Biking Around Berlin With Lukasz
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.
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.
great post – I find that some of the best minds that I have been dealing with for nearly 10 years are in Berlin and in Germany overall – I always enjoy my chats and have been learning German at the Goethe Institute so I can speak their language. There’s no doubt that there is an active startup scene in Berlin.
Can you describe in more detail the “private sale” business model that you mentioned?
Let me know the next time you want to take a bike tour of SF startups. 🙂
As a longtime reader – almost every day since almost the very beginning – it is so exciting to feel the change in the breeze from these European posts. They are terrific! I am sure you are inspired, and I am inspired! The world is changing, breathing, and there are a lot of opportunities. No one’s going to believe that a girl with a German first name and a German last name has any credibility, but I think Germany is a rockin’ place. I love French food and French culture, but there is a solidity to the Germans. Serious people. Their time has come. By the way, I got married last month. To a guy who also reads your blog. Ain’t it cute?
congratulations on your marriage! that’s wonderful news.
Sorry if i blah blah blah here. But this is of interest to me.I think of the future of retail as a Shopping Dig(g), because I believe that our experience of buying stuff will soon become much more akin to an archeological dig, where unearthing meaning and culture are more actively part of the experience.I think shopping curating, (another variation of the privately directed retail experience), and private sales are just the tip of the iceberg in the transformation of the retail sector; It is late on the scene, and just coming of age within the Web 2.0 space. More importantly it seems as though a shift is beginning to occur in how we relate to the things we purchase.I began WRLDs, because I saw the connection between information and objects, and an opportunity to generate new forms of support for educational and non-profit research if these 2 forms could be merged.I learned about this in part from talking with people involved in biotechnology, (both VC’s and scientist/entrepreneurs, (Carl Weissmann (Accelerator Corp), and Lee Hood (Systems Biology)). They mentioned how certain types of research, that were very experimental and badly needed could not find funding, as they addressed small populations; which did not work for the investors ROI. So, they looked for ways to create hybrid funding models, to support experimental research.If you think about the problem from a structural perspective, bringing information out into physical retail locations, in real time, through higher level fabbing techniques, will also transform the retail sector. (No I do not mean printing avatars from SL, though that is a fine market…; )) I am talking more about using 3D fabbing techniques to change the context of information, by shifting it from one domain into another. Where the physical object and its aesthetic value actually changes how we understand something based in more abstract forms of language.(Forgive the poetics here, art background…)Metaphorically, physical locations then become like empty fields in a database, where objects fill the spaces, recede, and are replaced with new objects, reflecting the markets as they constantly transform. This allows physical retail spaces to be more rapidly transforming spaces; much more in keeping with the experience of communicating through social networking environments.So, yes, this is an excting time for the way we purchase, but it goes beyond the form of the transaction. It is now a time where we will be able to consider how markets can actually play a role in how we think about and understand things.Spreadshirt and Ponoko are very interesting models. They change the way we transact business in retail. But it would be most interesting to work with a model that changed how retail was used to generate meaning.George Lakeoff’s work addresses this, on a philosophical level. And Bataille described it like a mad man…and much earlier.
hmm … retail used to generate meaning … ??
Markets generate meaning already don’t they? We are pushed towards new products and pulled away from others. We work to invest in or create a technology which generates a market. If instead, we found a way to merge the nature of markets with information we generate, our participation in markets would fundamentally be changed. This would alter our role as consumers.
Looks like the typical cool drizzly German summer stuff would be more comfy than the current NYC humid/heat for either biking or scootering.I rented a bike to attempt to get around Silicon Valley meetings last summer– it did NOT go so well (too huge, and hot!)And SF too hilly. Need to really be shape in general for bay area biking.
Fred, very happy that you took a look at the German start-up scene – disagree with two points though: First, I don’t think that Germany suffers in particular of a lack of money but rather a lack of serial entrepreneurs. Second, I have not really seen true innovation coming out of Germany (or Europe for that matter) in the consumer Internet space – the exception is mobile but the Internet start-up scene is still largely driven by the copycat approach. (More here if you are interested: http://www.wmediaventures.c….
I actually do think that there is a lack of money, not in an immediately visible way, but you saw it yourself very clearly: It’s only one start-up of each kind. Not two, not three, not 10. The problem is that there are very little investors, and those are investing in a lot of things together. They aren’t funding competing start-ups. We have only one (funded) start-up in each “category”, and it’s difficult to get funding once Lukasz funded one.This, of course, is not good, because competition puts pressure on the start-ups and makes them work better.To the people that think Germany doesn’t do innovative stuff, MyMüsli (MyCereals – http://www.mymuesli.com/) is a company where you can create your own, custom-mixed box of cereals. The company is not just a good idea, it is mostly profitable since a few months after being launched and are growing rapidly. They also report their business numbers, which is pretty cool.
