TRANSCRIPT
- Hi, so here I am today
in Techstars Berlin
with the managing director
of Techstars Berlin.
Jag Singh, who I've known for
about ten years, give or take?
- Far too long.
- Far too long.
- Far too long.
- [Interviewer] So Jag, great to be here.
Thanks for hosting me.
- Of course, thank for co--
Thanks for coming by, man.
It's so good to see you.
- [Interviewer] It's so
exciting talking to bright,
ambitious, can-do people,
like we met this morning.
- This is what happens when you spend time
outside of Westminster.
- [Interviewer] Well this is a good point,
good point well made.
Tell me first of all, what is Techstar?
- So, we're a investment organization.
We invest in early-stage
startups like, Uber, Twilio,
San Greg, Classpass, some of
these you might have heard of.
And we give them a little bit of cash,
but we give them a ton
of mentoring and advise.
It's an organization built by
founders who have gone to be
very successful, and we surround
new founders or founders of
early-stage startups with
the best possible advice
and support that they can have.
The infrastructure they can
have, to really accelerate
their companies and grow
as fast as they can.
- [Interviewer] And tell
me about Techstars Berlin.
So you've been here for two years?
- I've been here for a
couple of years now, yeah.
- [Interviewer] And how long
has Techstars been in Berlin?
- So we've started, I think
we opened our office in 2015.
And we started by partnering
with some organizations
like Metro, its a big wholesaler
here in Germany and also
SAP, and we set up a couple
of funds and we kind of tested
the waters and started investing
in early-staged companies
that also fit the mold or that
could also do business with
the likes of SAP and larger
corporates like Metro.
And then a couple of years
ago, we decided we wanted to
focus on our own brand and
also companies that weren't
necessarily just capable of
working with Metro and SAP.
And so, we've done a program here set up
for investing in 10 early
staged companies, we give them,
like I said, we give them
a little bit of cash,
a lot of coaching, a
lot of advise, and then
we help them fundraise after
that from private investors.
- [Interviewer] Why Berlin?
Berlin is part of Germany.
Obviously it's the capital,
and Germany is sometimes
seen as a pretty staid
and sort of conservative
business environment.
Startup center in the middle of Berlin,
in the middle of Germany.
Why is that?
- Well, there's actually a ton
of innovation happening here in Berlin.
The cool thing about Berlin is that
it's not necessarily
representative of Germany.
I would actually challenge
the assertion that Germany
is not a great place to do business.
I mean, it's still a
massive stalking economy.
Within the EU it's got
incredible amounts of influence.
Even outside, Germany is
one of the best places
to do business if you're a large company.
But it does translate
to the smaller startups
because Berlin holds that special place.
One, like I said, it's not
representative of all of Germany,
it's actually one of the most globalized,
cosmopolitan cities around.
And I think the best way to
look at Berlin is, Berlin's been
shaped by a ton of history and
from the late 90s when Berlin
became the center for political
activity in the country,
there wasn't a lot of industry here,
and so politics became
the biggest industry.
But what Berlin has always been
is a utopia for the misfits,
the people who were always not necessarily
in the mainstream in
other parts of Europe.
And so they flock to
Berlin since the early 90s,
and so since the late 90s,
we've had the capitalists,
the socialists, the anarchists,
all competing with each
other and out of all this
creative destruction,
we've had some amazing companies come out.
We've had the likes of Zilando,
we had the likes of GetUrGuide, N26.
There's more unicorns within a square
block of our office here
than most of European cities.
- [Interviewer] It's really
exciting I was part of,
I did some work some big
corporates including SAP and
Reobotron and Siemens in
what was then the new eastern
Germany or the former eastern Germany.
And there is that kind of
exciting can-do attitude
which maybe isn't everywhere
but it is definitely here,
you can feel it on the streets.
I've worked a little bit overseas
in Silicon Valley and the
UK and in Germany with businesses.
You've done much more than I have.
What's the difference between
the startup environment
in the UK and the US, and
mainstream Europe in Germany?
- So the way I like to think
about it is, if you're an
early-stage founder, if
you need to secure a deal.
If you're in the US, you
just pick up the phone,
and if you can get through to the C-suite
of any large Fortune-500 company.
They'll answer the phone,
and they'll answer the phone
with an attitude of, alright
cool, let's do this deal.
