Why the Silicon Valley is not in Germany

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The future is invented in California, not in Germany. An entrepreneur and a venture capitalist with two regions familiar to you, call several hard-to-cross reasons.

There are several reasons why the venture capital funded business in Germany is still much smaller than its counterpart in California, and why so many talented Germans to emigrate to the US. The learned DW from Interviews with Matthias Ockenfels, a Berlin-based venture capitalists (Venture Capitalist, VC), and has previously worked in California, and Pascal Zuta, a trader who lives in San Francisco, but previously ten years spent to establish various companies in Berlin.

“We have [in Germany] is still a piece of the path in front of us, in order to develop a culture of full-blooded venture capital funded entrepreneurship,” says Pascal Zuta. “On the other hand, the German culture of perfectionism in some areas, also has its advantages.”

A stronger start-up culture is also wanted by the German government and encouraged. The semi-state “High-Tech gründerfonds” (HTGF) invests in start-UPS from sectors including Software, media, Internet, Hardware, energy and Automation, Life Sciences (medical technology, Diagnostics, biotechnology) and chemistry.

California dreamin’

According to Zuta California ambience of the inspiring optimism is a reason why many of the young emigrate entrepreneurs and risk takers, engineers and programmers from Germany there. The Californian culture accept or even celebrate business setbacks and failures; such are understood as opportunities to “grow” and adapt to a new start-up prepare, on the next Startup.

“In Germany, it is often prefer the know-it-alls who says, ‘this is wrong’. And most of the time it is wrong – so it’s right. In Germany, the plan to search all the ability, but in entrepreneurship you do in the end is almost never what you planned at the beginning. You have to remain flexible, to take chances.”

In addition, the salaries and the cost of living in California are almost three times as high. Net, you can save significantly more, if you work in San Francisco or Silicon Valley as an engineer or a programmer, as in Germany, the Zuta. Therefore, there are so many German engineers and businessmen in California – at least 60,000.

Matthias Ockenfels head of the Berlin office of the Vienna Risikokapitalfirm speed invest.

Business Angels are crucial

The most important reason, however, why Germany will not long be with Silicon Valley’s competitive, is California’s huge advantage when it comes to establishing a founder-friendly “Ecosystem”, saying Zuta and Ockenfels. Especially much larger Pool of experienced Business Angels in California is a key component, and there is not in Germany.

In the language of business, an “angel” Investor who is not a professional venture capital investor, a VC, but a Mentor to the founding team and a source of money for early-stage financing of the company. “If there is one thing that Germany more than all other needs, it’s a larger base of experienced angels, who built himself a successful business and Exits have achieved,” says Zuta. “Angel and the founder form the Basis of the start-up Ecosystem.”

Everything for the “Exit”

In VC Jargon, Exit, “” the long-awaited event that all are working towards: the day that the company is sold, and the shareholder will be paid out: of angels and VCs who have funded it, as well as the founder.

A good angel is working closely with the founders, and gives you not only money, but also wise advice and useful contacts. A good angel can stop a young entrepreneur from committing a beginner’s mistake that would bring a company to Fail.

Zuta, 41, is a self-angel. He has a number of successful “Exits” behind (but also a few failures), in industries from film production to E-Commerce, video games, and a Website for the booking of doctors appointments. Currently, he is co-founder and CEO of GYANT, a San Francisco-based company that uses artificial intelligence (AI), in order to improve the asynchronous communication between patients and hospitals through telemedicine.

In order to get money from American VCs, drag in the United States

Matthias Ockenfels, 34, is a Partner in Speedinvest, a Vienna-based venture capital Fund with offices in several European cities as well as in San Francisco. Ockenfels head of the Berlin office. Speed invest invests mainly in Europe, but often times European companies to establish themselves in the US market-which makes sense, because the North American market is huge and uniformly, while the European markets are still fragmented by a variety of different cultures and languages: “a Lot of customers and follow-on investors based in the United States. It is easier to find American customers and investors, when the founders move their main office to get there – and by yourself to California to relocate.”

An example for the Berlin Startup-scene, the young company Jobspotting is.

Borrow money with friends

Europe offers a large amount of engineering and programming talent, and it is often cheaper, highly-qualified people in Europe than in California set, which is why Europeans established companies do, sometimes, an important share of their engineering work to continue in Europe, even after the founders have moved the company’s headquarters in the United States.

The VC points out that VCs are the only source of funding for Startups. “A lot of entrepreneurs take advantage of other sources of financing, such as banks, family members and friends, or customers,” says Ockenfels. “At speed invest we see more than 5,000 investment opportunities per year, but all of our funds invest in only about 25 Startups per year. If a VC rejects your case, this means that your company might not be profitable, or your technology does not make sense, but only that it is not a case for VCs.”

Berlin – a small Silicon Valley

Pascal Zuta says that California has many advantage for the founder, but more generous conditions, in the case of risk capital, not donors, as in Germany, these include: “In both countries, entrepreneurs can expect to need to give up at each round of financing 15 to 20 per cent of the equity capital of the company.” Because there are a lot more VCs and experienced Business Angels in California than in Germany, the place of the stubborn entrepreneurs in California have easier access to money.

However, Zuta and Ockenfels say that Germany builds, in the meantime, a promising founder-Ecosystem – in the capital. Berlin is clearly the German centre for VCs and startup companies, Zuta, and it was good: “We need to build an Ecosystem, a critical mass of angels, VCs, and startup entrepreneurs in a city, and this city is Berlin. She has now said a worldwide reputation as a cool, hip, affordable city with a lively start-up scene. We should appreciate and build upon it.”


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