Earlier today we revealed how veteran entrepreneur Konstantin Guericke, whose impressive CV includes co-founding LinkedIn, has joined Berlin-based VC firm Earlybird as a Venture Partner in San Francisco.
Silicon Allee spoke to Konstantin earlier this week, and he revealed what his secret formula is take the Berlin startup scene to the next level.
SILICON ALLEE: How can you help German startups?
KONSTANTIN GUERICKE: If you ask people over here (in the US) what they think about German startups, it’s like asking them what they think about the Bavarian Prime Minister: ‘What’s the name of one?’ So it just hasn’t been really felt here and given how large Germany is, and how people drive German cars and admire the German economy, I think that there is an obvious gap there and I can help.
It’s not that people are ignorant of startups in other countries. They could name Israeli startups or Finnish startups or Swedish startups. Some people call it a problem, I always look at it as an opportunity. And so if I can be helpful, I think it would be an exciting thing for me to be involved in and I guess I also feel a sense of responsibility to try and make that happen given that I have been over here for over 20 years.
SA: What has driven you to accept this role with Earlybird?
KG: I’m not trying to become rich from this. I would like to see if one of the Earlybird portfolio companies that come out of this current fund can become a household name in the US and worldwide. To me that would be the outcome I’m shooting for.
I enjoy the mentorship that I do at Stanford. There are a lot of things I can be doing with my time, and one of the reasons I selected this is because, similar to Stanford, Germany is very much part of my background; my parents still live there and I have met a lot of German entrepreneurs. I think it will hopefully happen over the next four or five years where we have some big company like SAP emerge that people here say, yes, this is a great startup based in Germany. It’ll make for awareness here, so it won’t be only this blank spot on the map that is only for copycats, but even more important is the impact it will have in Germany.
SA: What exactly will the role entail?
KG: I will not be working so much on trying to pick companies; my focus will be on working with companies that the German team picks. My role is more defined by, of the startups that come across, how can I help them? Some startups will stay and operate completely out of Berlin, and I will advise them as best I can from over here. With others, maybe the CEO decides that they want to relocate more along the Israeli model where the development team and most of the people stay in Israel, but a good part of the management team are focused on getting a Silicon Valley investor involved, and need to be perceived much more as a local company. Those companies will be the ones I work with most closely because then I add a lot more value. I can connect them to the local investors here, to partners, to potential employees etc.
SA: How do you see your work benefitting the startup scene in Germany as a whole?
KG: Hopefully one of these companies will become a standout success because I think what the German startup scene really needs is an example. One of the problems I have seen in the past ten or 15 years is that most German startups that I have known get started by two MBAs, and then they just find someone to develop the thing for them. They look at it very much from a business perspective, of trying to see where there is a good market opportunity; where you can make the most money with the least amount of risk. And that’s not a good recipe for creating a startup with a huge amount of impact. It’s probably a good recipe for making money, but not a recipe for changing the world.
SA: What can Germany offer the US?
KG: There are a lot of engineers in Germany that are good, and one of the things Silicon Valley really lacks given how much money is available here, is just technical talent; that’s clearly the number one problem here. That’s why investors here are also interested in startups where the development team is in India or in Bulgaria or in Germany or in Latin America, because they know it is one of the biggest risks for startups in Silicon Valley – they just cant execute on their plans because they can’t find the technical talent.
SA: And what are the weaknesses of German startups?
KG: Well, there is the technical talent that makes things happen, but there is also the technical talent that starts these startups. That’s very important, and my sense is that the German talent just hasn’t been willing to do that. Sometimes there are a lot of good technical people but they don’t think of themselves as entrepreneurs at the same time.
Whereas in Silicon Valley – I do a lot of work with Stanford engineering students, and they think of themselves as every bit as good at business as any of the business students. They are not that interested in the technology itself but more the impact it can have on people’s lives.
SA: How can we solve this problem in Germany?
KG: Once we can get a couple of German examples, I think we will see much more technical folk starting companies and we’ll see the overall impact increase. My theory is maybe that is what happened with the success in Scandinavia; I think some of that may have come from Skype, MySQL, having a couple of local examples that are global successes. That may have motivated people to do Rovio or Spotify or Podio, a whole host of pretty successful Scandinavian startups.
SA: How hard is it for German startups to become successful in the US?
KG: It is possible, SoundCloud is an example of that, but it’s certainly a lot harder if you’re not here locally, because all over the world people prefer face to face relationships. If you’re not physically here you better be networked really well. But how do you become networked in the first place? You don’t just do it by coming over for a week and attending three events. That doesn’t really give you a network in Silicon Valley.
SA: And you can help with that?
KG: I can be a facilitator to it but it’s not like the supermarket where you go in and pick something off the shelf. I can help in the beginning with the credibility and to direct startups to the right people who are maybe most open to it, but those that invest more in Silicon Valley will be more successful here.
SA: How do you see the future development of Germany’s startup scene?
KG: In the dotcom boom, you had some business angels – certainly not as many (as now) – but most of them came from other traditional businesses, whereas now you have business angels who have come out of startups themselves. I think that makes a big difference for strengthening the ecosystem. Silicon Valley is not something that was created overnight; it was probably 50 years in the making. So with each generation, the ecosystem just gets stronger. I would assume therefore that it might take another 40 years for Berlin or other places in Germany to have a vibrant tech community. It’s not something that just happens from one day to the next.
SA: You mentioned copycats earlier. What’s your take on the whole clone debate?
KG: Here, people don’t look at it as a Berlin (thing). Each deal is looked at individually. I don’t think it’s something that is holding back success…
I know it’s not so easy to escape in Germany from (the copycat idea), because a lot of investors don’t expect really huge returns, they don’t expect a billion-dollar or 10 billion-dollar company; they expect exits that are maybe 50-200 million. If you expect only those exits, the risk that you can take is much lower. It’s a self-fulfilling cycle that has happened in Germany that will take a little bit of effort to break out of. If we say that we do believe that we can create some exits here that are a billion dollars and above, then entrepreneurs will feel more emboldened to create companies that have a higher degree of risk. It usually, in my experience, just takes a couple of examples, and then we’ll be out of that difficult cycle where everybody is looking to reduce risk. Investors will get the kind of companies that they want to invest in, and entrepreneurs will start the kind of companies that they think are fundable as opposed to those that have the biggest impact.
(In any case,) there’s nothing I could help a copycat with in the US.