Europe Punishes Startups Again

lanes2.jpeg

Last week the European Parliament issued its ruling on Net Neutrality by rejecting protective neutrality amendments, thus allowing loopholes for an Internet with two speeds. This dealt a royal flush to telco providers, an unbeatable hand that could make it impossible for startups to complete.

Immediately after the announcement, Deutsche Telekom AG CEO posted a blog supporting a win-win for everyone. The major loophole allows DT and the alike to create a toll on any company that doesn't have the liquidity to finance whatever price they decide.

In addition the doors also swung wide opened for major companies like Google, Facebook, etc to dominate in Europe. There was a reason none of these companies signed the protection for net neutrality document. European startups will have to compete on a uneven playing field (like it isn't already) against industry giants, while smaller groups might have their voices drowned out by well-financing groups. 

Proponents of the passed legislation cited 'consistent net neutrality regulation across Europe for the first time' as a major win leaving Europe in a better position today than yesterday. So much better that DT is already to offer special services to startups for just a little piece of revenue. 

Europe had the opportunity to learn from the USA and do it better. In the end, corporate interest came first. The governments of major European cities traded revenue and taxes at the expense of innovation and competition. Time will tell how it plays out, but at the end of the day the biggest loser will ultimately be the consumer.

Startup Weekend Frankfurt

Collaboration.jpg

Everyone is back from holidays and the work sprint to the end of year has begun. That also means it's event season. Not all events are built equally. Poor organization, boring panel discussions, and lack of networking skills can make many events a huge waste of time. But there is a different kind of event happening in a few weeks called Startup Weekend Frankfurt. Instead of panels and slides, this event is an interactive accelerator where entrepreneurs build teams and work with mentors to launch a business over a weekend. It's a very 'hands-on' approach and a perfect opportunity for anyone looking to launch a business or wanting to join a startup and doesn't know how to get started. Join Today. I hope to see you there.  

Here is an interview I did for the event:

Matt please explain who you are and how you can help our Teams at Startup Weekend Rhein-Main? I'm really excited about the concept and format for Startup Weekend this year because the teams will have to focus on understanding markets, customers and G2M strategies, not just a glorified hackathon. Personally I'm passionate about building products people love and in order to achieve that it requires understanding many aspects of product building that aren't found in just a beautiful mobile app. I started as a venture capitalist, then became a 2x entrepreneur. My goal is to help the startup teams think through use cases and critical questions. The teams can leverage my experience from 'both sides of the table'.

What are the trending topics / startups in Frankfurt's Startup Scene? I've spent the majority of my career working in Silicon Valley, thus I have fresh eyes to the Frankfurt Rhein Main area. But that also means I have a 'jaded' view of what I believe it takes to be a successful startup ecosystem. No other place in the world is like and/or compare to Silicon Valley. I think Frankfurt is trying to figure out its place in the German and European startup scenes respectively. Because of Frankfurt's central and accessible location in Europe, as well as being a major banking center, it has a lot of natural characteristics to be an impactful startup ecosystem. Recently I'm seeing this topic debated and discussed at events more often. This is a good sign! Bring the issues to the market. Startups are organizing better, asking for support, and trying to raise capital. This forces the surrounding Frankfurt ecosystem to take notice about the fantastic opportunity in front of them. The big question is will the angel/VC/corporate community bring the support as well. If the startups don't get that support, they will leave to other areas. Industry wise, the Fintech sector has a growing buzz and a few incubators and accelerators are being established with a specific Fintech focus. Also the 'Connected' anything is gaining traction as businesses and consumers start to understand the use cases and benefits that machine to machine (M2M) and Internet of Things (IoT) can provide.

From a VC perspective: Why is it useful to support a Startup Weekend as a mentor/partner/sponsor?Many VCs have been entrepreneurs themselves. Making the leap to start your own company or join a small startup team is the first and most difficult step into entrepreneurship. It's risky and historically not widely supported by the culture. That's why it's important that there is a entrepreneur and startup support network available to mentor, answer questions and provide encouragement. The fact is building startups is a meaning, learning and highly rewarding experience. It is difficult to launch a company and at times it feels like being stranded on an island with nothing, but all of us entrepreneurs can point to situations when others have lent a helping hand. That is one aspect that makes a great startup ecosystem. Events like Startup Weekend can help encourage some of these ideas form and grow and hopefully gets others to join as well.

Follow Bolt Capital at http://www.bolt.capital and @boltcapital

To Build or Not

Recently I've been asked the same question many times over: how do you decide if you want to build a product in the first place?  My answer is very basic and always the same. Here it is:

1. Exactly what problem will this solve? (value prop)

2. For whom is that problem solved? (target market)

3. How large is the opportunity? (market size)

4. How is success measured? (metrics/revenue strategy)

5. What alternatives are available? (competitive landscape)

6. Why you? (differentiator)

7. Why now? (market window)

8. How will the product get to market? (g2m strategy)

9. What are critical success factors? (solution requirements)

10. How to measure success / make money? (financial plan)

The Pitch Club

One guarantee about startup pitch events is there will be excitement and passion as hopeful entrepreneurs give their elevator pitch over and over again. I got to see this first hand at the Pitch Club event held in Frankfurt recently. The contest brought selected inspiring startups from the local Rhein-Main region to 'pitch' to a crowd of investors. Entrepreneurs had 10 minutes to shine and then field questions from the audience. The quality of the presentations and business ideas were solid, on par with similar events in other regions. 

Notwithstanding the enthusiasm, a gap exists between the needs of the companies vs the investor funding and support in this region. Technology and talent are strong, but productizing to create commercial solutions is weak. In addition entrepreneurism means risk, and as Thomas Schulz wrote in his Spiegel article with Ben Horowitz - ‘Business failure is stigmatized in this country’. This is reflected in how startups are funded. They get enough capital to survive but not enough to attack opportunities. Startups become the 'living dead' by satisfying a niche as competitors gobble up the market share. As the article also points out, SAP is still the only German software company with international status. There is a reason for this, and it isn’t talent or technology.

@jogebauer drilled into the subject with a blog Why VC is Failing in Germany. His premise is that VCs "don't have the funds necessary to take risks". Seed and early stage investing is high risk, high reward and small cap VCs can't create a true portfolio to spread the risk across several startups. While there some merit to this premise, the root cause and fundamental issue is the engrained nature of not taking risks. 

The mentality needs to change. Do you agree?


 

Winning with Winners

A new post from CBInsights about the 'Recycling of VC Dollars' sparked me into action to pen a blog post I've been meeting to write..... 

Silicon Valley is a false economy. Many companies have an interesting idea, raise capital, launch product, get buzz, get early customers, and then fizzle like a flat soda that’s being sitting in the refrigerator for months. Why is this?

Because many of their customers are also startups themselves. They feed off each other. Startups as customers use their VC capital to buy the latest and greatest software packages, helping create website 'logo' noise for each other. In reality many of the products don't solve real needs, don't apply to a broad base of the market, and promote wrong business decision behaviors. Most of these companies fail with short-term winning.

It is critical from the early stages of product launch that a company finds real, linchpin customers that will be customers for a lifetime. Build your customer base with real companies. Your first customers should be your longest tenure customers in the years to come. 

This was also one of the points made in my favorite product management book called 'Inspired - How To Create Products Customers Love' by Marty Cagan. (I'm sure I'll reference it more).

Win with winners. Don't fall into the Silicon Valley trap of shift VC money from one startup to another in something called ‘revenue’. It's really a false economy.