In the interview Christoph Raethke we have talked about the Startup scene and about values that are crucial for founders. As a founder, investor, author and lecturer, Christoph has been one of the driving forces in the German startup ecosystem since 1999. Thank you very much for the insightful interview.
How is the startup scene currently positioned and what impact has the pandemic had?
I think when we look back on this time next year, we will be amazed at how little the startup scene was affected by the pandemic. The mantra of the industry is: trial and error, react quickly to new customer data, build up few fixed costs. In my opinion, economically speaking, a pandemic is also just a set of new customer and context data. Startups can react to that in the same way they would react to new megatrends or target groups.
Startups also rarely need to keep physical infrastructures running, and employees are equipped with capable hardware and software. Because of this, and because software products are easier to adapt to changing circumstances, the startup industry is certainly doing much better than the hospitality or tourism industries.
What have you learned about yourself in the past year?
I’ve learned how important everyday inspiration is to me, because I was suddenly lacking that. Living in Berlin-Mitte means constantly picking up quick, casual and sometimes bizarre sensory impressions everywhere, whether on the street, in the subway or in a bar. These can be snippets of conversation or the most diverse languages, and sometimes contemporaries who are deliberately a bit different from others. Such observations inspire me, I draw stories, creativity and wit from them. Since Corona, there’s been absolutely none of that. It feels like a mental numbness. A couple of friends and I have countered this by forming a “lockdown band.” We do everything online: rehearse, compose and record. BC & the VCs (www.bcandthevcs.de) is Germany’s first combo made up only of tech investors and startuppers. And we’re fired up to bring our repertoire live on stage post-corona!
How do you rate the education of founders in Germany?
For a long time, “founder education” was a niche topic by and for crazy people who were somehow infected by Silicon Valley. I’ve been involved in this topic since 1999 and ran my own accelerator program, the Berlin Startup Academy, up until four years ago. For a long time, something like this only worked in Berlin because the critical mass was there and there was a cultural acceptance of the job description “digital entrepreneur.” Even though progress in the last 20 years has been tremendous, in my view it took far too long in Germany for the methods and attitudes to reach established organizations and the mainstream.
This has finally changed in recent years. The Campus Founders are a symbol of this dynamic change. Significant resources, seriousness and professionalism are being deployed to create a center of gravity in Heilbronn that is driving tangible, long-term and positive change. Especially in the last five or six years, the pace and quality have picked up again. Overall, I think we are on the right track.
Campus Founders wants to train the next generation of value-oriented founders. How important is it for young founders to adopt a social attitude?
In my experience, founders have always been more reflective and value-oriented than other professional groups. That’s simply because they can’t swim along in a hierarchy, but have to develop their own corporate culture. To set up a new company profitably, the only things that help are customer orientation, problem focus and commercial craftsmanship, not buzzwords. At the moment, however, I see more and more aspiring founders who want to do just that and replace the important cornerstones with wokeness. Maybe a little unpopular, but for me the thing with the “value orientation” is first of all propaganda, a word shell, a charade. We are told in detail how important sustainability and climate goals are, only to end up presenting a company idea without a business model, innovation or customer research. Often these ideas can only survive on the basis of tax or donation money. I absolutely believe that climate and environment are the most important economic opportunities of the near future, but only if they are tackled with hard skills.
The Campus Founders advocate for zebras instead of unicorns. They want founders who not only want to earn money, but also take on responsibility. Zebras are economically successful and sustainably improve society. They don’t sacrifice one for the other. What do you think about this approach?
I’m sorry, but I have to sound the propaganda alarm again. The cult of the Unicorn exists only in a media fantasy world, just like the distorted image of “founders who only want to make money.” In reality, the German startup scene has been moving in the direction of smaller, industry-related B2B solutions for many years, especially in the southwest. Many investors have accordingly turned away from the search for the billion-dollar case with millions and millions of users. Instead, they work on companies that might have a few hundred customers in a particular industry and could bring a two- or three-digit million exit. I find it redundant how startup observers from the sidelines currently invent black-and-white fairy tales of sustainability versus profit, horned versus striped cloven-hoofed, and value versus amorality. It’s all smear theater. Among experienced founders, the tone is quite different – there, every success is supported because everyone knows how damn hard it had to be worked for.
