First February Friday of 2016 belonged to venture capital. In the heart of Europe, Vienna, first volume of UpVenture Conference took place. Here is a short summary of the event along with four interviews with Martin Hauge (Creandum), Eze Vidra (former Google Ventures), Oliver Holle (SpeedInvest) and Manmeet Singh (Chinaccelerator).
You could almost touch the energy, creativity and passion during the whole conference. New connections were made, new perspectives and opinions were given, ideas and projects were pitched and recommendations given during the networking conversations.
Three inspirational keynote speeches caught the attention of the audience. Martin Hauge from Creandum in his opening keynote talked about building global brands. After lunch, Aeromobil co-founder Juraj Vaculik mentioned several news about the project as well as challenges they recently faced in regards to regulations. During the closing keynote by Rafal Brzoska attendees received an insight into the past and found out how the postal industry in Poland was disrupted.
As the main goal of the conference was to connect LPs and GPs, LP Perspective panel was more than welcomed. Michael Gastauer (Gastauer Family Office), Tatiana Issaeva (Fluent Digital Capital), Peter Schwanitz (Portfolio Advisors) and moderator Suresh Patel (Verdexus) discussed whether there still is a space for further investments in Europe and how to pick up the right GP persons – what are the qualifications and experience he or she needs to have.
Investing for Impact panel moderated by Nicholas Pöschl (Business Angel) brought up discussion on definitions of what does it really mean to be a startup with social impact. Different investors have different interpretations. One remark resonated especially – this kind of startups does not always need to be for-profit organizations. As Dr. Erwin Stahl (BonVenture) said: “All companies we lost were for-profit, not non-profit.”
“Search for scale,” says Oliver Holle (SpeedInvest) in the interview answsering the question what he misses in CEE startup scene. He was also a participant of the Fundraising panel together with Nikolas Samios (German Startups Group) and Guillaume Lautour (Level-Up) where they were answering challenging and in-depth questions of already mentioned Martin Hauge.
When talking about correctly and precisely posed questions we definitely need to mention the moderator of the Early stage investments panel, Manmeet Singh (Chinaccelerator). As he is relatively new to our venture and startup environment, his inputs and inquiries were unbiased and curious. Many East and West concepts were debated – both on the scale as Eastern and Western Europe, Europe as whole compared to USA as well as East and West on global scale.
Very valuable panel was also formed by startup delegates. They talked about the experience with investors as board members of their companies – what is the value they bring, how does the communication look like, what is important. Conclusion? Always be open and transparent in communication. Even with bad news.
In order to get deeper feedback and reactions from the guests we managed to interview some of them. To read what Martin Hauge (Creandum), Eze Vidra (ex GP @ Google Ventures), Oliver Holle (SpeedInvest) and Manmeet Singh (Chinaaccelerator) had to say, please, carry on reading.
For deeper overview of the conference from other attendees or photos, please, visit the Facebook page.
Correct me if I am wrong but you have visited Slovakia several times. What comes to your mind when we say Slovak startup ecosystem?
I would say I meet such a great willingness to do something in the startup area. I meet so many people that have this ambition of contributing and doing something with meaning in the startup area.
Your opening keynote´s theme was “Building global brands”. What do you think is the right way to build a global brand from Slovakia or CEE? What is crucial?
There are two things I would point out. First, if your ambition is to be a global brand you have to be born global. So from day one the startup has to focus on a global market. I personally don´t have much interest in companies that want to start in Slovakia then want to move to Czech Republic, maybe to Germany afterwards. Those kinds of companies are not my cup of tea.
And the other thing that I am preaching to my entrepreneurs is: don´t ask for marketing money to expand your market. With marketing money you can buy any number of users. If that´s the way you are going to expand it will never work. You have to crack the code on how to get virality into your brand. Like Vivino, the company I advised Creandum fund to invest in: someone at restaurant table takes out the smartphone, takes the picture of the wine and then the others ask “What are you doing” and he shows them. Suddenly the other people have downloaded the app. That´s what we call virality.
