Green Bites – Europe’s econnext: Leveraging Family Wealth for Environmental Dividends
Given the sheer enormity of the amount of investment capital required to accelerate the necessary global transition to a low or no-carbon economy, the econnext example could and should be emulated much more broadly.
econnext was founded in 2016 by two entrepreneurial former senior bankers from Deutsche Bank, Michael Schneider and Jobst von Hoyningen-Huene. Crucially, the two men immediately recruited members from several of Europe’s wealthiest business families as initial angel investors, including the Siemens, Brenninkmeijer
and Mohn (Bertelsmann) families, among others. What they built could be regarded as a multi-familybusiness, albeit one with a precise but ambitious target: tackling the climate change challenge by accelerating the decarbonization of the global economy. Decarbonization is at the heart of the investment logic which ultimately unites all of econnext’s efforts and investments.
To date, the families have contributed the bulk of 100 million euros in capital, the vast majority of which is equity. After the company had progressed considerably and been substantially de-risked, institutional investors have now begun to participate. The company is currently embarked on a major, 150 million euro capital raise, in order to fund the growth stages of its various portfolio companies. It is likely that many of the new investors will be institutional.
Over and above the funding they provided, perhaps the most important contribution which the families have made is almost certainly the fact that it is patient capital. The importance of this cannot be overstated: unlike conventional venture capital firms, econnext can afford to nurture its portfolio companies with a long-term perspective. This frees the companies’ managements from the pressure and necessity of producing strong returns relatively quickly, which is typical of most VC firms. For most VCs, “exiting” (i.e. selling) their investments is a core part of their job descriptions, formalized in binding legal documentation. Such pressures can result in value destruction when executing such mandated sales becomes more important than the long term interests of the company, its customers, stakeholders, and thereby its value. At econnext, most of the portfolio companies represent what Warren Buffet calls “forever investments”. The families can afford to wait for their investments to develop and mature; after all, their wealth has itself been generated over several generations. They have no need for short-term returns, and no real stakeholders to satisfy beyond themselves. This allows the portfolio companies to grow and develop without the short-term revenue pressures which so often come at a significant strategic cost.
econnext Multiverse
We build and scale profitable enterprises that benefit climate and society at large.
Our guiding and central logic is the decarbonization of all human activities, pursuing the ideal of a circular economy.
We are focused on climate tech and circular economy businesses that successfully developed their own patented technologies and proprietary services.
Our businesses are full of synergies and are building pipelines of future-proof, resilient, net-zero or net-negative infrastructure projects.
Help us to decarbonize.
Green Fact of the Day.
Renewable energy creates 5x more jobs than fossil fuels.
