Founder Philipp Schröder wants to generate billions in sales with 1komma5°. To do this, the start-up is buying dozens of companies – and must risk going public. These 15 steps should lead the expansion to success.
The plans of 1komma5° co-founder and CEO Philipp Schröder can be summed up in one word: size. The start-up is to become a leader, not only in Germany, but also internationally.
1komma5° is growing rapidly – with acquisitions
Just three years after its founding in Hamburg in May 2021, the company already employs more than 2,000 people – in seven countries: Germany, Sweden, Finland, Denmark, Spain, the Netherlands and Australia. The expansion is mainly based on acquisitions. The start-up has taken over around 40 companies by July 2024. 25 of them are German craft businesses: electricians, heating technicians, solar system builders.
Heartbeat is intended to reduce electricity prices
They are at the heart of the business idea: the energy transition for private households or businesses – all from a single source. Installation of solar systems, heat pumps and charging stations for electric cars. Plus a digital control unit, called Heartbeat, which is intended to drastically reduce the costs of purchased electricity.
The strategy is a success – at least so far. Mainly because Philipp Schröder and his team only buy companies that fit into the company’s growth culture.
The Hamburg start-up shows how takeovers can succeed and serve as growth drivers – in 15 steps.
1. Identify growth potential
Schröder is not alone. He founded 1komma5° together with Philip Liesenfeld, Micha Grüber and Jannik Schall. Schall is the Chief Product Officer, as it is called in start-up parlance, and formulates what is probably the company’s key success factor: “You have to have control over the end customer business.”
In spring 2021, the quartet hatched their business plan. Anyone who wants a heat pump or a solar system, they think, usually gets help from a specialist company. “So if we want to grow quickly,” says Schall, summarizing the founders’ idea, “we should integrate the players in the market and leverage their growth potential.” In other words: buy craft companies and make them part of 1komma5°.
2. Use Philipp Schröder and Jannik Schall’s Tesla network
What can be quickly written into a business plan, however, requires a lot more in practice. How do you find suitable companies? And how can you convince the owners to sell their companies?
At this point, the founders’ past is important. Schröder was Tesla’s Germany boss from 2013 to 2015 and then managing director of the solar power storage producer Sonnen in Allgäu. Schall has also worked for both companies.
What remains from this time is a full contact book with the addresses and telephone numbers of specialist companies that install charging infrastructure for electric cars, solar systems or power storage units.
“We understand what makes them tick,” says Schall. And above all, they know what these craftsmen and women have already achieved and created.
“There are great companies that have been doing this for many years and are really good at it. They know the tricks and pitfalls of the business. They know the regional differences, the legal requirements, the state funding.” In short: know-how to be successful in the market.
3. Build contacts
For months after the company was founded in 2021, they drove around the country from one company to the next. “Sometimes there were several in one day,” says Schall.
His expectation at the time: “It will be brutally hard and it will take a long time.” After all, most craft businesses were doing well. Business was booming. So why sell?
Among the first entrepreneurs that Schröder was able to convince were Ingo Stephan and Alexander Pape. The owners of the electrical engineering company Bode & Stephan from Göttingen received an email from the 1komma5° founder in May 2021.
He asked if he could come over for a coffee and talk about business. He had a business idea that he would like to present.
Schröder was not unknown to either of them; Pape even knew him personally. They installed Sonnen power storage units for customers, where Schröder used to be the boss. So why not listen to what he has to say?
4. Attract entrepreneurs to the start-up
A good week later, Schröder came. The three of them were sitting in Pape’s office. The 1komma5° founder explained his strategy – and that they, Stephan and Pape, could become part of it.
Participation is crucial. The owners should stay in the company and manage it even after the takeover. Otherwise, valuable knowledge and the bond with the team would be lost.
Bode & Stephan had a good 30 employees at the time. Hands and minds without which the desired growth would not be possible.
“We don’t want those who can’t find a successor,” says Schröder, “but entrepreneurs who say: I want to do this with you because I believe in the mission.”
