Everyone is talking about startups. Each month a new billion-dollar deal is made in California’s Silicon Valley; the financial sections of newspapers are full of stories about venture capital and business angels, while TV shows inundate us with casting shows for young entrepreneurs. Startups can mean many things these days and are certainly no longer limited to social media platforms like Facebook or Twitter.
An inconspicuous courtyard in Vienna’s fifth district – a few racing bikes are locked up along the walls, one end of the yard is taken up by a supermarket’s delivery entrance, and on the side is a white door through which a constant stream of young people in trendy clothing is coming and going. Through the door and up a narrow staircase, past mountains of Cola and Club Mate crates, you reach the entrance to the co-working space Sektor 5. Visitors step from an expansive foyer with couches and a bar into an open-plan office, where programmers, graphic designers and architects sit in front of their laptops at rudimentary desks, glued to their screens or typing on their keyboards when not holding hushed conversations with one another.
Thomas Schranz has found a cosy spot in the foyer. The 28-year-old with a closely cropped hairstyle is wearing a black T-shirt, cargo pants and chunky white trainers. His pose is very relaxed – and you would never guess that the Viennese native is now working with clients such as Apple, Twitter and Netflix, and that he is in the process of moving his place of residence from Vienna to San Francisco. The reason? Thomas Schranz is one of the people that politicians like to mention in their Sunday speeches, people who are described as the new hope for continued economic growth. The media can’t get enough of them. He is a young entrepreneur, specifically the co-founder and CEO of the startup blossom.io. It only took a few years for the team to progress from founding the company to moving to San Francisco, and this company is a good example of how quickly startups can grow and network on an international level.
It isn’t easy to say straight away what actually constitutes a startup. In Great Britain, for example, every newly founded company is a startup. But what we commonly consider a startup has a somewhat narrower definition. "It’s about solving problems with new approaches that haven’t existed in this form before," Matthias Reisinger says. He operates Impact Hub Vienna, another co-working space about half an hour on foot from Sektor 5. The concept is similar too: Instead of sitting at home or at a regular office, you can work in these openly designed spaces, network with like-minded people and participate in events.
Reisinger also thinks that a startup is usually based on a new business model and aims to bring a new product into an existing market, or the other way around – an existing product into a new market. "That means that the new hair salon around the corner is not a startup, because it’s already a tried and tested model," he says. There is another key factor, too. Startups aspire to grow; their business model is scalable and increases exponentially after a certain point. That is where venture capital or risk capital comes into play: Venture capital funds or so-called business angels – individuals with an entrepreneurial background who contribute funding – invest in the new company, accepting a high level of risk in return for a correspondingly high stake in the company.
Of course the funds have to be spread out, as Reisinger explains. "If I’m investing in ten entities, I know that three will fold, three might turn out to be mediocre, two a little better and one will skyrocket." For that reason, Impact Hub tries to connect startups with potential sponsors and help entrepreneurs get off the ground with funding programmes.
Thomas Schranz has already completed these steps. In 2011 he and two friends got the idea for blossom. The three friends knew each other from their computer science courses, which all but one have given up by now. Previously the three of them had worked on various projects as programmers, always using different tools to organise the projects. But the tools disappointed them to such an extent that they finally decided to develop one on their own in order to help software developers like themselves work more efficiently. After a development and testing period, they went public with blossom and managed to get into the Seedcamp programme in early 2012.
This British investment fund is also a mentoring programme and provides startups with financing and advice. Seedcamp organised a three-week tour of American cities such as New York, Boston and San Francisco for blossom and other startups. Here the three partners got to go behind the scenes at Google and Twitter, speaking with founders and executives from the largest software companies in the world. "It was incredible, we had two to five meetings every day without breaks, where you leave one meeting and immediately have to get into a cab so you can get to the next one on time," Schranz recalls. After they returned to Vienna, he and his colleagues quickly realised that they would have to spend more time in San Francisco. "It sounds like a cliché," Schranz says, "but Europeans tend to think in smaller dimensions. In the US, you have a pretty large market from day one and people really do think a hundred or even a thousand times bigger, whether in terms of making money or having an impact."
At this time, the three partners can only get US visas that expire after six months, but they try to arrange things so that one of them is always there. Schranz explains: "We all agreed that it’s stupid from a communications perspective to not all be in the same place, but especially because of our customers, it’s even worse if we’re all in Vienna." In the meantime, they have also started a US-based company whose clients include developers from Apple and Twitter.
The Impact Hub Vienna also shows that startups are not limited to just the web and mobile sectors. The hubs specialise in social impact – entrepreneurs who aim to tackle social problems with their startups, from youth indebtedness and sustainable clothing to waste reduction.