If you don´t advise your entrepreneurs to ask for money for marketing, what is the advice? To ask money for what?
To ask money for two things. First, building your product. When I see a startup and I am an early stage investor there is one thing I know: the product the entrepreneur is showing me is not the product that´s going to fly out on the market. He needs money to develop the product.
The other main thing is to build the team. Most of all I want to see entrepreneurs showing what I call “recruitment power”. They need to prove to me that they are able to build a group of people around themselves that actually are better qualified, at least in certain areas.
As General Partner you have been Board member of several startups. What are the most common challenges startups face in their growth phase?
It´s actually sort of same thing I just mentioned. It is recruitment. It is the capacity to attract the right kind of people to help expand the case to the next funding round.
And of course it is also a challenge to find the right “go-to-market” model, the right business model. We have experienced with most of our companies that they needed to be able to experiment with the business model before they really found out how to make it a great venture.
The opening panel´s title was West meets East in VC. What do you think are the binding points of CEE and Western VCs and where do you see differences?
I must say I never talk about Western and Eastern Europe. I talk about Europe as one market and it´s not so that people in Slovakia or Bratislava are operating in a different market than other entrepreneurs in Europe. They are exactly the same market. They are competing for the same money. At least when you come out on public funding. So for me it´s one market.
But of course some areas are more developed than others. I am based in Stockholm, a highly vibrant startup community, close to the level of London or Berlin. There is no London or Berlin or Stockholm in Slovakia but the distance to these centres is not so far that Slovak companies cannot interact with the rockstars from these cities.
When we talk about Slovakia, any startup, product or service that comes to your mind?
Of course the flying car, Aeromobil. There are some startups that have been on my mind for years but first of all there is this amazing entrepreneur. He never gives up. He has the determination that he could make anything fly and now he is going to make his car fly. I am not sure that I would invest in the case but I never forget about it and I will never forget about the entrepreneur. So congratulations, Slovakia! It´s a great case anyway and I hope to see many more crazy people like him.
How many investments have you done in CEE?
Last one. In your keynote, you have mentioned that in five years you don´t see any banks or insurance companies on the market. What makes you make that conclusion?
That was maybe too rough. What I said or at least what I meant to say was that I think 50% – and it´s estimate of course – of the established banks and insurance companies in Europe will be gone in the next five years. I think there will be a serious shakeout among the corporations. And this will happen because of all these startups now slicing bit by bit off the attractive market that these corporations have been able to keep for themselves for too long time.
Now really the last one. You are a fan of Vivino app. What is your favourite wine?
My favourite wine is a wine called Prieure Lichine from Bordeaux.
You have launched Campus London and you did it from scratch. What are the most crucial factors when creating such community?
I have been very fortunate to be at Google at the time when the idea of Campus was conceived, when Eric Schmidt gave a speech and said that Google will establish an innovation centre in London. I was fortunate to work with very bright and ambitious people. So I think that´s number one criteria. You need to have a sort of the right mindset and support to make it happen.
But from my perspective, clusters are not made of buildings, they are made of people. So casting the right content and creating the community at Campus was a crucial thing. It was about giving entrepreneurs a physical space to interact with each other at work, providing the support and mentorship that they need in order to grow. Whether it´s by creating a system for an open source events where anyone can apply to host an event at Campus or organizing mentorship programs where googlers can come and mentor the startups. We had a thousand mentorship sessions a year.
Finally, having the different parts of ecosystem and be active in the building because it´s not just about the super-early stage, it´s not just about single entrepreneur. There are different parts of the ecosystem.
So at Campus we had a cafe that was more of an open space and there is fifty thousand registered members that work from the cafe. We had coworking space where entrepreneurs could rent a desk or several desks and have their office everyday there. We rotated accelerators and had multiple accelerator partners that changed every three months, Startupweekend, Up Europe, Techstars, actively organizing hackathons. Having the representation of multiple parts of the ecosystem made it the truly representative cluster because it´s not just the place where you come and work. There are many things you can engage with.
