There's been a lot of discussion lately about what needs to be done to bring the Cologne startup scene to the next level. The whole thing reminds me of the "Let's clone Silicon Valley in city X" meme that seems to pop in a new spot on the globe every few months. I have a theory for why every single time that turns out to be an elusive goal. It's simple, really: just follow the money.
I call it the "funnel theory of early stage investment". Schematically, it goes like this: Big Exit > Re-Invest > Smart Money.
Basically, you need people who had a big exit, who are willing to re-invest instead of retiring & who turn out to be actually smart rather than lucky. At the top of the funnel you throw in a colorful bunch of entrepreneurs. Most of them fail & never make it past the Big Exit step. Of those who exit a good number simply retire because you have to be a little crazy to stay in the startup scene. Finally, as a startup you want to avoid taking money from those who were lucky rather than smart.
If you treat the investment ecosystem as a funnel like the one outlined above you quickly see how sheer volume gives Silicon Valley a head-start of approximately 50 years. Barring another spark of massive cold-war-style military spending I can't see how you can get so many generations of people who had a big exit together in one place.
And having multiple generations of entrepreneurs in one place turns out to be important. The single biggest differentiator between Silicon Valley and the rest of the world is culture. It's not about office space. It's not about universities. It's not about money. It's about the people in SV, their attitudes, their culture. And culture grows organically when you put people in the same place for an extended period of time. Let's look at three of those attitudes & how they map to the startup investment funnel.
Again, schematically, it's all about: taking risks + working hard + being smart.
Taking Risks. When you have people around who took big risks to get big exits it becomes a whole lot easier to work on your own risky projects. Failure becomes accepted, if not rewarded! To put it in Steve Blank's words: "Do you know what we call a failed entrepreneur in SV? Experienced!" When you see entrepreneurs fail big-time without ending up in the gutter, your own failure suddenly becomes a whole lot less frightening.
Working Hard. In SV entrepreneurship is a valid career path. It goes something like this: entrepreneur > angel > philanthropist. Working hard at your startup is a given, not something you need to defend to the people who would prefer you to take a steady job. Since there's a respected career path suddenly it becomes a whole lot easier not to retire to Hawaii after your first exit. Why retire when you can work on something bigger & better? And still be respected for it!
Being Smart. Sure, you'll meet a good share of hustlers & bullshitters in SV. But you'll also meet some seriously smart people working on startups. I've met these kinds of frighteningly smart people in Europe, but they tend to hide in universities or consult for BigCo's. The rewards system in Europe is just set up all wrong. We tend to live by the adage "Judge a society by how it treats it's weak". While that is fine & dandy, don't forget to give big rewards to those who take disproportional risks. Otherwise you'll just wake up in a nation where your smartest are working on freakin' Prozessoptimierung.
So you're not going to see a new Silicon Valley in Europe anytime soon. But you're a pirate. You're ambitious. You want to tackle big problems. You want to build new things rather than clones. What are your options?
Bootstrap. With the technical cost of doing a startup coming down dramatically, this has become a viable option. But beware the consulting trap: if you're not 100% focussed on your startup you'll be moving slower than your deep-pocketed competitors.
Take Stupid Money. Sure, you can take money from people who were lucky rather than smart. This may help you kick off your project. Or ruin it in the long run. It takes a lot of self-confidence & experience to spend someone else's money while ignoring their input. Even if you know their advice is wrong.
Look into Crowdfunding. While crowdfunding is starting to take off in Europe it's not nearly as easy as putting up a Kickstarter is in the US. This is mostly due to fragmentation & regulation. Still, a good option for an early second round.
Jump on a jet-plane. Silicon Valley is only a short jet-ride away & there are plenty of organizations that will help you settle in. This is the option I'm exploring right now. I'll be attending Blackbox right in the heart of Silicon Valley. And I'll try to get some funding. I know it's going to be
hard nigh impossible to pull off. But if it's not hard, it's not worth doing! Ask me again about this option in September!
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