As a German entrepreneur being engaged in the market with an own, seed capital backed start up I want to share some of my perceptions and encourage you to provide your viewpoints on the ecosystem for SW and Internet start ups in Germany.
With interest, I do follow the articles, discussions and activities by individuals, institutions or politicians concerning the start up ecosystem and its potential in Germany. In direct discussions with graduates just starting their career as a founder, seasoned entrepreneurs, university professors or managers of typical German companies, I come to the conclusion that Germany is full of bright, innovative and highly motivated people willing to start their own business. As far as I can tell, also the political environment is supportive. In some cases, I see major challenges for local entrepreneurs, mainly in B2B are the risk taking behaviour at customers end. My perception (I want to state perception and not statement or fact) is this needs to be overcome and we will have by far more successful start ups, later on followed by more and more founders willing to take a similar route. This will be a major benefit for our economy and all of us at the end.
Start ups in Munich often relate to a focus B2B – an ecosystem with specific local challenges we need to change
Not too long ago I participated in a panel discussion concerning SW as a key driver for growth. One major topic discussed was whether Munich or Berlin is the better place to start a new venture in SW, Internet or Web 2.0. My perception is that a discussion “Munich vs. Berlin” is of nearly no importance but a major question for German entrepreneurs is whether to start a venture with the market focus being B2C or B2B and how to get the critical first few reference cases for later growth.
Munich based start ups are often around B2B. To my opinion, selling to corporates in Germany (B2B) may lead to major challenges not experienced then selling to individuals (B2C). In comparison to the US or the UK, German middle managers in corporate are often very risk averse and do not easily try new things or products & services, e.g. from local start up. Thus even good ideas or innovative products from German start ups do have a tougher time to get the first 10 or more references and showcases to a bigger financing by venture capital. It looks like an US based start up with a similar offering has a by far better chance to get friendly trial customers, showcases and then further capital in a short period of time and in a bigger scale as its German counterpart. This will result in more momentum, faster time to market and eventually to bypass any German competitor. This needs to be overcome.
Start ups in Berlin often relate to a focus B2C – an may be able to build on an already stimulating ecosystem with existing momentum
It looks like this is considered by local investors and several ones prefer business models around B2C when investing in local entrepreneurs. Innovative business ideas in B2C are often originating from young entrepreneurs. And for them Berlin is for sure the more vibrant and fancy location than Munich. Berlin seems the place to be when going after individuals. I very much hope and firmly believe that the current run towards Berlin is stimulating further growth and will end up in a lasting momentum (not a short term hype).
Looking back at Munich and the increased focus on B2B, I think the situation is a little different. Here the aforementioned challenges when trying to sell to the middle managers in Germany kick in and slows down growth of this ecosystem, despite all the opportunities which are existing.
My simple proposal to overcome those challenges is to push for an environment where corporates start to support the start up environment in a much bigger but very pragmatic way. In addition to corporate ventures and strategic investments (for which everybody should be thankful) I think achieving an atmosphere where innovation by others is valued by simply giving their ideas a try – even at risk it is not that good as promised – makes the big difference. I would be delighted to see that top managers of a corporation create environments within their companies where every middle manager in Germany is strongly encouraged to test at least one innovative idea from a local start up per year (and not be punished later on if it is no success). This might have a bigger impact than any image campaign, political commitment to strengthen entrepreneurship in Germany etc.
My take away and message to politicians, investors and especially managers: Try more! Give the start ups a chance.
At one of the discussions I attended, a well recognized German professor stated that in our times, innovation does mainly come of young entrepreneurs and not from corporate research – also in B2B. My take away for managers at corporates therefore is: Don’t just look for takeovers or build a corporate venture arm, test and try fitting concepts at early stages. And if some are good, you are the first reference. Then build on it.
Just to be explicit: I am not talking about any regulation by politics or a planned program. I hope for a change in people’s mindset across organisations or companies simply based on the importance of the topic for all of us.
This is a short sum up of some experiences, also based on a lot of discussions with other founders and entrepreneurs and perceptions. Believing this to be an important topic, I wanted to express this. I am aware that general statements like those are not applicable in several cases. I hope not to have offended anybody.