5. Present a convincing vision like Philipp Schröder
For him, a key question to the business owners is the guideline in these discussions: “What does it take to make 1komma5° the project of your life?” So what can make it the project of your life?
Stephan, who stands out from the founders’ start-up chic in his sweatshirt and wild hair, says that he grew up with the idea of becoming independent of fossil fuels and using wind and solar power, and then made it his profession.
“And then someone comes along who has a vision of how more can happen. In other words, he wants to achieve exactly what I wanted,” says Stephan. This possibility of becoming part of something big “triggered” him and Pape, he says.
A few conversations and weeks later, the two entrepreneurs were convinced and embarked on the 1komma5° adventure. For Stephan, this was the beginning of an “emotional rollercoaster ride,” he says. In the end, he had to give up his self-employment and the company he had helped to build.
6. Make 1komma5° GmbH a stock corporation
And all this at a price that required a great deal of trust in the business model of the Hamburg start-up: In addition to money, Stephan and Pape received stock options of 1komma5°.
These options give them the right to buy shares of the company at a specific, very low price when the company goes public.
However, the company is still a limited liability company. It is not clear when 1komma5° will become a stock corporation and go public. Philipp Schröder has not commented on this. In financial circles, speculation is about the year 2025.
7. Use the 1komma5° IPO as a lure
The details of the takeover agreement are not intended for public release. However, it should be clear that the higher the 1komma5° shares rise, the more Stephan and Pape will benefit from the deal. The downside: If the company fails, their stock options could become worthless.
Stephan is aware that he has made a big bet. “We contributed our company as venture capital,” he says.
Just like the international financial investors who have invested an estimated 400 million euros in capital in 1komma5° – with the hope of making a lot of money after an IPO.
So far, this seems possible: in 2023, 1komma5° had a turnover of around 460 million euros and, according to its own statements, was profitable. The operating profit (EBIT) is said to have been just under 50 million euros.
Selling the business to 1komma5° seems attractive not only to Stephan and Pape, but also to many craftsmen. The first contracts were signed in late autumn 2021.
8. Check fit
Bode & Stephan GmbH became the Göttingen branch of 1komma5°. From then on, the new company logo was displayed everywhere – from the website to the van.
But before 1komma5° bought the company, Schröder’s team wanted to make sure that the takeover was really worthwhile. A three-person acquisitions team checks each company in detail.
First the hard facts: figures such as sales, profits, costs, current loans, but also contracts with suppliers or employees. This gives an impression of the situation and the company’s perspective.
However, mere figures and facts alone are not enough to make an assessment. Schröder and the acquisition team take a close look at the companies.
What does it look like on site, what impression do the employees make, what is the mood in the company? You have long discussions with those responsible in the individual areas such as roof and electrical installation or sales.
Experts recommend such so-called site visits, also to get to know each other personally. “Mutual trust is important when selling companies,” confirms Hauke Thilow, a lawyer specializing in takeovers and mergers at the Brock Müller Ziegenbein law firm in Kiel.
9. Take away the team’s uncertainty
The visits did not go unnoticed. Electrician Stephan remembers that the team was very unsettled. He tried to talk to the employees.
“It was important to convey that this was not a distress sale and that jobs were not at risk,” says Stephan. That was enough to transform the nervousness into a more positive tension.
For company buyers, such reactions are a good indicator of whether the takeover will be a success. Schall says they have developed a good sense of who is a good fit for 1komma5°, whether there is the necessary “human and cultural fit”, as he calls it. So far, no purchase has been a real flop.
10. Support acquired companies
Economically, the owners who sell their businesses to 1komma5° can hope for two effects: full order books and better processes. “We used to go to the construction site with a notepad,” says Stephan, “now we use tablets.”
The old electrical engineering company would hardly have been able to digitalise the entire business, from order acceptance to acceptance of installed systems by customers, at this pace.
11. Create a win-win situation
In addition, the acquired companies receive support for tasks outside of their core technical skills. Marketing, sales, financial accounting – much of this is handled by the holding company in Hamburg.