That’s a good point about lack of competitionBut there are competitors globally for every one of the startups I saw in berlinI am not sure if the german market is large enough to support 10 versons of eachI am pretty sure the US market isn’t either’Me too” companies have been the bane of my existence for as long as I’ve been a VC. So I wish the market in the US was more like berlinBut I realize it can never be that way in an open free marketFred
Most other competitors are based in the US, which is a very different market culturally. Also, they are small – they don’t concentrate on the European market (or fail in doing so, if they try).I know that the German market isn’t big enough to support 10 versions of each project. It supports one or two of them, but if three are funded and two go nowhere, the time all three work on their products concurrently will make the “winning” product(s) much better.For VCs, this of course isn’t desirable (on the short term), because the chance of having the own investment succeeding is reduced, but for the overall market, it would be important.
This is the age old debate between vcs and entrepreneursI posted a long time ago about ‘venture fratricide’ and got a lesson in how entrepreneurs think about this issue in the commentsTry googling ‘venture fratricide’ and see if you can that post. Its probably four or five years old now
here’s the link to the venture fratricide posthttp://avc.blogs.com/a_vc/2…it’s over four years old but it’s timelessthis is an issue that will never go away
Thanks – it’s a really good read!
I was a better blogger back then!
Fred, you should check out the music scene while you’re in town. Over the last 8 years, the center of the electronic scene has shifted from London to Berlin. There’s so much amazing creativity going on there these days.
Yes, I should spend a month in berlin, not a day!
Great stuff Fred. I’m really enjoying these posts about entrepreneurship in Europe. What a great idea to bike from start-up to start-up…probably helps with the mental acuity of the investors and entrepreneurs to get out and about!
So I think a non-US (or non-Valley, perhaps to be more precise) startup has two choices – either a) pick up the new trends emerging in the valley and quickly build a local player (a copycat approach), or b) build a unique business model, roll it out locally first and show initial success, and then go global. Of course b) would be a more difficult route as creating something new is way harder than copying someone’s product, and also just because one thing succeeded in one market doesn’t mean it will succeed in the rest of the world.
Or pick up the trends emerging in the worldNot every trend starts in silicon valley as much as the people who live andwork there think it does
good ideas and action spreading around the world. we share the same thoughts of how to involve the economy and the society to a greater good with online innovation improving our daily life.Nice to hear that you like Berlin on the bike. Next time visting make a visit at another great online platform started in Berlin:www.betterplace.org a online donation (and soon micro-credit) people-2-people platform which takes the kiva-model to the next level. I am sure Lukasz also knows about it……and continue have a good time in Berlin
Fred, enjoyed your update from Europe and Berlin. The Vente Privee, or private sale, you cite as a European invented business model has been very active in this country in a variety of forms for at least 30 years. While online its relatively new, offline Membership sales organizations have existed in the US for a while. Costco, BJ’s, Sam’s Club and who can forget CUC (the electronics membership club) which became Cendant. CUC’s original model was that, for the annual fee, you could purchase electronics almost at their factory cost. Major retailers also have been doing “private sales” for a long time, offering early access or previews to their best customers. As for sales of overstock, that is how many of the BJ’s of the world started. While perhaps in its exact implementation some of the private sales of today could be unique, the concept has essentially existed for a long time in the US.
That’s true but there are some unique aspects of how its done online, withthe short window. It reminds me of woot in parts, and also HSN
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Good on you for pumping up the pedaling of bikes around distant locales. What we need these days is such enthusiasm for bikes Stateside! Keep up the good work, VC and otherwise, and get the word out.
Have to wonder if your German “Handmade Goods Market” is Dwanda?
Yes, I spent about 10 minutes at Dwanda and met the two founders. Very nicepeople.
Glad to hear you stopped in to see them 🙂 I’ve heard there site is wonderful for reaching customers beyond the US.
Next time in Germany, stop by and I show you around our new bicycle showroom in Munich. Or maybe we have one in Berlin by then…. Owning a bike is much more emotional and rewarding than renting one.And yes the website needs improvement – but this is just a very young side-project at the moment.
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Great post. As a German living and working in the tech scene in NYC I am thrilled to see an investor crossing the pond. NYC is certainly unique, but it’s crazy on how many business opportunities companies in the US and Europe miss out by staying local.
Very interesting comments from everybody. While I agree that member-only retailing is nothing new (read Costco…) I do think the vente-privee approach is innovative and that their recent expansion into Spain, Germany, Italy and the UK is a testiment to their growing appeal and strength. The UK site launched two months ago and I think that this will be a real ‘test’ for vente-privee, as the UK retailing market is already flooded with sales, and I also believe member recruitment could prove difficult in a country with such savvy internet users. Time will tell!