The strategic value of corporate venture capital investments

Fueling innovation and growth

CVC serves as a critical engine for innovation. By investing in startups, corporations can tap into cutting-edge technologies and disruptive business models that have the potential to transform industries. Buy-side co-investors can gain early access to high-growth companies that can deliver substantial returns. The symbiotic relationship between established companies and agile startups fosters an environment where innovation thrives, driving economic growth and creating new market opportunities. For buy-side investors, this can lead to more informed investment decisions and access to a pipeline of high-potential ventures.

Exploring investment opportunities with DB1 Ventures

The mission of DB1 Ventures, Deutsche Börse Group’s CVC arm, is to foster growth, drive industry innovation, and create value for the Group’s portfolio companies and stakeholders. As an international exchange organisation and innovative market infrastructure provider, the Group’s business areas cover the entire financial market transaction process chain. This is also reflected in the investment themes of DB1 Ventures.

On the trading side, business propositions around new asset class and market design models, with infrastructure and connectivity systems are the key target areas. That is why DB1 Ventures invested in Trumid, a FINRA-registered broker-dealer that provides an electronic credit trading and market intelligence platform designed to unlock liquidity for institutional clients. Another of the recent investments, Forge Global, also brings innovation into trading. With its global private securities marketplace, it creates an accessible, liquid, and transparent private market.

On the post-trade side, DB1 Ventures welcomes companies with innovative solutions around settlement, custody, collateral, liquidity management, and fund servicing. Its recent investments in this field include HQLAx, a block chain-based liquidity and collateral management platform as well as Next Gate Tech, an AI- and cloud-powered platform that specialises in the automation of data management and analytics and solves use cases in fund servicing.

However, since the acquisition of SimCorp last year and the creation of the Investment Management Services segment, the buy-side has become Deutsche Börse Group’s core customer and a key theme for the Group’s corporate venture investment, with connectivity solutions to the buy-side, i.e. for asset managers, pension funds, and insurance companies in their role as asset owner in particular.

Hence, DB1 ventures targets software and data solutions that help asset managers and owners with their front-office, middle-office, and back-office operations. With an impressive double-digit growth forecast (CAGR 23-26: 11%) and a high priority for the buy-side (representing 15% of AuM and 45% of buy side-revenues)¹, private markets and their respective software and data services along the GP/ LP value chain is one of these themes. This ranges from front office software, including pipeline tooling, through middle office with portfolio management and reporting, to back office, involving fund reporting, operations, and compliance. Interesting here are solutions targeting private credit and private equity funds but also distribution vehicles like ELTIF, and similar structures.

Bright prospects of investing in buy-side solutions

Investing in buy-side solutions presents a range of promising prospects, driven by several key trends and developments in the financial industry such as increasing adoption of advanced technologies and growing interest in alternative assets. Partnering with DB1 Ventures means gaining access to extensive industry expertise, strong network, and collaborative approach. If you share the same vision and are interested in co-investing, DB1 Ventures would love to hear from you. The team can be reached via DB1 Ventures website or via direct contact at DB1Ventures@deutsche-boerse.com.

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This guest contribution was written by Monika Fuchs, Investment Manager at DB1 Ventures, and Lucas Menke, Head of Investment Management Solutions Strategy at Deutsche Börse

Note 1: Source - BCG: The Asset Management Report 2024; McKinsey