Sharing our FlixBus learnings: A story about courage
- In 2013, HV backed three founders in a small office but with ambitious plans to make long-distance travel more comfortable, greener and less expensive.
- Five years later, the company’s green busses and trains enabled over 45 million people to reach one of over 2,000 desired destinations across Europe and the US.
- Reviewing their success factors, courage stands out as a defining characteristic of the founder’s decision-making.
- HV is grateful to continue being a part of FlixBus’ journey, having invested around 100m€ across HV “Fund V” and “Co-Investment Fund 1" to demonstrate our promise to “back those who dare”.
The Story of FlixBus
Today, it is easy to view FlixMobility (holding company of FlixBus) as a European success story. In 2018, the company’s green busses and trains enabled over 45 million people to reach one of over 2,000 destinations across Europe and the US, while delivering a significantly better carbon footprint than a car. But how did it get there within just six years?
At HV, we strive to learn from both our successes and our failures to improve our decision-making process. We believe that the recently closed Series F financing round provides an excellent opportunity to share our learnings. Summarized, we think that FlixBus got a few important things right. Characteristics that were of relevance to their success and that we at HV are extremely excited about once we see them in a new team that approaches us.
Why did we invest in the first place?
Of all the well-known investment criteria, market size is likely to be the most relevant for my investment evaluation. Although some have, convincingly, argued for the importance of other factors (team being the most prominent), I get most excited about really relevant markets served with a product that both provides a meaningful value and can easily be communicated. Despite the market being in its infancy when we first met André, Jochen and Daniel in early 2013, the massive impact of what they were building was obvious. With FlixBus, the team aimed at giving millions of consumers access to a seamless, comfortable and inexpensive travel experience. This was exciting not only because of the business opportunity. For decades, the ability to move between locations at our own convenience has been a cornerstone for individual freedom, independence and opportunity. In a sense, we believe that FlixBus, by connecting countries, cities and millions of individuals, is able to facilitate these values. Ultimately it was this opportunity that outweighed all of the potential risks and led to the decision to invest € 1.2M in FlixBus in 2013.
What did FlixBus get right: Courage!
Understanding why portfolio firms succeed, while others fail, is one of the most important tasks of a VC. We try to generalize these learnings and share them with HV’s portfolio companies. For FlixBus, one characteristic stands out. A characteristic shared by each of the three FlixBus founders, which eventually became a guiding star for the entire operational team, all partners and the entire investor base: Courage.
Courage, defined as “the ability to do something that frightens one”, is too often dismissed or overlooked in conversations on personal traits that VCs look for in startup founders. But what is courage in a business context? To illustrate, I want to share three of FlixBus’ success factors that are a function of courage.
Courage to build a world-class organization, no matter the ego
Why does it involve courage, one may ask, to build a world-class organization? Doesn’t every business book provide clear guidance on the importance of hiring the right team members? Yet, in practice, we often experience the opposite. Founders struggling to prioritize hiring in general or hiring the right people at the right time. In many cases that struggle can be traced back to courage. It takes courage to scale an organization before the workload overwhelms the founders and the team. Courage to grow a team of 10 to a team of 100. And even more courage to grow from 100 to 1,000. It means more responsibility, more communication and a loss of control. It also means that the founders have to grow from operators to managers. Things become even more complicated when a founder has to hire another C-level or a senior VP that takes over some of his tasks. Having the courage to accept the loss of vital responsibilities and the feeling of being less important is easier said than done. Here, Jochen, André and Daniel did an exceptional job. They had the courage it took to build an organization of that size by getting the right people on board at the right time.
Courage to stand up for consumer choice, no matter the competition
Since day one, the team has been incredibly focused on building the best possible product for consumers, independent of the competitive environment. And since day one, the team demonstrated the ability to conceptualize and execute on a plan that would lead to the best possible outcome. Therefore, it should have come as no surprise when the team introduced the idea of FlixTrain to the board. FlixTrain, they argued, would perfectly complement the existing FlixBus offer by providing a faster and more comfortable travel experience on selected routes. What seems perfectly logical from a consumer perspective, is so much more complex from an operational perspective: Characterized by strong incumbents, heavy regulations, longer planning horizons and differing financing requirements, the board was undecided on what to make of the team’s proposal. Again, it was the team’s courage to stand up for their decision to create more and better consumer choice in spite of growing complexities. Ultimately, it was a combination of clarity, communication (“a train is a longer bus”) and courage that led the board to put trust into the founders and go ahead with the launch of FlixTrain. Today, FlixTrain operates three active lines and has become a significant and rapidly growing part of FlixMobility’s business.
Courage to go to the US (and beyond), from Europe
A similar story can be told about Jochen’s, André’s and Daniel’s expansion ambitions. While U.S. companies traditionally grow within and then from the U.S. to Europe, only a few technology firms have successfully reversed that expansion logic. Even more so when it comes to operation-heavy startups with HelloFresh being the only exception I can think of the top of my head. As a result, the team’s proposal to expand to the large but complex U.S. market seemed brave to say the least. Especially due to the existence of large incumbent players such as the iconic Greyhound brand or Megabus. Still, based upon the European success and the in-house technology stack, the team found the courage to propose, strategize and implement a U.S. expansion plan. A plan that today serves not only as a blueprint for future highly-competitive markets but also contributed significantly to FlixBus’ fundraising capabilities. Having the courage to expose yourself and your organization to a new level of uncertainty, especially when operating from a “comfortable position”, takes exceptional courage.
The road ahead!
It’s interesting to observe the positive externalities that a display of courage creates. Working with the FlixBus team helped us, as VCs, to focus on what is possible in the long-term if things go right rather than to dwell on challenges. It shows how only three entrepreneurs with the right team, the right mindset and a grain of luck have the capability to transform a global industry within only six years. It teaches us both optimism and gratefulness. Above all, it reminds us of the power of entrepreneurship and why, in the end, we became Venture Capitalists.
With the support of our LPs, HV invested around € 100M along FlixMobility’s journey. This is a perfect illustration of our promise to entrepreneurs to heavily “back those who dare”. We’re more than excited to continue backing the company and we are thrilled about the road ahead!
