Backing pioneers | since 1999 | Alando
The Alando Story— The first generation of startup entrepreneurs
With the Internet still in its teens, they sparked a wave of startups, that still has an impact today
Alando was founded prior to the dot-com crash in 1999, as the first peer-to-peer auction marketplace in Germany by Marc, Oliver & Alexander Samwer, Jörg Rheinboldt, Karel Dörner and Max Finger. “They came basically empty-handed, without one single chart” — Christoph Braun, Acton Capital recalls the first encounter. Less than a hundred days later, Alando was sold to eBay, Inc for $43 million, creating the core of eBay Europe. How the story of Alando sparked a wave of young start-ups that continues to have an impact today.
1999 was a year of major firsts, brilliant debuts, pioneer ventures, key releases, first moves, and new beginnings: the Euro was introduced as an accounting currency, blockbusters ’The Matrix’ and ’Star Wars Episode 1’ profitably premiered in movie theaters, and the Space Shuttle Discovery became the first to dock with the ISS.
Though the Internet was still in its teens — with a mere 200 million people online — the air was buzzing with anticipation of change and opportunity. Prices for web domains skyrocketed, and digital pioneers set out to pave the way for new Internet communities, networks, platforms, and marketplaces. The first prototypes of what would later be called Wikipedia were introduced, Apple premiered the iBook, and Shawn Fanning created his peer-to-peer music file-sharing network, Napster. On Dec 27, 1999, Time Magazine declared that “e-commerce is changing the way the world shops”, naming Amazon’s Jeff Bezos its “Person of the Year”.
“They didn’t give a shit, they were completely different”
Meanwhile in Germany, the remarkable success story of Alando raised awareness of e-commerce ventures on a large scale and inspired a flock of young entrepreneurs to establish e-based start-up companies. “Back then, the scene only knew two types: the investment banker in a classic black suit and the strategy consultant in a fancier blue one. Individuality was only expressed by the color of their tie,” recalls Christoph Braun, Managing Partner of Acton Capital. Within the course of a few months, the Alando founders in their sneakers and t-shirts had become media darlings and the first VIPs of the nascent start-up scene.
“Back then, the scene only knew two types: the investment banker and the strategy consultant.”
The German public seemed especially entranced by the Samwer brothers. “Marc, Alexander, and Olli were extremely likable and full of energy,” Christoph remembers of his first encounter. Most memorably, however, they represented a genuine new group of entrepreneurs that were trying to establish themselves. Scott Barnum, then Manager and Vice President of eBay International, stated: “In the German Internet-commerce world, they are very atypical.” Or as Christoph bluntly put it: “They didn’t give a shit, they were completely different.”
Presumably they had to be — in order to achieve the impossible. But first and foremost, they had to convince future business partners and potential investors of their idea — at a time when experts put Germany anywhere from eight months to five years behind the United States in e-commerce development.
Using opportunities of the Long Tail Effect
Although Germany in 1999 had one of the best telecommunications infrastructures worldwide, and more web users than the UK or France, people were reluctant to disclose financial information via the Internet. At the same time, consumers weren’t familiar with credit card payments — the vast majority didn’t even own a credit card. Add to this the conservative business practices of the traditional media houses that dominated German Internet business, and it is no surprise that e-commerce was off to a slow start.
Yet the Samwer brothers remained unfazed and convinced by their idea. They were determined to redefine German entrepreneurship by strategically analyzing a Silicon Valley success story and adapting it to the local mindset.
Oliver, Alexander, and Marc Samwer grew up in Cologne and had all proven outstanding in high school. Immediately after Oliver and his 24-year-old brother Alexander had finished their university degrees in September 1998, they joined their brother Marc, 28, as interns in Silicon Valley. Soon, they came across eBay, the lucrative U.S. online auction site. The brothers instantly understood what was later to be known as “The Long Tail Effect”: an increase in demand of niche products that previously couldn’t be accessed due to physical limitations, most often shelf space — and the shift in focus on the Internet as a place that provides the opportunity for people to easily access and consume a limitless number of products. eBay was exactly that — and the Samwer brothers saw the opportunity to generate significant profit by providing a similar site in Germany: a marketplace that allowed many buyers to access an online store with a huge range of varied, difficult-to-locate items, instead of selling large volumes of a reduced range of popular items.
All they needed now was a site script and servers with the required capacity, but most importantly, money to fund it all. They needed support.
“The three brothers had come by train from Cologne — basically empty-handed, without one single chart.”
In January 1999 and having quit their internships, they returned to Germany and recruited three college friends: Jörg Rheinboldt, Karel Dörner, and Max Finger. Dörner had worked at McKinsey and was the only founder with corporate work experience; Finger had been developing guidelines for founding profitable businesses based on already prospering U.S. companies, having jointly written the diploma thesis entitled “America’s Most Successful Start-ups” with Oliver Samwer. But more significantly, Finger was connected to risk and venture capital investors who they believed could be helpful.
“We simply had the best product”
“A good friend of mine who was a business angel contacted me and asked me to meet with them”, Christoph says. “The three brothers had come by train from Cologne — basically empty-handed, without one single chart,” he remembers of their first encounter. “All they had sent me in advance by letter mail [sic!] was a simple business plan.” Having said that, Christoph still vividly recalls his initial reaction after the meeting. “I smiled from head to toe and I simply thought: either this is totally schizophrenic or totally boss. I said to my colleagues: Let’s do it!” The youngsters emanated a rare mix of vitality, chutzpa, and brains that resonated with Christoph. “Those three were simply sensational, there was an energy level in the room that I had rarely experienced before, but one that was crucial for the moment.”
With the financials sorted out, Oliver, Alexander, and Marc Samwer along with Jörg Rheinboldt, Karel Dörner, and Max Finger founded Alando.de in February 1999. On March 1, the site went live and quickly gained three million page views within its first month.
“All they had sent me in advance by letter mail [sic!] was a simple business plan.”
The company’s rapid growth did not go unnoticed. In May, Goldman Sachs called in to say that eBay was interested and the Alando team decided to meet with them. eBay’s founder Pierre Omidyar flew to Germany, and on May 30 — less than a hundred days after founding the company — the six 20-something-year-olds sold Alando to eBay for $43 million. In the meantime, more than a hundred new auction websites had popped up, but “we simply had the best product“, the Alando founders later reminisced on rationalizing their fairy-tale exit. “They are successful role models for entrepreneurs,” former eBay manager Barnum rightly stated.
Although the Samwers might later have come to regret selling too early (given the company’s growth potential), their first exit not only became legendary, it also served as a blueprint for many more to come. Undeniably, their success story sparked a wave of young start-ups and continues to have an impact 20 years later; they have helped to create and inspire an entrepreneurial community that has flourished ever since.