The German Startups Association and the digital association Bitkom have presented a joint diversity initiative. The goal: “a long-term change in the startup ecosystem – towards more gender equality and diversity.” What do you think needs to happen for something to change here?
The most important thing is to get away from black-and-white slogans and a constantly resonating moral high ground on this topic as well. The record of decades of promoting women in the startup segment is pathetic. Few women dare to take the step of going public with an idea to the startup community. I’ve been offering open, free events since 2008 for anyone thinking about starting a business in the tech industry. The gender ratio at the entry level is still 80/20, and the female-only funding programs, conferences, and perpetual awards ceremonies make waves primarily in the media, but have little measurable impact. We finally need to be more data-driven.
There is too much talk about irrelevant and shadowy but polarizing observations like “unconscious bias.” But we should instead be talking about the fact that a startup career is the least suited to gender engineering. It is dramatically less amenable to planning and arrangement than staffing positions in government agencies and corporations. There is absolutely indiscriminate transparency of knowledge and resources that are important to a startup. Women do not take advantage of the countless offers that are open to everyone. In my eyes, the reasons for this lie outside the startup scene – gender stars and diversity initiatives won’t change this, just as they haven’t changed anything in recent years.
What are values that you personally stand for? What values are crucial for founders?
For me, they are the values of liberalism, which must be defended against racism and exclusion from the right and state faith and thought police from the left. I even had a T-shirt made with “Liberalism rocks!” printed on it. I believe that founders generally lean toward liberalism. Without an open-minded organization on the one hand and a rejection of dictates from above on the other, you can’t be innovative.
Why do some founders find it so difficult to represent a big vision and address a big problem?
One of the two most important factors is that many early-stage investments come from the hands of the state via the funding pots in this country. Funding has to be awarded on the basis of factual, commercial criteria. Anyone applying for funding must provide a comprehensible breakdown of what the money will be used for. This is the only way to ensure that applications can be compared. Dragging the responsible administrator along with an inspiring vision brings comparatively little. This is in contrast to the quintessential American investor, who wants to be carried along above all. However, I believe that this is slowly changing in Germany, because more and more founders from the first and second generation are becoming investors.
The second important factor is that “storytelling” often arouses suspicion outside the US. Even experienced founders struggle with this. Self-marketing tends to be culturally frowned upon here, both professionally and personally. That’s why I force teams I work with to write down their story – a story where they really create, change a piece of the world, and make themselves and their employees and investors rich in the process. It’s amazing how hard that is for most German, or rather non-American, founders – even if they have every reason to do so.
What makes good founders for you?
There is a magic that happens when someone is on fire on a specific topic and at the same time shows the common sense and craftsmanship to make it happen. I feel that rare combination right away. Everyone is looking for it and when someone finds that combination, he or she tells others about it with wide eyes.
What industries are you most passionate about as an investor and/or business angel?
I like ideas that are close to an efficiency problem. My last investment was Movacar. From them I learned that German car rental companies waste 300 million euros every year on paid vehicle transfers. I am also a shareholder in Seniovo and iCombine. Seniovo transforms bathroom remodeling for the mobility-impaired and elderly from a months-long battle with tradesmen and insurance companies into a one-click solution. And iCombine HR software simplifies the flexible creation of cross-departmental task forces for new assignments.
Are there areas that German startups should focus more on?
I honestly don’t believe in industry-wide directives. Founding teams work on the problems that excite them and that they can solve. Yes, there are areas where you would like to see new solutions, such as teaching and education. But, as is evident again right now: Those who start up in the field encounter so much government regulation, intense concern with privacy, bureaucratic budget allocation, and inadequate infrastructure that they find themselves on a suicide mission.
What advice would you give to young people who have an idea for a startup?
Come to me or startup incubators like Campus Founders as soon as possible. There are now a lot of resources for people who dare to take their future into their own hands with a startup – and they are waiting for you.
Author:
As a founder, investor, author and lecturer, Christoph has been a driving force in the German startup ecosystem since 1999. With his podcast angelsofdeutschland.de, he works to get more people excited about startup investing, while his methods, articles, university lectures and events aim to give aspiring founders a better chance of success. Since 2012, he has been developing and implementing entrepreneurship programs for some of Germany’s largest companies.