After a wild startup ride with Liquid Labs in Boston last year, I moved to Berlin recently and have joined ezeep as CTO. Right before I left Cambridge I gave a little seminar about the differences in European and US startup culture at MIT E-Club. An interesting discussion evolved in the seminar and finally I found some time to write a little post about the question why European startups (I will focus on Germany) still face trouble to form global market leaders like Facebook or Google.
There are many reasons, why Germany still isn’t a good environment for innovation driven startups. I will just talk about some of them in this post. The most obvious one is probably that Germans tend to take everything (including themselves) way too serious. But more about that later.
The Importance of Innovation Clusters
Naturally, Cambridge/Boston is one of the most vibrant innovation driving communities you can find in the whole world. With more than 100 colleges/universities and more than 250,000 students in the greater Boston area, the city has one of the highest densities of higher education institutions. In 2010, Boston was ranked as the #1 city for innovation worldwide in the Innovation Cities Top 100 survey. Institutions like Harvard, Massachusetts Institute of Technology and Boston University contribute a lot to the local innovation economy with their research but also by linking higher ed and research with the entrepreneurial community.
Thanks to New Atlantic Ventures, we were able to work from the Cambridge Innovation Center for the last few months. CIC is one of the largest co-working and startup spaces on the east coast and is located on the MIT campus. Right next to CIC you will find Dogpatch Labs and Tech Stars Boston just across the street. Can you find any comparable innovation cluster in Germany? No, you can’t. Berlin, which is currently praised as startup city #1 in Germany still hasn’t started any larger scale efforts to fuel innovation and technology entrepreneurship. Individuals have started many interesting initiatives, meetups, startup programs etc., which is great but can’t replace institutional efforts. Berlin’s institutions, including research centers and universities, should invest in creating a dense and powerful innovation cluster.
When I’m talking about density I mean geographic density. Right now all startups are spread across Berlin which is a problem since the probability to just randomly meet interesting people is quite low. With our last startup we’ve built an incredible network in Cambridge and most of our connections started by randomly running into the most interesting people in research and entrepreneurship. We literally met everyday at least one new person who was working on something interesting. The value of this serendipity factor is higher than most people think because your startup evolves so much faster when discussing it with smart and experienced people.
Education and Entrepreneurship
Yes, there are some positive examples of German universities that start to get into supporting and teaching entrepreneurship. Amongst others, the Center for Innovation and Entrepreneurship at Karlsruhe Institute of Technology and the LMU and TU in Munich are doing a great job. But there are still too many universities that offer barely anything. The college I went to, the University of Bayreuth, doesn’t offer any startup support at all.
It is also interesting to see that many entrepreneurship professors in Germany have never started an own company. You can’t do entrepreneurship by the book, so it would be important to attract successful entrepreneurs to give seminars and to help universities and students navigating the opportunities and risks of entrepreneurship.
At this point I have to refer to the MIT again, which is doing a great job in preparing the next generation of successful tech entrepreneurs. The MIT Trust Entrepreneurship Center and MIT StartLabs, founded last year by Chris Benson and his team are just two examples from a wide variety of great campus startup initiatives and seminars.
Tying up Smart People in the Copy Cat Machine
You might have heard of StudiVZ, Wimdu, Simfy or CityDeal. All these companies have something in common: They are all copy cats. In Germany many investors tend to put their money in ‘proven’ business models. This means they tend to invest in companies that copy promising products and business models of startups from the US and apply them to the European market, before the original US company has the resources to expand to Europe on their own. The goal is to sell back these copy cats to the original US company after while (e.g. CityDeal got acquired by Groupon for more than $100 million).
Don’t misunderstand me, starting copy cats is a legitimate business model and I respect how well for example the Samwer brothers have perfectioned their execution strategy. But the tragic consequence of the copy cat economy is that many smart people spend all their time and effort in making the quick buck. I know of more than one case when some smart founders approached German VCs with an innovative and promising business idea and the investors refused to invest but asked the team to work on a copy cat instead. How can Germany possibly form an innovation economy when so many smart people are chasing the quick $100 million exit?
Germans don’t like to fail
You might ask yourself why so many German founders decide to start a copy cat. I think the reason is deeply rooted in our culture. German people are usually relatively risk averse compared to for example the US. We like to make the ‘safe bet’. Copy cats are a pretty safe bet compared to hacking something completely new without any monetization model behind right out of your dorm room. Failure in Germany is still perceived as something negative which is ridiculous since failing is usually the best learning experience you can get in life. Many people are stuck in their risk aversion and try to navigate through life without collecting a track record of epic fails.
Let’s build the European startup community!
Germany and the European startup community has a vast potential that desperately needs the right environment to flourish. We won’t be able to overcome cultural boundaries like risk aversion very soon, but we should better support innovation by better connecting research to entrepreneurship and embed entrepreneurship in the education system. European business angels and college administrations should visit innovation clusters like Cambridge or Silicon Valley to learn how these places have become what they are today. We should not try to copy them though. We should learn from the US and build our own European startup environment. Last but not least we should make people in Germany aware that failure is usually a positive learning experience and should be embraced instead of rejected.
Let’s fail, learn, communicate, built great things together, be successful and have an impact!