Biking Around Berlin With Lukasz

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For the past six months, there’s been a noticeable increase in the number of german investors and entrepreneurs stopping in to see me at my office in New York. Every time I ask them, how did you hear of us? And each time, they’ve said, “Lukasz told us to see you”. But the couple times Lucasz was in NYC, I was out of town. So when I made plans to spend time in Europe this summer, I made sure to hunt down this guy Lukasz and figure out what he was up to. I am glad I did.

Lukasz’ full name is Lukasz Gadowski, he was born in Poland, spent most of his childhood in Germany, started a successful german online t-shirt company called Spreadshirt, helped start StudioVZ, the largest social net in germany, and now he’s an investor in something like 60 startups, mostly in germany, but a few in the US, France, and Poland.

I met him at his office this morning, spent time with two companies he is invested in and shares offices with and then we headed out to meet a bunch more startups. I was thinking we’d be driving around town in his car. But happily that was not the case. When we got outside, he turned to me and said, “the best way to get around Berlin is to bike”. So we grabbed his bike and a rental bike from a company called Call-A-Bike and headed out. This is what a Call-A-Bile looks like.

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We proceeded to meet three companies at the Hotel de Rome where we also had lunch and I saw his partner Oliver. Then we saw three more startups around the Mitte neighborhood where apparently the Berlin startup scene is focused.

As much as I love riding my bike around NYC and as much as we’ve come to rely on the Velib system in Paris, I honestly have never spent a day anywhere in the word bicycling from startup to startup. Now I have and I am surely going to do it again. It really works to see a lot of people and a city at the same time.

It’s been 25 years since I’ve been to Berlin and it’s changed a lot, for obvious reasons. It’s a modern city with a vibrant tech startup scene. Lucasz and his partner Oliver are invested in over 50 german startups. Some are in Hamburg, Munich, and elsewhere, but most are in Berlin. There are a few other local german early stage investors, including the European Founders Fund (aka the Samwer brothers), and publishing companies like Burda (a coinvestor of ours in Etsy), and Hotzbrinck Ventures.

But I got the distinct feeling today in Berlin that there is a mismatch between the number of high energy/high quality tech startups and the capital to fund all of them. It feels like New York ten years ago.

I’ll do the same thing that I did in my post about the “speed dating” in Paris, which is categorize the eight startups I saw today.

Online health community – 1
Private sales – 2 (apparel and travel)
Browser based games – 1
Peer to peer lending – 1
Videochat for social nets – 1
E-commerce – 1
Handmade goods market – 1

While the overlap between the companies I saw today our current deal flow in the states was not quite as tight as the companies I saw in Paris yesterday, it was still quite strong.

Again, I will say with conviction that Europe doesn’t lag the US by much, if at all these days. When an idea occurs to an entrepreneur in NYC or silicon valley, you can be pretty sure that the same idea is occurring to an entrepreneur in Paris, Berlin, Stockholm, London, or most anywhere in the world. That’s because they all read the same blogs, use the same technology, and talk to each other at conferences and online. Though the physical distances may be great, the intellectual distances are minute.

And in some areas, the europeans are inventing business models. Take the “private sale” model. It was first executed by a French company called Vente Privee which is now an very big business. I don’t have any access to information to confirm this, but I’ve heard that Vente Privee does over 500mm euros in annual turnover (as they call revenue over here). And at very high margins for a retailing business.

I saw two similar businesses in Berlin today and it’s clear to me that the europeans are ahead of the US in executing this business model. We have several companies doing this in the states now, like Gilt Group and at least one other. But the US are followers, not the innovators, in this category.

There’s nothing wrong with the follower approach, but it’s still worth noting that the US isn’t inventing every good online business model. The Koreans pretty much innovated on the user pay model in gaming if you want another example.

But back to Berlin. For a long time, the Germans have been known as good fast followers, copying business models in the US and building local franchises. And about half of the companies I saw today will probably stay in Germany or at best roll out across the continent. But the other half are gunning for a global business and eager to compete in the states and elsewhere. That’s similar to what I found in Paris yesterday.

So my take on Berlin is similar to my take on Paris. I think the economy and social issues are a bit better in Germany and it seems like it’s a bit easier to be an entrepreneur in Berlin than Paris. But I also think both cities have a larger supply of quality deals than early stage and expansion stage capital. And from someone who has played that game in NY for the past dozen years, that smells like opportunity to me.
And best of all, you can bike to board meetings.

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