One example is the 34-year-old Moriz Pfiffl, who for the last three years has been selling custom-tailored jeans with his colleague Michael Lanner under the name Gebrüder Stitch. Measurements are taken for the trousers during a fitting session with the customer, then they are ethically produced at the local workshop. The team has now expanded to eight people, all of whom earn a living wage. Pfiffl and Lanner used to work in advertising, but at some point they both decided they wanted to leave the industry and finally came up with the idea of making custom-tailored jeans. "It’s always more fun to sail under your own flag," Pfiffl says today, expressing what many company founders are probably thinking, even if he wouldn’t consider his own company to be a traditional startup.
In addition to their Butt Lab, as they call it, Pfiffl and Lanner have been operating the so-called Vollpension on their company premises for about a year since last Christmas. It’s a multi-generational cafe in which pensioners and young people alike work as waiters and chefs in a space with a rural retro ambiance. "It all started with the question: Where can you get the best pastries? Not at Café Demel or Café Sacher, but from your grandmother or aunt," Pfiffl explains. Every weekend this December, the partners’ workplace, decorated with graffiti and packed with rolls of fabric and sewing machines, again turned into a cafe with waiters in old-fashioned uniforms serving a variety of homemade strudels and liqueurs, bridging the gap between the generations. That’s one way for a startup company to take shape.
Christoph Sollich wants to bridge another kind of gap. The Berlin native has been active in the startup scene for some time and recently founded the startup Student Brains. When we spoke with him, Sollich was in Munich, where he was holding a startup coaching session, at which he was sharing techniques with young entrepreneurs for selling their ideas. Sollich, who used to be in marketing and worked for two other startups during their initial phases, has now launched his own startup with Student Brains. The object of this website is to connect students looking for practical experience with small and medium-sized companies. Sollich presented this idea at the last Startup Weekend, where entrepreneurs with a variety of new ideas can introduce their concepts. He won the competition and began soliciting customers that same weekend. At the moment his team includes three others who are working on getting the site ready to go live on schedule in early February. Sollich had previously worked at a startup based on a similar concept, which failed. But that’s not a problem, he says. "It’s a fact that every idea has already existed before, and all investors know that.
The important question is always: Why now? Why would this work now and why didn’t it work three or four years ago?" Sollich decided that the time was right and took his chance. It will be a few months before he knows if his risk will pay off. But he is already looking for customers, making enquiries and trying to validate assumptions, because that too is indispensable for startups nowadays. The result is what is referred to as a Lean Startup after the title of a book by the American entrepreneur Eric Ries published in 2011. "That is the approach you use for startups today," Sollich says. "You no longer work on a concept for three months, then execute it for nine months, and then after a year, a customer comes and says: ‘No, I don’t really need this.’" The trend is moving increasingly towards more agile startups that can adjust to the environment.
After his trip to Munich, Sollich will return to Berlin to continue work towards the launch of Student Brains. This means he is surrounded by one of the most vibrant scenes in Europe. After London, Berlin has now become the emerging startup metropolis in Europe. In recent years, founders have come specifically to Berlin from Eastern Europe, Scandinavia and Southern Europe, which is why the scene here has grown enormously. But Sollich also points out: "Silicon Valley wasn’t created in just three years. The local ecosystem, which is still the best startup ecosystem in the world, took a long time to develop."
Just because Berlin startups such as Soundcloud and Zalando turned into true giants in recent years doesn’t mean there is a wealth of successful entrepreneurs who will pass their capital and knowledge on to the next generation of founders. According to Sollich, the expectations are a little too high. Exits – lucrative sales of startups to larger companies after a few years, such as between the photo app Instagram and Facebook – are still fairly rare. "Of course it’s generally possible to have a billion-dollar exit in the US, but even there, you are just one of 10,000 startups. And it happens so infrequently in Germany that anyone who believes in this is living in a dream world."
Many founders, however, want to develop a sustainable company, keep control over it for a long time and are not looking to get out at the first opportunity. This also applies to Thomas Schranz. He will visit his partners in San Francisco again in the near future, and if all goes well, he will soon have a permanent residence permit. "We don’t really want to sell. The reason we started doing this was because we could make our own decisions about how to design the product and how to develop the company." That’s a reason that can explain many startups and what motivates many of their founders: "It’s a lot of responsibility: every time you make a mistake, you’re the only one to blame. But that’s what’s nice about it, too: if anything isn’t working the way it should, you can change it."<
(c) Cover-Photo: Matthias Brandstetter