“Entrepreneurship is not a sprint, it’s a marathon”
Mehrdad Bonakdar, founder of KENSIGNTON International and editor of ON LOCATION Lifestyle Magazine, met with Tim Bütecke, Exporo Founder, for an entrepreneur to entrepreneur talk about entrepreneurship, venture capital, visions and more.
Tim Bütecke, 45 years old, is a pioneer in the world of crowd investment in real estate. In 2012, he developed an idea that was to shape an entire industry: in 2014, together with partners, he finally founded the Exporo platform for innovative real estate crowd investment. The company, which started with a small team and printed brochures in the hanseatic City of Hamburg, is now the market leader in Germany with over 250 employees and a market share of almost 85 percent. Tim Bütecke gradually withdrew from the company last year to devote himself to new ideas.
MB: Hello Tim. How are you today?
Tim Bütecke: Excellent. Relaxed and ready for action.
MB: And how do you think the crowd investment industry is doing these days?
TB: Turnover in the real estate sector has declined somewhat recently. This naturally also applies to project financing by means of crowd funding, i.e. crowd investment.
MB: What is the reason for this? Have project developers become more cautious and therefore construction activity has decreased, or is there simply less investment?
TB: In general, the real estate market is proving to be crisis-resistant, which means that new projects arrive on the market every day. Separating the proverbial wheat from the chaff is therefore taking investors more and more time. Added to this is the uncertainty of end customers since the beginning of the Coronavirus pandemic. A noticeable consequence is that the financing of projects, especially via the platforms and by small investors, is more protracted. However, I’m noticing that the uncertainty caused by Covid-19 in particular is subsiding.
MB: You are talking about small investors – who else should finance the projects?
TB: Projects are often co-financed or even fully financed by semi- and professional investors.
MB: When you and your partners founded Exporo, you started small at first, but then grew relatively quickly. How did that work?
TB: The idea of building a crowd investment platform for real estate projects originated in the mezzanine business with my company HFH Hamburger Finanzhaus. The business was defined on the basis of experience and we then presented it to investors. With the so-called venture capital we then had the opportunity to grow. This is the usual process – of course, it is presented in a very shortened form. There’s a little more behind it.
MB: Interesting keyword: venture capital. How exactly should this be imagined? The company is founded and when the money runs out, you start looking for venture capital?
TB: In principle, start-ups build themselves up in this way. In principle, investors naturally also speculate that the respective business will pay off in the future. In addition to know-how, the vision of investors also plays a decisive role here. Some start-ups are therefore financed directly from the outset with external capital, others engage in so-called bootstrapping. This is a financing strategy in which the company is founded entirely without external financing. Exporo, for example, was profitable from the very beginning: not through its core business, but through real estate brokerage. That was our strategy. The brokerage fee we received for selling the property was often higher than what we earned by brokering mezzanine capital. This income then subsidised the core business.
MB: Exporo has brokered real estates?
TB: No, that is not the right way to describe it. The financial pillars on which Exporo was built were two companies that I had previously founded: HFH Hamburger Finanzhaus took care of the debt capital for the projects, crowd funding was added via Exporo and the properties were brokered by HFH Immobilien. So the basis was 14 years of experience on the market with HFH and the resulting reliable network.
MB: What happened next? At some point you had to focus more on your core business.
TB: That’s right. We were aware that this business model is very scalable. In other words, if we had not resorted to venture capital, another player would have been ahead of us. So as founders, we prepared ourselves intensively for the pitch of our business idea, gave the company value and started looking for investors. Looking back, it all happened very quickly and we had the chance to expand the company step by step. It goes without saying that with a consistent growth and development strategy, a company is dependent on long-term financial support.
MB: So with Exporo you have basically followed the ‘classic’ path. Start-ups are therefore not solvent for a long time, but always need financial injections.
TB: That’ s a good point, the external financing of such companies is always an issue. But that comes as no surprise: in every capital round you can measure how long the investment will last.
MB: So always new capital?
TB: That’ s right. Then there is the so-called burn rate: the amount of negative cash flow at the end of the month. Either existing investors make further investments or you start looking for new investors. It is important that the business is so promising that potential investors can assume that the turnover in the future will balance and even exceed the investments. In the case of Exporo, the decisive argument was the volume – after all, it is 450 million euros in the form of mezzanine, which has been proven to show growth. While at present start-ups seem to be springing up like mushrooms, there is no illusion: the statistics have not changed in 40 years, in the sense that ONE investment out of ten in venture capital is actually paying off. Or in other words: Nine out of ten companies disappear again before they have even become known.
MB: What is the explicit aim of the market leader Exporo?
TB: Following the last major financing round in the summer, it’s very likely that only international players will be able to afford it. A possible IPO would still be one way to raise capital. Officially, almost 60 million euros have already been invested in Exporo.
MB: Does the pandemic currently have an impact on the venture capital scene? Are there business models that are still being flooded with capital?
