Center Stage: Securing Investors and Solving Problems with Digital Tech
Key themes in Berlin from Startup Europe Week 2018:
Startups are vital to a happy healthy society, according to organizers of Startup Europe Week (#SEW18), the largest multi-event of its kind for startups in Europe.
In fact how new digital tools can be used to improve quality of life as much as possible on a sustainable basis has been a main theme discussed in Berlin. At the same time, how to raise capital in Germany is also a hot question. Let’s take a closer look at how founders can benefit from both topics beginning with designing digital tech for good.
Gut leben digital:
It’s now widely accepted around the world that digital technology is having an impact on quality of life everywhere. However, Dr. Stefan Bergheim, head of the German non-profit think-tank “Center for Societal Progress” says digitization is still largely discussed without the insights into quality of life. He’d like to see this change.
For SEW18, Dr. Bergheim led a workshop for entrepreneurs, hosted by the German Technology Entrepreneurship Center — a startup campus on a mission to drive digitization in Germany and Europe — where startuppers spent the evening drilling-down on 10 key quality of life subject areas.
His goal was to harvest the collective intelligence of the Berlin startup community with the aim of discovering how startups can use new digital tools to sustainably improve quality of life in Germany and beyond. He suggests startups investigate reoccurring topics and common threads to spot innovative solutions.
10 reoccurring topics in quality of life projects:
1. Work and Business
2. Leisure / Art / Culture
6. Transport and Mobility
Startuppers wanting to solve problems via digital tech worked together to answer big questions including “in which areas does digitalization not yet have the hoped-for impact or even negative consequences for people’s quality of life in Europe?” It was found that reducing the digital divide across generations, breaking-down social isolation and improving education for all were areas that still need major progress.
It’s believed that founders wanting to design tools to address these issues can use the internet of things (IoT), artificial intelligence (AI), blockchain, augmented reality (AR) and social media networks to create technology that improves quality of life in a sustainable way.
“Investments in digital companies and access to capital are always needed for helping startups to grow. But startups also need supportive policies. Linking and networking them will unlock more of their potential, and offer the scale necessary to compete with other ecosystems around the world.”
- Andrus Ansip, Vice-President for the Digital Single Market
Raising Capital in Germany:
Roughly eight out of 10 entrepreneurs fail within the first year and a half of starting their venture. This equates to an 80% failure rate, mainly due to a lack of capital, according to CUBE GmbH, a Berlin-based global network driving collaboration between the top B2B industry 4.0 startups and corporates.
So, to address this challenge the organization held an event for Startup Europe Week that examined the best way to identify the most viable source of monetary investment in Germany.
CUBE hosted experts to walk entrepreneurs through the advantages and disadvantages of private funding, public funding and inital coin offerings (ICOs) to ultimately help to determine the best funding strategy for their business.
Initial Coin Offerings (ICOs):
An Initial Coin Offering or ICO is a way for funds to be raised for a new cryptocurrency venture. Berlin-born Brickblock’s Chief Marketing Officer (CMO), Manuel Gonzalez Alzuru, outlined best protocol and conditions required in order to successfully launch an ICO. In addition to currently working with blockchain technology, he’s also a serial ICO investor.
- All companies looking to do an ICO must decide what jurisdiction to base the operation from.
- Keep on top of your compliance and don’t overlook the fact that you have to use the contract laws of the chosen jurisdiction.
- Marketing materials drive growth during your pre-ICO and ICO phases.
- It’s important to communicate what’s unique about the offering you have and deliver it in a transparent and truthful way.
“Poor but sexy” doesn’t really fit Berlin anymore. The city is now a founder’s market when it comes to public funding. Cash is available to startups at the local level (Berlin), national level (Germany) and via the European Union.
Detailed information on the big menu of choices founders can tap into can be obtained from Berlin Partner for Business and Technology. The organization helps grow business in Berlin and their team of experts work to guide founders through the many different options available.
Venture Capital (VC) Investment:
Venture capital is financing that investors provide to startups that are believed to have long-term high growth potential. VC funding generally comes from high net-worth individuals, investment banks and any other financial institution.
However, Berlin Partner says there’s even public instititions offering venture capital funding for startups in Germany. For example, Investitionsbank Berlin (IBB). Meanwhile, High-Tech Gründer Fonds supports early-stage and Series-A rounds through a public-private partnership.
Founders with innovative business ideas should also think ‘outside the box’ when it comes venture capital investors. VC investment does not always have to be just cash money. It can be provided to startups in the form of money, technical and/or managerial expertise.
One such fund providing equity and support to startups is b10. Founded in Berlin and focusing on early-stage B2B companies with the potential to be ‘category killers’, b10 invests and acts as an operational investor alongside the founders by offering active support with a team of specialists in the fields of HR, UX/UI, communications, finance and fundraising.
b10 Co-Founder and Managing Director Daniel Höpfner says his VC fund is special within Germany because there are not many funds like his focusing on helping build very early stage companies. He’s usually a startup’s first investor.
The fund’s name ‘b10’ stands for ‘building 10’ meaning Höpfner has only 10 companies in his portfolio at any given time. He believes this focus allows b10 to help founders scale faster.
An example of one of his successful exits is Quandoo, a restaurant reservation system now popular worldwide. Quandoo was founded by Philipp Magin and Daniel Glasner. B10 backed the pair early then assisted in future funding rounds that included amongst others, Holtzbrinck Ventures, one of Germany’s largest venture capital funds with more than €1 billion under management. After just two years, Quandoo sold to Japan’s Recruit Holdings in 2015 for €200 million.
Based on his experience in the Berlin startup scene, Höpfner shared his favorite hints to help startups make a strong and successful pitch to an early stage VC in Germany. He suggests that startups work on a clean-clear presentation that demonstrates market awareness.
Very early-stage VC’s want to see:
1. How big is the market and how big is the problem being solved? Is it a top problem for the target market?
2. How is your product or service solving this problem?
3. Why are you perfect to do this? (Your skills.)
4. What kind of company will it be in five years? (Software or tech consultancy etc.?)
5. What’s the secret? Is there any specialty you own? (Passion, previous founder, tech skills etc.)
“This grassroots movement helps those interested in entrepreneurship to make the first steps to bring their dream projects to life. The initiative fosters creativity as well as more entrepreneurial spirit for continuing the success story of the European startup scene.”
- Mariya Gabriel, Commissioner for the Digital Economy and Society
Startup Europe Week is an initiative that brings together entrepreneurs and regions for one week to showcase some of the best projects that are fostering entrepreneurial ecosystems all over Europe. Events have been held in more than 300 cities across more than 50 countries for SEW18. Startup Europe Week is in its third year and is promoted by the European Commission and Startup Europe — an initiative of the European Commission, which falls under its priority of the ‘Digital Single Market’.
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