Celonis has taken its place among the “unicorns”, as the world's most successful start-ups are known: The spin-off from the Technical University of Munich (TUM) has been valued by investors at 1 billion dollars. Celonis offers process mining software that can analyze any digital business process. TUM is considered one of the top universities in Europe for promoting start-up founders.
The signs that Celonis would stand out among other start-ups were there right from the start: Profitable from its very beginning, in 2011, it was ranked as Germany's fastest-growing technology company in 2015. The New York office was established a year later.
Now two international investors have placed a value of 1 billion dollars on the TUM spin-off – the threshold for the designation of a start-up as a “unicorn”. Sightings of these mythical beasts are rarer in Germany than in the USA or China: According to the Handelsblatt business daily, just five German start-ups have achieved valuations topping the billion dollar mark in the past 10 years.
One third of all DAX companies are using the software
The Celonis software investigates the everyday processes in companies, generates easy-to-read graphics based on the analysis, and suggests improvements. This automatic consulting can be applied to all kinds of processes that leave digital traces wherever they arise: from a pharmaceutical company's manufacturing operations to the logistics of a trading company. Global players and mid-sized companies in 20 different industries are using the software, including one third of all companies listed in the German DAX index. This puts Celonis among the global market leaders for this technology, which is referred to as process mining.
Bastian Nominacher, one of the three founders, sees one key factor behind the success of the start-up: “From the very beginning, we worked with our customers to develop the software – and we very quickly gained major customers.”
“Knowledge from our studies is incredibly important”
But how was it possible for three students to do business with big corporations? During their time at TUM, Bastian Nominacher, Martin Klenk and Alexander Rinke worked with Academy Consult Munich, a student club offering business consulting services. They were asked for help with the customer service processes of a major broadcaster. “When we realized that the conventional methods were getting us nowhere, we looked around in the academic research world and stumbled on studies about process mining,” says Nominacher. “But there weren't any good software packages in existence. So we decided to develop one.”
Their best sales pitch: “This software can help companies at the push of a button and can generate a lot of value very quickly.” Further developing the software, the entrepreneurs benefited from their studies, which they completed in the company’s founding phase. Nominacher studied Finance and Information Management, while Klenk and Rinke majored in Informatics and Mathematics, respectively. “Whether it's a software architecture problem or a complex financial model – we can always fall back on things we learned at the university. That is incredibly important to us, considering that none of us had any professional experience before.”
Half of revenues in the USA
TUM played an important role even before the start-up was launched. In addition to the advice from the TUM start-up consulting team, the chairs for Information Systems, Industrial Design and Entrepreneurship helped to develop a business model and a corporate identity. The ties remain strong today. More than 25% of the 400 employees are from TUM.
Some of them work in the USA, where Celonis has 4 locations and generates half of its total revenues. The founders were undaunted by the jump across the Atlantic. “We were convinced that US companies have the same business challenges in terms of process optimization,” says Nominacher. Celonis also laid the groundwork thoroughly by entering into the first partnerships with experienced investors five years after the company was established.
IPO not excluded, but sale
These partners have now invested 50 million US dollar in a second round of financing. With this capital, Celonis plans to step up the focus on machine learning in its software development and expand its global presence in order to offer more direct customer service.
The founders do not rule out the possibility of an IPO, but have no intention of selling the company. “We think we are still just scratching the surface with the software,” says Nominacher. “The technological potential is huge and the market is almost unlimited.”
Every year around 70 technology start-ups are formed at TUM, which offers them a level of support seen at few other institutions in Europe. UnternehmerTUM, the Center for Innovation and Business Creation at TUM, offers support in all phases of the start-up process, from business model coaching to accelerator programs, and from prototype construction in a high-tech workshop to the procurement of venture capital. In TUM's incubator, the start-up teams benefit not only from the infrastructure, but also from the latest scientific insights of the Entrepreneurship Research Institute.