In retrospect, what were the greatest challenges you faced when building Campus or the community?
First of all, it´s a physical space so you have things broken, like toilets. They brake. So you sort of have the upkeep of a physical space but it´s not a big deal and it´s very solvable. One thing that was important for me to foster from the beginning was how do I build a real community. In the sense that how do I make a lot of small companies that are trying to survive and grow, how do I make them care about the community and the bigger picture?
One of my labours of love and the way that I tackled this is by founding Techbikers which is a non-for-profit organization that brings together startup community, entrepreneurs, VCs, accelerators and people from the tech industry around cycling challenges. And together we raise money for a charity called Room to read that starts schools and libraries in the developing world. So with Techbikers it has now been around for four years, there are about 200 people that participated in the rides just in London chapter.
Suddenly you had all these people that are either designers, developers, CEOs, VCs – all practising cycling together and raising money for kids. You can meet people for drinks 50 times and never make a connection but cycle with them for three days and you have friends for life.
Overcoming these barriers when you are more than just your title was real fun adventure.
What do you think is the “sales point”? Why people love to be part of Campus? Why do they come there?
When we started it was the first time Google has done a physical space for entrepreneurs. So one, it was a novelty of touching Google. Two, it has a special energy. I really encourage you next time you are in London go visit Campus and you´ll feel it yourself.
It´s like going to Starbucks where everyone around you is an entrepreneur. When we first started it was new and there were all these people around it and all these things you can do – attend event, get mentorship, test your application in a mobile device lab. There was a pull to get people through the door.
But what kept them coming back was the community. It´s not the four walls of the building – although the building was nice and comfortable – but it´s really the people and the energy that was created there.
Right now we are in the heart of Europe, in Vienna. How do you see Slovak or CEE startup ecosystem? What do you think is working well and what are the challenges?
I think that in general, the Eastern European startup ecosystem is flying too much under the radar. I am happy that there are blogs like you, exposing the stories and the companies that are really innovating in their fields. Of course it´s a smaller market than let´s say London so there is less capital available, etc., but there could be great success stories that come from this region because you have all the ingredients to make it happen.
There is great technical skill, there is cheaper cost of labour so you can get more done with less money and most importantly, there needs to be that ambition to create big success stories, big companies that have global ambitions.
So I find it that there are all the ingredients there for success and there are already few examples. We need more.
What comes first into your mind in terms of startups, services or products from this region?
I have been having a lot of conversations in the last 24 hours so if we are talking about Slovak startups – Eset and the little cluster around antivirus and security. Or something like Aeromobil – the flying car shows the level of ambition and skill that you need. And in regards to the fact that it´s a small country in the middle of Europe it´s a great PR service because you are talking about very ambitious idea.
There are more and more regional examples of startups that managed to break out even from small countries. Like PicsArt in Armenia that Sequoia invested in and companies that suddenly out of nowhere essentially managed to break through.
Unfortunately in many cases this means establishing a presence in the US. It is very hard to just stay in your living room and become a global success.
That would be my feedback for entrepreneurs – it´s OK to be from a small country and to be headquartered there but it shouldn´t mean that you don´t go and see the world and connect and build the bridges with other ecosystems because it will help you with sales, recruiting, fundraising and more importantly with a state of mind in retrospective.
What do you think are the crucial ingredients for building a startup or business with global impact?
There are many ingredients so if I have to mention some obvious ones you need to tackle a problem that is in the large and growing market. You need to have a solution that fits your customers, meaning right price point, right experience, etc.
As a pre-requisite for that you need to have a strong team that is capable of delivering the solution and attracting other talented smart people to work with you.
Those are the main three components – market, product and team. If you want to add another secret ingredient I would say you need to have a little bit of luck and timing as well. Because there are great examples of companies that had awesome tech and good teams but were ahead of their time. I helped co-found a startup in Israel in 2002 that developed text input solutions for PDAs but there was no Appstore, there was no iPhone, it worked on ComPilot and Blackberry. So that´s an example of timing. And then you look at SwiftKey a few years later and it´s 250 million acquisition by Microsoft.