From the minute they pick
up the phone it's cool,
like I know you're selling
me, but let's figure out
how we can make this work.
Let's do a deal.
And in the UK, you might get that C-level
exec's phone number.
You call a FTSE100 company,
you might call, you might
be able to get through,
but they'll let the phone ring.
They don't wanna answer the phone.
And in Germany, well that
phone number is not published
for data privacy reasons.
That doesn't mean business doesn't happen.
It's just you got to adapt
to a different way of doing business.
In the US, cold calling works,
because you can literally
call any random person and try and sell
them and they'll probably
say,"Cool, let's try it out".
In the UK, cold calling
works to a certain extend
but you have to have warm introductions.
And in Germany, you have
to have hot introductions.
You have to have trust.
It's an economy based on
trust and credibility.
And so you've got to
figure out how to navigate
that path if you try to do
business with a large corporate.
- [Interviewer] And
that's part of what you
offer in your package?
- Well --
- [Interviewer] Those connections and that
sort of invitations.
- The connections but its
also just the awareness
that that's how you have to do business.
Again you know I'm a
new immigrant to Germany
but many of our mentors, some of them have
been here for what...
Some of them are actually Berliners.
But many of them have been
here for 15, 20 years.
So they've navigated those
paths before and so if you're a
founder of a early-stage company,
and if you haven't perhaps
had the experience of
building a company before.
The feedback that you get from
mentors, the advise that you
get from mentors is invaluable
because you've just figured
out how to build a shortcut
to grow your business.
You may be able to get there
on your own in the end,
but it might take you 18 months.
- [Interviewer] And of course
the caveat about that is that
when you're cold calling
in the States or in the UK
or when you're networking here,
is that you have
something that's of value.
- Exactly.
And we like to think that we
are pretty good at vetting
companies, we see, I mean I saw over
a thousand applications this year.
I met with them over a
thousand companies last year.
And we kind of weighed them
down to 10, that we've taken to
the accelerator program every year.
- [Interviewer] This is a sort
of fishing competition hoping
that you'll give me secret tips but,
the question that so many
people ask is what do angel
investors look for in a startup?
What is your criteria for a startup?
- I think for me its all about the ability
to have set out a plan.
And I mean this not in terms
of a business plan, but a plan
for what you're going to need tackle.
What kind of assumptions
you going to be validating
over the course of a few months.
So the way I like to think about is,
if I'm a seed stage investor,
I'm gonna evaluate you based
on your ability to validate
all the assumptions that you've
set out to kind of validate
at the pre-seed stage.
And so, you go to the pre-seed investor.
So, someone before me , or in some cases
I'm the pre-seed investor too.
You say, I have this assumption
that I can get x number of
people, who look like this,
business that have this
profile to pay for this product.
And that this product will work.
And so cool, I'm like great,
I'll give you a little bit of
cash, why don't you go test
all those assumptions out.
And then 6 months later
you come back and go,
hey, you know, all
those assumptions I had.
Well, I've got a few more
but I've cracked 99% of them.
I need more cash to attack
these other assumptions.
And so, you think about
it as a staged process.
You go from pre-seed, to seed, series A,
series B, series C, D onwards.
The pre-seed , you know, idea phase.
The kind of early execution
phase, is all about
just clearing out all those assumptions
you have about the world.
And so if you have industry experience,
if you have knowledge and domain expertise
in this industry well, you're probably
gonna be a better bet.
And so I'd rather give someone whose got
founder market fit.
A little bit of money in the early stage
because they probably gonna
know the challenges ahead
and then I judge them solely on the
basis of their ability
to validate assumptions.
At some point you get to the
biggest assumption will be,
well okay great, we've now
proven this with a 100,000 people
if you'll be the seed company.
We've proven this with 100,000 people.
Can we take this to 10,000,000 people?
What are the steps needed?
What are the assumptions
you have to tackle those?
And at that point I go, cool.
You're probably ready for
your Series A round now.
Lets go talk to some big boys,
lets talk to some big investors.
Who will ask me and say okay well,
how do they do with their journey so far.
- [Interviewer] Now, we had
some fun this morning working
with some of your CEOs.
I think it was 10 there
this morning, but you get
a thousand applications a year?
So, a thousand down to ten.
What do you look for in a pitch deck?
