“The app economy is finished” – The view from Taiwan from a European Silicon Valley investor

volker
volker

“Well, you work seven days a week in new position! You know what it’s like!” German investor Volker Heistermann is immediately ebullient. Despite patchy Skype and the late hour in his base of Taiwan, his enthusiasm for his new home and market jumps from every sentence.

volker heissmann

The former Commerzbank banker, Silicon Valley veteran, friend and compatriot of new Madvertise boss, Christof Wittig and now pioneer of the Taiwanese scene heads up Yushan Ventures – an early-stage investment and accelerator program in Taipei, as well as numerous events in Taiwan’s nascent but burgeoning startup scene.

We caught up with the outspoken German to find out why he thinks Taiwan is such a rich hunting ground for adventurous European investors, what the key tech trends are, why he’s “disappointed” with the Berlin scene and thinks Facebook is “doing a terrible job on their products”.

So Volker, what brought you to Taiwan from Silicon Valley?

VH: Opportunity. I made an angel investment and that required some business development over here and tapped into a ton of awesome developer talent.

At the time there was only one incubation programme, but it was very local. And with my experience of having been 15 years in San Francisco working in an investment bank [a boutique firm – Rutberg and Co – specialising in the wireless and digital media industries]. I saw that I could make a difference here.

Taipei

So what have you been doing since you arrived?

VH: I have been here for two years now. We have our own investments here, and we’re refocussing on incubating into the hardware sector instead of software – 3D printing and that sort of thing. Taiwan is in a really interesting spot for this. We’re also helping to build up the startup ecosystem here. It’s still pretty fresh and young.

We now do Startup Weekend all over Taiwan and have brought Startup Labs incubation programme here, which has gone global.

And we’ve also got our own investments and doing a bunch of different events here. Just been a great opportunity. Just seemed like a good time for a change and Taiwan seemed to be the next logical choice.

Coming from an established ecosystem such as Silicon Valley, what are the main differences that you see?

Everyone is trying to copy Silicon Valley, but our focus is shifting towards hardware. When I first came here I thought we could turn this into a software ecosystem, but Taiwan has something that nobody has – Berlin doesn’t have it, Silicon Valley doesn’t have it. Nowhere except for Southern China… and that’s just hardware!

I realised that Taiwan has all this hardware that nobody else has, so why not focus on that? Stay home and see what you’ve got. It’s stupid to try to copy Silicon Valley.

And the government is actively involved too. The Taiwanese government actually asked me for an introduction to the mayor of Berlin, because they wanted to copy Berlin’s success. I had to explain that the mayor over there has nothing to do with the startups there.

Explain a bit more about 3D printing? Isn’t it still just a novelty that gets wheeled out at CES?

3d printing

I believe that it’s still a novelty everywhere. But there is huge potential that we realise over here.

3D printing is doing to hardware what software encountered with open source. The barrier to entry to making apps is now so low – you have a bazillion ecosystems all round the world now. This is only possible because everyone can programme mobile apps with a little training.

We’re seeing that now with hardware with Arduino and Raspberry Pi. These things incorporated into 3D printing enable smaller startups to be disruptive. Just look at something like the Pebble Watch – it raised over $10m on Kickstarter.

Kickstarter is full of these examples where big companies such as Nike come up with a wristband that probably cost them millions in development and it’s not that great. Now 3D printing means that small companies save time to market and save money. It enables smaller teams and companies to get into markets that were previously prohibited to them.

Everyone’s always looking forward to the next big thing. The iPhone, possibly the iPad. The next big thing will be the million little things that will really drive the future of innovation. These are exciting times. We believe we are well positioned in Taiwan to ride this wave…

3D printing is already in the UK store Staples. You can go in with a sketch and get your custom product printed. Look at the mouse that you’re using. Is that custom-made for your hand? No! In a few years everyone will be printing their own mouse that will fit to their own hand…

What challenges did you face in Tawian, as a European “outsider”?

Oh, there were huge challenges! I mean, first off the language barrier – I’ve been here for two years and I still don’t speak Chinese. I affiliated myself quickly with the university to open the first coworking space – we got calls for months and months at the uni from people going ‘Who is this German guy??’. This is especially challenging in Taiwan and China ,where so much is built on relations. We had to establish that I existed and that I wasn’t a crook!

But you quickly grabbed the opportunity to own startup events in the area – did this give you the advantage?

Absolutely! It’s really important to use events to build a network, name and brand. We grabbed Mobile Monday, Startup Weekend, adding some value personally with our company to Taiwan that is struggling on so many levels. We hosted Startup Labs at Microsoft and closed it at Google, so we’ve made quite a splash in the area. You have to be bold, be unafraid and just do it.

Do you think that the app economy and software economy is finished? What about the Berlin scene that is so steadfastly built on this?

AmenLook – if you examine any of the incubation programmes in the US that focus on this, how many of them are making money? I’m pretty sure that’s the same for Berlin. The whole app economy and the whole incubation around that is finished.

I spent some time in the startup scene in Berlin and visited a few guys, but basically it’s a copycat scene.

I think there’s  great potential in Berlin – it’s inexpensive and it’s very international, but it’s disappointing to see how these 6Wunderkinder and Amens are not performing. I’m not really sure what’s coming out of Berlin. It’s certainly not rivalling Silicon Valley right now…

What startups excite you then?

I think the whole Kickstarter movement – those kind of projects and the crowdsourcing model and changing legislation in the US is going to open up more opportunities for people.

But I think that Facebook is totally overrated and overhyped. The technology behind the site is horrible. It’s terrible what these guys are doing with all the smart people they have. They got lucky they built the right community, but the technology is not up to par with what they are doing. Facebook is a big disappointment.

Is it still challenging to raise money in Taiwan?

It can be, but it’s getting better. Dave McClure from 500 Startups has made two investments here, there’s some angel money in hardware and European money is coming in. The market is only 23 million, so relatively small which can be a challenge.

But there’s tremendous developer talent here. Facebook has staged three hackathons in Asia. What is lacking is business development and business skills. There are no exits here really – there’s not that Silicon Valley mentality where people have built up a company to the top and then sell it.

We have ground-up developers who read TechCrunch who come to events like ours and try to get it right. Singapore is the opposite – there’s great business skills but no tech talent. But the potential here is amazing. Truly the future is in Asia. Without a doubt…

For related posts, check out:

I’m ready to start more companies around the world” – Team Europe’s newest partner Markus Fuhrmann on business philosophy and breaking the Asian market
Hitfox hits Asia-Pacific, appoints new chief

Image credits:
Taiwan: flickr user Luke Ma
3D printing: flickr user makerbot