All of these things need to be present to even have a chance but then you need to have timing, luck and sort of attitude of never giving up.
I read that you are “the face of venture capital in Austria”. What is your opinion on CEE VC infrastructure? What challenges does it face?
I think we still have very few globally oriented investors. There are still many small regional business angels or government funds that sometimes lack perspective. And the same holds to entrepreneurs, there are way too little people that think globally.
What do you think are the binding points of CEE and Western VCs and where do you see differences?
History matters in the sense that in the UK or German or especially US you have VCs that have been doing it for many many years and that have seen many ups and downs and also have built really global network of peers, follow-on investors and co-investors and this is just slowly building up.
Also for us as SpeedInvest this has been the main task in the last years – to really build ourselves a brand and a network that can take these companies from A to B and C and D. That´s where a lot of our fellow investors in the region are still in the starting point.
Your main focus as an investor is on Europe. What startups got your attention lately?
Many. We already invested in fifteen startups in last nine months, so quite a lot. The last one we announced is Financefox. It´s a Swiss startup in the insurance space. Really really agressive, and fast-moving. But there is also couple of very interesting Central European startups. We invested in Metrilo from Sofia which is cool. We invested in Enbritely from Hungary, in Cloudo together with Pioneers Venture. So lot of interesting tech startups.
What do you think are the most crucial competitive advantages of CEE startups?
I think tech talent is excellent, mindset of capital efficiency is still here which means low burn rates, taking the time to develop product market fit and overall – a few entrepreneurs that have these kind of advantages but still can think globally. And this is a very interesting combination for investors.
And on the other hand what do you miss?
Search for scale. Many startups are still too little aggressive and not driving it hard and fast enough. Not thinking on the global level but also then translating this into very specific weekly, monthly milestones of what needs to be done to actually get there. It is sometimes a bit too comfortable.
As far as I know you are new to Central Europe. Is there anything that especially surprised you? What is your first impression of the environment?
Over the last 2-3 years I have been coming a lot to Ukraine and starting from there. Now here in Austria – obviously linked with Slovakia – what I am particularly impressed by is the level of the companies, entrepreneurs, investors and people within the ecosystem. The maturity of their understanding of the business models, of the opportunities that are out there. I think that´s the same as what we have in Asia as well.
What i think – and this is maybe just my own bias – what we are severely lacking is an engagement with Asia. Naturally, when you talk about venture business or early stage entrepreneurs or midstage or so and you look at companies anywhere in the world they always tend to look at the US as the first big market to target. And that´s natural. The US has many advantages and very mature system, so that certainly makes sense. Alongside that, I think they should start looking at the Asian markets. And they would see a very vibrant, growing ecosystem and economy. You have a very rapidly raising middle class there, wealth levels are growing. So there is a huge consumer story and it also makes us an industrial story that´s been built up in Asia.
I wonder if that isn´t a very interesting hotbed of opportunities for entrepreneurs here to build businesses for Asia. Taking a lot of the learning from mature markets that you have here in Europe and mature consumers and seeing where are the gaps in the Asian growth model and trying to fit something in there.
To follow up – what do you think are the key ingredients for a startup or business to be successful on the Asian market or specifically in China?
If you are talking about China you have got to be in China. You have got to sit there and understand it. In order to invest in China, basically you´ve got to invest your time, effort, energy in China, to think of being successful there. And it´s going take its time. It´s not going to be an immediate success story. It´s very rarely if ever.
That´s something that has to be taken into consideration. Even for us at Chinaaccelerator for instance, we had companies, even the overseas companies that came and spent at least three months with us for the batch programme. They are there the entire three months working with us in our offices.
We fundamentally believe that that´s a very important element – to be there, to understand local market. You can get some ideas by reading books and articles and watching videos but it´s a whole different ball game if you have to be sitting in that country and seeing it first hand and understanding the nuances and picking up a lot of the cultural variances, etc.