TB: This is a very interesting question! My experience so far has shown me that people forget quite quickly. At the moment, there is no doubt that a certain reluctance can be felt, but that will change again. However, there are fundamental differences between European and American markets: While an almost aggressive investment attitude prevails in America, investors in Germany have been more prudent and sensitive, even before Covid-19.
MB: Why did you choose to withdraw from Exporo at this stage instead of waiting for the IPO, for example?
TB: As an entrepreneur, I particularly enjoy developing ideas and business models. With the HFH Group I have been in the market for 20 years. The experience gained with the company was, as I said, the basis for the idea of a crowd investment platform. HFH has already proven itself in the past as a think tank for real estate and real estate financing. I have decided to develop further innovative business areas with HFH or to expand our portfolio. One focus in this respect is on digitisation. In addition to the further development and expansion of HFH, I also work as a business angel for promising companies such as Hamburg-based Proptech REOS Software.
MB: But you have remained loyal to the industry since you left Exporo, right?
TB: Absolutely. I am once again focusing on the further development of the HFH Group and, together with my team, am putting new ideas into practice. Even before the founding of Exporo, we supported project developers in structuring their financing – from bank financing to financing with mezzanine capital. However, we are constantly professionalising our processes. Our advantage here is quite clear: close networking based on many years of cooperation: We know the general conditions, see changing needs and can act efficiently and flexibly.
MB: And what is the crucial difference compared to your work at Exporo?
TB: Quite simple: without the pressure of venture capital, quarterly targets and scaling plans, it is not only more pleasant work, but there’s also no need to make compromises. We simply have more time for our projects, restrict ourselves to the top 7 German cities geographically and can react flexibly to the respective initial stages of the projects and develop individual strategies.
MB: And is there also something you’ll miss after your exit?
TB: Of course! At Exporo I had the opportunity to work with a really great team, side by side with movers and shakers, as well as newcomers. Even though I don’t miss the increased pressure to grow, there is something stimulating about the full-throttle mentality that prevails in the start-up scene and it suits my nature.
MB: I have a few ideas. If you ever get bored after all, just let me know.
TB: Sure, I’d love to!
MB: What is your next project? You are still much too young to take it slowly.
TB: Yeah, that’s exactly how I see it. (laughs) After your exits, you started new projects yourself. My next project is a mezzanine fund. The structures are already in place and it will officially start soon.
MB: That’s what I thought. Which investors is the fund designed for?
TB: Basically for all private, semi-professional and professional investors.
MB: What would you perhaps do differently today than you did when you founded the company?
TB: I sometimes ask myself how the project would have developed if we had tried it without venture capital.
In other words, the path I have taken with KENSINGTON from the very beginning until today?
TB: Yeah, exactly
MB: Yes, I am constantly asking myself this question: Moderate growth with full control of the shares and freedom from debt without obligations through venture capital, or fast growth, but with pressure from venture capital.
TB: What do you currently tend to do?
MB: Current status: I do not want to take a different path. Would you support that?
TB: There is no general answer to this question: whether venture capital should be included in a start-up is both a question of defining the goal, i.e. the desired growth, and question of how to go about it.
MB: Which five recommendations would you give to a founder?
TB: Choosing the right partners is crucial – you shouldn’t compromise and should take your time. Thorough research of the business model is a must. Founding a company is not a sprint, but a marathon. Without hard work and sacrifice it will not work. One should fully support the cause or let it go.
MB: I observe that many founders have a problem with saying that they want to earn fuel – to put it casually. So in my early 20s, at least for me, this aspect was crucial. Nevertheless, I have the feeling that it is not seen or heard with pleasure.
TB: No, this is actually not appreciated. The topic of money in general is quite a taboo subject in the German-speaking world. However, I can only recommend every founder to speak out about it: Yes, I want to step on the gas and become financially independent.
MB: Tim, I have six quick questions for you: If you were allowed to meet a famous person – dead or alive – who would it be and why?
Steve Jobs, because he has completely rethought products and changed the world.
MB: If you could change one thing in the world, what would it be?
TB: A higher general awareness of tolerance, consideration, mindfulness and so many other positive and desirable qualities that are currently being neglected.
MB: What was the best decision in your professional career?
TB: To make myself independent.
What (besides people) could you not do without in your life?
TB: Definitely good food and travel.
If you could choose a country, which one would you like to live in?
I love living in Germany, with the freedom to spend a lot of time in other places.
Which decision in your life would you like to undo in retrospect?
I wouldn’t want to go back, but I should have spent more time with my family and fathered children earlier.
MB: I wish you much success, stay healthy and happy.
My conclusion: I have gotten to know a totally relaxed and positive entrepreneur who is full of energy and knows exactly what he is talking about – a role model for every founder. Unfortunately, printing the entire conversation, which lasted several hours, would have gone beyond the scope of this article. But I am looking forward to the next conversation with Tim.