Georg Kraus is a specialist in so-called post-merger integration. With his company Kraus & Partner, he has already advised numerous companies on how to successfully integrate acquired companies. The key thing, he says, is that “a win-win situation is created”. The takeover must be a win-win for both companies.
To this end, 1komma5° sends an integration manager to each company it acquires. Over a period of several weeks, he or she runs workshops with the team to practice the new processes and how to use the new software and digital tools.
In addition, there is an event at the 1komma5° holding headquarters in Hamburg to get to know each other. The entire team is invited to attend. Later, there are regular online meetings for the site managers and specialists in the individual areas such as electrical installation or roof assembly, as well as personal meetings to discuss questions about day-to-day business.
That seems to be working. Stephan says that only one employee from his company resigned immediately after the takeover, and another later.
Philipp Schröder says that the retention rate in the acquired companies, i.e. the proportion of team members who stayed afterwards, is 50 percent higher than the industry average. This was determined by his financial investors.
12. Learn lesson from Tesla
Why is the start-up doing so well? During his time at Tesla, says co-founder Schall, he learned one thing above all: “The team is the most important thing.” And: “The key to a good corporate culture is setting an example.”
This means getting to work, pursuing ambitious goals, and supporting each other when something doesn’t work out. And that means doing it on site, directly at the locations. “You have to be prepared to dig through the shit,” says Schall.
At the beginning of 2022, for example, there were hardly any heat pumps left on the market. Schall and some colleagues spent days calling all suppliers to secure capacity.
Then he drove to the 1komma5° site in Lingen on the Ems to set up a central warehouse for the whole of Germany. The company there had a hall, but it wasn’t big enough. So Schall quickly organized a large tent to store equipment there and helped the team on site.
13. Set ambitious goals
Philipp Schröder wants more, much more. In 2030, sales should be between 10 and 20 billion euros, more than 20 times as much as in 2023.
He calls the strategy he wants to use to achieve this goal Build and Buy. 1komma5° is to acquire additional companies and build new locations itself. The latter, i.e. Build, will be the focus in the future, he says.
The companies that the start-up has bought since 2021 are also contributing to this. Bode & Stephan GmbH, for example, only had one location with around 35 employees when Schröder stopped by for coffee.
Today, the former owners Stephan and Pape are responsible as branch managers for three locations – Göttingen, Kassel and Braunschweig – with a total of around 120 employees.
Does Stephan feel pressured by Schröder’s seemingly insane growth targets? “No,” he says. He would set the targets for his branch together with his partner Pape – albeit in coordination with the Hamburg headquarters. From there, however, there is a “clear message” that targets should be ambitious.
14. Analyze development carefully
Hamburg can keep up to date on how business is developing. In monthly meetings, managers from the holding company look at the figures achieved together with the site managers.
If the targets were missed, the reasons for this are analyzed and adjustments are made. Stephan says he not only achieved his targets for 2022 and 2023, but exceeded them.
1komma5° will have 75 branches in the summer of 2024. Around 1,500 of the company’s 2,000 employees work in the craft businesses. It is unclear whether things are going as well everywhere as they are at Stephan and Pape. The start-up does not release detailed figures on this.
Overall, however, the company’s development indicates that the integration of the craft businesses into the holding company is successful. Otherwise, the rapid increase in sales would hardly have been possible.
The so-called partner meetings are also important for this. Twice a year, the founders, the management of the holding company and the site managers from the regions come together to talk about strategy, goals and problems in the teams.
15. Conjure goals together
In July 2024, around 70 managers met at the headquarters of the former Bode & Stephan GmbH in Göttingen. From Monday afternoon to Wednesday morning, workshops and meetings in large groups were on the agenda.
In the end, the group made some decisions about how the business should continue to grow. Stephan says he likes the fact that they can exchange ideas outside of day-to-day business. And there is something else at stake: “That is a bit overly pathetic. It is also about reaching our goals together.”
Schall describes the team spirit at 1komma5° in a more down-to-earth way, using a craft metaphor: “Working together in extreme growth companies simply brings people together.”