If you gonna to look at Asia, you´ll have to very seriously consider having a strong presence there. It has to be a key component in your strategy.
Do you think that knowledge of local language comes along with that as well?
China is relatively unique and it´s very important to know the language, especially if you have to understand your local clientbase. But if you are in India, for instance, where 30+% of the population speak English, you already have a significant representation. Plus with a couple of other languages in India we can find enough talent that is bilingual or trilingual or multilingual. It´s relatively easier to survive and even thrive just knowing English.
In China that is less and less true. You have to have understanding of local language. That´s how you pick up the local culture. Otherwise, forget it. You´re not going to get the essence of the local culture dynamics without having appreciation for the language.
You can try it but the success rate is not as high, I would say.
Coming back to Central Europe, are there any challenges you see that we are facing or we will face in near future from the entrepreneur ecosystem perspective?
I am not so sure. I couldn´t tell exactly because I haven´t had as much experience yet to be able to really pick up on a lot of that.
But a few things that I can say is that I think what we have in Asia – which we developed very quickly – is an increasingly mature understanding of what it means to be an entrepreneur, what it means to start a business, who is a VC, what is their motivation, what are the economics of a VC fund, what does it mean to bootstrap versus take VC or angel or somebody else´s money and gamble with it.
Increasingly, we´ve got much more mature about it. Our entrepreneurs are becoming more and more mature about that over time. So their discussions with VCs are very challenging. It´s not just about the money. It´s like “Hey, Mr. VC, what value do you really bring me?” except of just the money. So I think that maturity is extremely important for the success of the industry.
That makes both the funding side of the business and the entrepreneur side of the business much more enriched. So they are working in a far more integrated and smarter manner and that´s important. Right now, I´m not sure if I´m seeing that level of maturity on the entrepreneurs´ side at this point. There is a lot of entrepreneur education that has to happen in some shape or form, maybe some development through the educational system.
And I haven´t seen a lot of your typical accelerators up here which are very valuable or or programmes that sort of constantly churn out these entrepreneurs. You push your companies through a three months nose-to-the-grind-wheel kind of programme and they learn something. Whether they succeed or not eventually influence many factors. But at least they learn something. Whatever it is they do next or even in the next stage of their existing business they´re going be that much smarter, much more educated. And not just the founder but the entire team that went through the programme.
That´s the first push.
Exactly, and then they learn a lot. We have couple of hundred mentors at Chinaaccelerator that are easily accessible by all the teams based on what they want. That depth of knowledge and experience that is easily accessible that they can learn from is the huge value to companies. I´m not sure if we have a lot of that here yet. Conferences like these are fantastic opportunities for the entrepreneurs that were here to network with all these people to gain that knowledge and experience. But I don´t know what else exists. They might exist and I´m just not aware of them. I´m looking forward to discover more.
What might be interesting for Chinese investors? Why would Chinese investors come to Europe to invest?
Usually it would be either because of the interesting technology behind it or it´s something that has a very strong opportunity in China. Transplanting some of that model into China. I think that would be your first level drivers.
What are the opportunities for China? What exactly do you mean? Or can you name some?
We´ve got a very strong growing Chinese consumer class for instance. So there is tons of basic e-commerce. I think that could be interesting place.
Or even in terms of technological place. Anything in big data, analytics. all the buzzwords that you can think of…AI, IoT, big data, fintech, you name it. Anything that is of interest, unique, with meaning and is not easily replicable.
If they can replicate it they´re not gonna come here and invest in a company or buy it out. They will just replicate it. Because they can throw money at it, they can put talent behind it.
If there is something truly defensible then it´s really sexy.
Is there any startup from CEE that got your attention lately or that is especially interesting for you?
Although these are not really in some way startups but today I think I really liked the two keynotes we had – the Aeromobil or InPost. That´s truly impressive.
Photos: Facebook UpVenture Conference