Berlin Startup Academy founder Christoph Raethke waxes lyrical on why central and eastern European founders should put their Silicon Valley dreams aside. Like it or not, San Fran isn’t waiting for them. Berlin is.
Many German digital and media companies, corporations and startups alike, see our eastern neighbors more as a source for employees (“they have so much technical talent!”) than as hotbeds of innovation in their own right.
So I was intrigued when Berlin Startup Academy was invited to speak at Bitspiration conference in Cracow, Poland, in June, and mentor at StartupYard in Prague in July.
Seed money? Prague’s got it – what it needs are the big guys
At and around both events, we had time to talk to protagonists about where they saw the Polish and Czech startup scene going. Nearly all of them were positive about what was currently happening in their countries in terms of support for digital entrepreneurs.
In Prague, besides being hosted by StartupYard’s impressive facilitators Lenka Kucerova (left) and Nikola Rafaj, we visited a very Berlin-style co-working space/ accelerator named Node 5, who immediately agreed to host visitors from Berlin for free and in return asked us to get investors from Berlin involved in a Skype “investor speed dating” with Czech startups they were hosting a few days later.
Generally, somewhat to my surprise, Lenka and other Czech founders told us there was actually enough seed money available locally; there were quite a few wealthy individuals pouring cash into the market, sponsoring activities like StartupYard and Node 5.
But all was not golden. Many Polish and Czech founders pointed out that it was hard to find bigger companies to work and go next steps with, as distribution channels, M&A or exit opportunities, or other kinds of partnerships.
As we walked through Prague, our local startup guides told us to “just look around! The banks are all Austrian- or German-owned. The press? Subsidiaries of German publishers. The Telcos? Here’s the Vodafone shop, and over there, there’s T-Mobile. Their decisions about partnering and investments are not made here.” And then, there’s the natural size limits of the respective home markets.
Chuck Norris starring in a T-Mobile Czech Republic ad circa 2010
As a result of these limitations, most founders have their eyes trained on the English-speaking market. Even more than that: when asked about where they see the next step of their company-building taking place, the answer is almost universally “Silicon Valley” (featuring the likes of Googleplex, below right).
In this view, they are supported by some observers and mentors of the central and eastern European startup scene. As an example, in Cracow, we met HackFwd’s David Bizer, who flatly told us that in terms of startup ecosystem, company building, and accelerator programs, “nobody in Europe is doing it right”.
How fitting, then, that many eastern countries have or are in the process of establishing government-funded accelerator programs in Silicon Valley. In addition, programs like Fadi Bishara’s Blackbox.vc to an extent focus on CEE startups, so there’s definitely something going on there.
Silicon Valley doesn’t want you – and maybe you don’t want it
However, what many CEE founders don’t seem to acknowledge is that, despite these efforts, Silicon Valley is not exactly waiting for them. (This, by the way, applies to German founders, too). I’ve been to California twice in the past twelve months, talking to local protagonists and asking them their opinion about the European startup scene. What emerged was that if there’s an advantage Europe has over the Valley, then it is precisely that… it’s NOT the Valley. Meaning:
- No neck-breaking cost of living.
- No outrageous developer salaries.
- No employee loyalty that lasts only until the next big thing comes around the corner.
The message here seems to be that if American startup protagonists and investors like the European digital scene at all, they do it because there’s both a basis and room for growth with much less resources than needed on that strip of land south of San Francisco. European founders have their personal networks, their educational background, their hiring opportunities, their infrastructure, their pilot clients over here. Why should they leave that behind and start from scratch in an environment that, as open and inspiring as it is, lacks most of this for a recently-arrived business owner?
In other words: From what I’ve seen, founders especially from central and eastern European countries need to face the fact that, after spending an extremely exciting and useful time in the US, they will have to come back and make do in the old country. Where, unfortunately, they’ll have a déjà vu with the limitations of their local markets as described above. A sobering thought.
Unless they make a conscious decision to choose Berlin as their base.
It appeared counter-intuitive to the Polish and Czech founders we met. If you can’t make it locally, why not address – and work in – the biggest possible market directly, without detours?
But here’s my case. As our Czech friends pointed out, many to most players in established digital, communications and media related corporations in their home countries are German, Austrian or (seldomly) UK subsidiaries. Accordingly, a Polish founder may find it easier to strike a deal with Deutsche Telekom in Bonn than with their subsidiary in Poland – because that’s where DT decisions are made.
And that’s only the beginning. Berlin has a growing startup ecosystem that is extremely welcoming to foreigners. Conferences, community events, accelerator programs, pitch events – they’re all in English, and they are based on a sufficiently large group of people who bring in relevant experience.
There is a significant group of foreigners who have already set up shop and scored success here by the Spree, serving as role models for more to follow. The buzz created by our newly-arrived Anglophone tech-blogging friends draws in international media and investors. More and more startup-friendly infrastructure is becoming available.
Stop dreaming about the Valley, focus on what’s close to home
So here’s my message. You, as a founder from central or eastern Europe, should take advantage. Misguided media sometimes chastise Germany for leaving other European countries behind in economic drive. But central and eastern European founders have every reason and opportunity to turn that into an advantage: just leave the sidelines and profit from this drive instead of lamenting it!
This doesn’t necessarily mean incorporating or relocating your entire team here. It doesn’t even mean wanting to address the German-speaking market; you can still go for your home markets if there’s an opportunity. It only means to get your company going, find business opportunities, build a network, acquire (seed) investors in a place where all this is much likelier to happen and easier to execute than in most CEE countries. And where you’ll find a lot of like-minded support, without having to leave all you have light-years behind. In Berlin, in other words.
And the Magical Valley? Do visit; do join an accelerator program there, build a network, get inspired, learn about processes. But then come back and build and grow your company in everybody’s favourite German capital. It’s the smart thing to do.