? Honestly, I don't want any of that. What I believe is necessary though is that funds work together to create an ecosystem. This then benefits the entrepreneur. Once this ecosystem is built, it feeds upon itself to the benefit of the system. When funds regularly work together, they can pool their resources and knowledge as well as networks to generate better returns. Further, once an ecosystem is in place and formerly venture-backed firms grow to the size where they are relevant M&A players, the ecosystem grows. This allows for ever more new start-ups to get off the ground, get funded and if successful, exit. Sure, many are left by the wayside on this journey but without such an ecosystem in place, Germany and Europe will forever trail the US.
Specifically in Germany you have the problem that very few funds have grown to scale. Basically if you look at Germany, you have Wellington, Earlybird , Rocket Internet and maybe Target who have been around for more than 10 years and have presence beyond Germany's borders, i.e. in brand, fundsize and relevance. Thereafter you have a bunch of regional players who most international funds have never heard of. Then you have the corporates, some super angel funds, more recently incubators and government entities. In total, there are quite a few funds but you definitely don't have enough for cliques to have formed and none of them can go it alone (one caveat: if the Samwers, as rumored, raise €1 billion, they sure as hell will go it alone!)
Further, you don't yet have enough companies at a scale where they can start buying smaller start-ups and generating relevant returns. When going for a trade sale, you always look first beyond Germany's border for a buyer, preferably a Google, Amazon, Facebook, eBay and so forth. Some large publishing groups are active in M&A in Germany too but the VC's don't play any role in their supervisory boards.
I strongly believe that the VC's in Germany (and Europe) need to start working closer together to inject higher amounts of money into start-ups, allowing them to be relevant beyond Germany's borders. We can't expect just the Samwers to have the balls to put 50 or 100 million Euro into a company. As long as German funds don't have the capital for such large rounds alone, they'll have to work together. It doesn't necessarily just have to be German funds. Syndication works well across borders in the EU as many of UK's and France's funds are ever more active in Germany.
Further, we need more companies which were venture-backed to grow to scale. There needs to be additional companies generating M&A exits in this ecosystem beyond just the large publishers. Finally, we need to have VC's who last more than one generation of fund in the ecosystem so relationship building evolves over years and groups can be formed. There is nothing wrong with people who work well together, i.e. the "Old Boy's Network" I'd like to see in place. It won't happen overnight and I'm confident we're on our way. Yet it's a concerted effort necessary on the part of all players in the EU game.