What do you look for in a...
How do those thousands...
How do those ten stand out?
In their pitch deck, do they
send you an email that was
good, or was it a pitch
deck they send you?
How do you impress Jag Singh?
- Well, we start with the
premise that, its all about
communicating your idea
clearly and communicating what
you've done and what you
set out to accomplish.
Your assumptions that you're validating.
In many cases founders
are horrible or crap
at communicating that or
expressing that in person
and that's where the pitch deck comes in.
Like the pitch desk is basically an excuse
for not being able to
communicate what you do clearly.
And so you have to rely on a pitch deck.
What that means I have
to look through 12 pages.
I have a very simple...
every investor's different,so
this is specific to me.
I look for jargon free
language in a pitch deck,
or even a pitch.
I look for evidence that
you know the industry
and you know the kind of pitfalls.
And I may not know that
industry, but I know,
I will know a lot of
people in that industry.
So I rely a lot on a network
of friends, colleagues,
other investors in the
industry to sort of help me
fact-check and kind of
sand-box some of these things.
Some of these industries at which point.
If I feel that you are credible,
that you have the ability
to almost predict the next set
of challenges then I'm very
likely to sort of say, let's have a chat.
I'd love to dig in more
into the unit economics,
or how you think the
unit economics will work.
Many of the companies that
we invest in, and that I've
invested in, are so early
that, they're looking for money
to build a product.
And I always kind of
challenge them back to say,
You should be able to sell
without building a product.
So why don't you go sell and I
help you kind of narrow down,
who your customers are and
what they're buying and what
you're selling and why they're buying.
And lets go pre-sell a little
bit and test the waters.
Lets de-risk it.
So, a founder that can proof
to me that they're able to
de-risk the situation at
every juncture of the journey,
that's kind of founder I want.
- [Interviewer] I think its like Kawasaki,
he talks about the 10 slide pitch deck.
- Yeah
- (Interviewer] Do you
buy into the letters more?
- I definitely do.
Its also I guess reflected
in my communication style.
I'm much more of a tabloid
person than a broad sheet person.
I like short punchy headlines,
compared to long academic essays.
I guess I'm a millennial.
(laughter)
- [Interviewer] And I'm a boomer, right?
As you put it this morning.
- I never said so.
[Interviewer] You did this morning.
Final question.
How early should a starter
look for an investment
or for advice?
Or is that two questions?
- I think that's two questions, but...
ask for advise to get money.
Ask for money, you'd probably get nothing.
So my suggestion to all
early stage founders is,
go talk to an investor.
Don't talk to them about raising money.
Ask them about the other
companies that they've seen.
Come to them with specific questions.
And they'll wanna help you out, because
that's what we're in the business of.
- [Interviewer] And then just a round-up.
When is your next establishment.
When is your next grade.
When's your next intake.
- Well so unfortunately we
can only do this once a year.
We invest in 10 companies
once a year through
our accelerator programme.
And so the next one is in 2021.
- [Interviewer] And so when
should people start applying?
For that?
- Applications open,
I think mid-July or August.
If you just go to techstars.berlin.
So it should be us, techstars.berlin.
There's a ton of information
there about what to expect,
how to go about the application
process and to even actually
just leave your email
address so we notify you--
- [Interviewer] And do yo
have any special industries
that you've got as favourites
or as special babies?
- I probably stay away
from hardware startups just
because of the challenges of
raising money as a hardware
company and also reflective
of the general investment
climate for hardware startups.
In Europe, it's a little bit tricky.
There aren't a lot of investors who like
investing in hardware.
It requires a different set
of skills and expertise.
But generally, I don't have any challenges
in investing in specific industries.
- [Interviewer] And I guess this is not a
Germany only setup?
- Absolutely not.
[Interviewer] You don't
welcome applications
from anywhere in the world?
- Off course, in our
program last year we didn't
have a single German startup.
We actually had startups
from, Australia, Israel, UK,
Netherlands, Romania.
Even this year I think will be five
of the startups are from Berlin.
Most of them are from abroad.
We've actually got a startup from L.A.
that's moved down here for the program.
- [Interviewer] Must be
because of the weather?
- Sure.
- Well that's all from
myself and Jag Singh
from Techstars Berlin.
Thanks very much Jag.
- Thank you.
- Back to work.
- Back to work.