27. July 2012–
International crowdfunding platform Kickstarter, this week pulled the plug on signing-up creative browsing startup FarFromHomePage. Prompting a last-minute partnership with US-based Indiegogo, the website’s CEO Manuel Scheidegger spoke to VentureVillage about the deeper, burning issue of Germany’s seed investment qualms.
Yes, Berlin is cheap. And with bags of style to boot, it’s become a haven for young, budding entrepreneurs. But on the flipside of the city’s cherished coins, are reluctant seed investors and a cash-strapped senate. A hindrance for burgeoning innovators, Scheidegger says German mentality is also to blame: “Initial (seed) investors that are based in Germany are very cautious. If you have a new product which is yet to be fully developed, and where it’s not certain of how big the traction and main market will be, then (in our case) it’s not a fast decision.”
Innovative ideas passed up for safer models?
Berlin is by no means short on venture capitalists. However, most hone-in on Series A and B rounds after initial investors inject the confidence and funds into getting projects off the ground. With seed funds ranging around the €300,000 mark compared to an average second (or Series A) round of €1.5 million, the lack of money doesn’t play a part – risk and big profits do.
Investing in a company's later stages is a more lucrative option when startups near the possibility of scaling internationally and/or being sold on. There's also the likelihood of startups "dying out" between the seed investment and Series A round, which is often the case when companies didn't raise enough capital in the seed round to effectively execute their product.
Getting in early is a gamble when funds could be directed toward a more established startup with higher chances of a win-win money-making situation. After all, the German private and public sector aren’t known for their risk-taking culture.
“That’s the difference between Berlin and the US. It’s a real problem in Berlin if you’re doing something different like what we’re doing and you’re not just following a big trend within say, e-commerce. It’s difficult,” says Scheigger. “It’s easy to get started once you have the first VC, but until then – it’s hard to get investors to put in €300,000 to develop the product to enter at market-level.”
Luckily, there’s always the crowdfunding option...
Getting off the ground with Crowdfunding…
While there’s a drought of seed investors, there's a growing tide of crowdfunding options worldwide, particularly in the US. But Berlin's edgy, creative appeal make many entrepreneurs determined to stick to the German capital.
“That’s why we haven't moved,” says Scheigger, “it’s just such an exciting place to be.” As for FarFromHomePage, Kickstarter made the decision to drop the project for reasons of FarFromHomePage requiring ongoing maintenance rather than meeting full project completion, and not to mention - industry restrictions.
“Kickstarter doesn’t allow anything that is a web service and they consider app products as web services. At the end of the day, we’re very happy to be with Indiegogo – it’s much more open for entrepreneurs, and it’s much more about web services,” says Scheidegger.
FarFromHomePage’s next steps
With their campaign now running on Indiegogo, the team's looking for €85,000 to develop a better and easier-to-use version of the tool. The Berlin team's got its sights set on revolutionising the way we browse the internet. Featured on VentureVillage in May this year, users can take snippets from the web like Youtube videos, audio clips, and news articles – to create a fully browsable presentation. Viewers can either interact with the presentation or sit-back and watch it play from beginning to end. “This is our ambition,” explains Scheidegger, “to create the possibility of browsable stories. At the end of the year the tool will be ready to be used on the market and you can use a free version, or pay an app price of €5”.
Advice for startups looking to launch…
“I think what’s really important is that if you’re doing such a new concept - start with a really simple version. You don’t need to develop the entire technology,” explains Scheidegger. “Just show a first, simple version to get people excited. Talk to people and create an awesome video! And then, you have a chance to talk to a lot of investors. At early stages, you can only be successful if people are excited”.