Big guy, meet little guy: explaining Deutsche Telekom’s new love for Berlin startups

Big guy, little guy (Andre the Giant)
Big guy, little guy (Andre the Giant)

Startups love to shun big corporate Germany but does that attitude mean we’re missing out? Yes, argues Berlin Startup Academy founder and Hubraum mentor Christoph Raethke. Plus, he draws us the sharpest picture yet of what Deutsche Telekom’s new incubator Hubraum has to offer and how much it will take in return…

Much of the current discussion in tech blogs focuses on the machinations within the Berlin startup scene, commenting on “clone wars”, “is there a bubble?”, “does Berlin come before or after London, and how do we fare compared to Silicon Valley?” or other topics created by and addressing other startup people.

Big guy, little guyIn recent months, however, a few new and somewhat unexpected actors have appeared on the Berlin stage, actors from outside the startup ecosystem. Namely, more and more representatives of Germany’s corporate world seem to take a manifest interest in what’s going on in the realms around Torstraße.

These days, many Berlin CEOs will tell you about substantial “startup tourism” going on: executives of German telco giants and media houses touring the city “under the radar”, meeting entrepreneurs, talking about linking up corporate entrepreneurship and the Berlin startup world, and praising Berlin as a potential source of corporate renewal.

Deutsche Telekom looks especially poised to make a mark. Over the course of the past seven days, Berlin Startup Academy has been present at two occasions where this interest in getting involved became specific.

Schooling Deutsche Telekom on Berlin’s startup scene

Last Friday, a group of Berlin Startup Academy mentors – Steganos CEO Gabriel Yoran, radcarpet’s Martin Pischke, Aupeo CEO Holger Weiss, barcoo founder Benjamin Thym, and myself – held a class at European School of Management and Technology (ESMT), Berlin’s poshest MBA school, located in the palatial former GDR Staatsratsgebäude in Mitte.

To around 40 international Deutsche Telekom executives (VP and above), we tried to provide insight into what this startup thing is all about; what it is that protagonists struggle with; how an entrepreneurial approach to product creation differs from the corporate one; and ultimately, how and why we think that a company like Deutsche Telekom should get involved in a tangible way (and how they should change to make that happen).

hubraumPeter Borchers, head of new Deutsche Telekom incubator Hubraum, wants YOU

Only three days later, on Monday night, Berlin Startup Academy was invited as Deutsche Telekom’s new incubator “Hubraum” kicked off operations with a mentors’ party at Michelberger Hotel. About 25 people from various fields of digital business were welcomed as the initial mentoring staff and officially introduced to Hubraum rules and opportunities.

So what’s the real Hubraum deal?

The good news is that, contrary to some initial confusion, the deal is pretty straightforward. While it’s true that so far the Hubraum guys have been somewhat wobbly about stating equity shares, it’s easy to figure out ballpark figures:

Hubraum is looking for teams and assets with a valuation of roughly €1 million and they’re willing to invest between 150-300k. Doing the maths, a typical Telekom share will be somewhere around 25 per cent. In addition, mentors get a three per cent stake which they can increase by another 2.7 per cent for a fixed investment of 15k.

Apart from cash, Hubraum offers infrastructure benefits and a set of Telekom asset packages that they plan to increase over time. One example given on Monday: advertising packages across Telekom’s digital and print assets that Hubraum startups would be entitled to purchase for a mere 10 per cent of their nominal value. Hubraum’s Peter Borchers told us that, for transparency’s sake, they’re even thinking about publishing their standard term sheet on the Hubraum website some time soon.

Telefonica and Axel Springer are already in the club

In the light of these and other events (I hear that Telefonica’s Wayra accelerator program held a semi-secret gathering in Kreuzkölln last night; Axel Springer’s “Media Entrepreneurs” concourse made quite a splash late last year; and for quite some time, Deutsche Telekom have been building that mysterious “School of Transformation” on Tucholskystraße), it may be time to take a closer look at how this intense flirting of Big Germany with Small Startup could be relevant for us all.

Let’s make Siemens and Bertelsmann sweat alongside startups

Christoph RaethkeIt’s no secret that Berlin Startup Academy’s programme, to be launched late October, is built to quite some extent on the belief in just that relevance. For the first time, we want to put startup founders and corporate managers through an accelerator program on eye-level. We want Siemens or Bertelsmann managers to pitch, do hands-on market research, set up dummy sites, fumble with the first mobile demo, calculate a business case, and pitch again – side by side with “regular founders” and mentored by Berlin’s best and most experienced digital CEOs.

Because as clueless as relations between the likes of Deutsche Telekom and the startup industry have been in the past 10+ years, there are good reasons to believe that the pressure on corporations to become nimbler actors on the innovation stage has increased to a point where credible, speedy action is due.

Breaking through the European startup ceiling

And this comes at a time when an expanding German – and European – startup scene more and more often hits a ceiling of available investment and consumer outreach that has them looking jealously to Silicon Valley opportunities.

But while Germany indeed doesn’t have the wealth of cash-loaded business angels, seasoned VCs, and merger-and-acquisition-happy Googles, we actually do have plenty of world-beating global players from industries that arguably thrive on digital innovation nearly as much as, say, Oracle does. Car manufacturers, global media houses, telco giants, utility makers: can these be drivers of the German and European startup ecosystem?

If yes, we may be looking at a whole new role for the Berlin ecosystem…

Next stop: new funding, new players, new partnerships

Tegel Airport Berlin’s Tegel Airport is set to become a hub for new urban technology development.

So far, Berlin’s most beloved asset was “plenty of playground for little money”. But what if Berlin became the place where corporations started to invest serious cash and focus to work on the next generation of products, services, and workplace mechanics?

Take a closer look, everyone: while everybody sneers at the BER airport fiasco, a team led by Philipp Bouteiller (former investor and COO at startups like sMeet and Pixray) is beginning to implement a concept turning lovely Tegel Airport into an “urban technologies” hub, attracting companies like BMW and Siemens.

Among startup people, we often take pride in shunning the corporate world. But it may be time to reassess. As all participants in Friday’s ESMT class will attest, the attitude of the Deutsche Telekom aristocracy present was extremely open, curious, even humble. The same can be said for the Hubraum start. It seems this is not about imposing a grand strategy anymore, devised by corporate kingpins in collaboration with Mssrs McKinsey, but about honest work with real entrepreneurs. In the startup world, an approach of “try, fail and pivot” is how we roll; it looks as if at least parts of Big Germany may be ready to take the same path.

We should get involved and support them. There may be a serious hockey stick story in it.

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