Referring to my last post on this blog about the behavior of some VCs I need to show the other side of the medal – the behavior, characteristics and attitude of some start-ups and entrepreneurs.
I joined my first start-up 1999. Since than I started and led three start-ups until 2007. In addition I invested in several young companies and took board-seats in some of them.
This presentation shows in a funny and critical way how start-ups are acting  (maybe a bit exaggerated and a bit caricatured):

When I joined Target Partners in early 2007 I also changed sides of the table from being an entrepreneur to becoming “One of them”, a VC. During my time as an entrepreneur I had a lot of experience working with VCs and related investment managers.  Over time I became very critical of VC’s and investment managers because in my view some of them didn’t have the kind of operational experience needed to support their portfolio companies to ensure success. They were missing the “seen it done it” expertise and sometimes they had an arrogant attitude.

I promised myself that I would try to avoid making all of the big mistakes they made including the way they conduct themselves.

Today I found a presentation which really brings it to the point (maybe a bit exaggerated and a bit caricatured):

It about two years ago when I posted something about Web 3.0 and the differnences to Web 2.0. Since than I am screening and waiting for companies with the right technology and a sustainable business case.

If I compare the first months of 2009 with the last year it is obvious that we are seeing more companies with services and products based on open, structured data, more real-time apps and filters. Wolfram Alpha, Twitter, FriendFeed and Facebook are some examples.

Lets structure and summarize the new trends:

• Open data
• Structured data
• Filtering content
• Real-time
• Personalization

Here is a short but interesting presentation about this matter:

Do you still remember the first mobile game you ever played? And do you still know when you’ve played it the first time? If I remember right it was 2004 (about 5 or 6 years ago) with my Nokia 6310i. I was playing Snake and it reminded me of the first video game.

At the same time while mobile games were monochrome, published on screens and without any thrill millions of people were already playing highly sophisticated and complex video games on consoles and computers.
One group of players was playing complex video games on consoles or on the PC. Another group are casual player. Which means a faster gaming experience, short games, an easy to understand game concept and a fast learning curve within the games and most importantly the possibility to play various games without getting new CD-ROMs or game modules for the PC or console.
The answer was browser games. That’s the reason for the success of the numerous browser game portals (e.g. www.king.com or www.winner.com). Another reason for the success of such portals is the social gaming aspect. Players can play against each other (even for small amounts of money or virtual currencies), they can compare their high-scores and they can communicate.
Fast-forward to today. A mobile phone has turned into a mobile computer as well as into a mobile game console. The iPhone is just the beginning of a paradigm-shift.

I got my first iPhone a year ago and I was amazed about the screen-flow, the graphics, the application and…about all the interesting casual games available on the AppStore. To be honest I became a frequent casual gamer and I started to evaluate this particular market.

Today there are thousands of single player casual mobile games on the Apple AppStore. Some of the games are from large publishers but most of them are from very creative independent games developers.

Compared to the browser games with its social features the mobile games were still single player casual games.
Wasn’t it Nokia who claimed “connecting people”. Sure – if a person is calling another person both are connected. And they are connected with their mobile phones. Lets translate this to the gaming behavior. If one gamer plays a game wouldn’t it be much more thrilling to play against (asynchronous or synchronous) an opponent.
The main task of a game developer is to create the best gamer experience, thrilling games and screen-flows. It’s not his turf to run a transaction server in order to connect numerous gamers with each other.
Well, this task is been solved.

Scoreloop is exactly providing all the functions and features to the game developers. Scoreloop has a back-end-server which processes all challenges, keeps the high-scores, provides game stats to the developers, etc.  The game developer is integrating a lean SDK (software development kit) into his games (developers feedback: “took me an hour”) and his former single player game has been transformed into a social game.
Scoreloop launched its service in April. Only one month later game developers are launching new games with Scoreloop inside on a weekly basis.
I became a big fan of connected mobile games (phones are to connect with people!), some simple data streams out (high-scores, etc) AND links into existing social networks are actually likely to activate a lot of the potential in there.
Single User Mobile Gaming shifted to Social Gaming!

I am screening this particular trend and market since some months and I will share some key findings about social gaming in my next posts.

The animation gives you a brief intro about social gaming:

The summer season is near and the first tournaments will start in May. It’s time to exercise and to the get the final cut. As every year we are going to Mallorca to join the ChampCamp Beach Volleyball Camp:

• 5 days training
• Experiences and well-educated coaches (especially Martin)
• A lot of fun with 80 players

I don’t know anymore when and who mentioned an interesting indication about startups. But one of my colleagues made a clear statement:

• „The startups with the most awards have the highest probability to fail!“

We can put this statement even the other way around:

• “A startup award is no indication for a successful business case.”
• “A startup without any awards can be very successful.”

It might have been just a gut feeling but he was right.  We double-checked our portfolio companies and other startups and we came to the same result. Only a few of our successful startups have ever attended a startup award. None of the successful startups have ever collected various startup awards.

That’s why:
Successful startups are focusing on product development, on customers, on business development and they are allocating their resources (time and management attention) onto the relevant issues.

Don’t get me wrong – I appreciate the efforts of all associations, the government, etc. to give young entrepreneurs attention and a stage in order to raise money much easier. Please carry on!

But – some of these awards have to improve the selection process. The latest bad example was the “Gründerwettbewerb” of the German Department of Trade and Industry (BMWi) during the Cebit 2009.

I had the honor to share some insights of the startup and venture capital industry in German, impacts of the recession and some of my experiences. Later on I was sitting in the audience to follow the award. I don’t know how many startups have been awarded, but the fact that 95% of these business cases won’t get venture capital made me thoughtful. Most of the business cases were copy cats of already existing cases, some of them were trying to solve problems which already have been solved and some others haven’t thought about if there is a reasonable market potential.

Here comes my recommendation:
Please put experienced people (successful entrepreneurs, business angels and venture capitalists) into the jury.  People who have seen it and done it! (no politicians, no consultants, no state officials, no “old” managers from large corporations)

The results will be:

• Promising business cases with awards
• Increased relevance and attention of those awards in the venture capital industry
• Less participating companies but with a much higher quality

networking, networking, networking – well, hopefully I will see some interesting startups and business cases, too.
Nevertheless the Red Herring conference which takes place in Berlin is an good platform to meet the Europen and especially the German VC scene and to exchange the latest news and updates.
First impressions:

• the crises is not the top theme
• entrepreneurs are still motivated

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From 1999 until the end of 2006 I founded several technology startups. I am also a business angel and have invested in several startups since 2001. During this time I learned a lot about the startup business. How to raise money? How to build execution driven management teams? How to market products? And how to work with VC’s? (I painfully felt the drawbacks as well as the joys of having a VC investor on the advisory board.) I also learned how to bootstrap a startup as well as how to sell a company (exit). And a lot more…

In 2007 I joined Target Partners, a Munich based Venture Capital firm, as a Venture Partner. Since then I fully immersed myself as an investment professional and was always treated as part of the team. Early this year, I joined Target Partners as a new Partner.

People often ask me how to become a venture capitalist and why I decided to become a VC instead of founding or joining another company. To be honest – it just happened.

After two years of working on the other side of the table as a VC I have to emphazise that this move was a rather large paradigm shift for me. The entrepreneurial mind-set is more like “Yes, I can fix it” or “Come on, just do it”. As a VC I can’t operationally work in a startup as part of management, meaning, “I won’t fix it”. The entrepreneur/management team members are responsible for the operative business. In my new role “I have to let go”. Now, I am standing on the sidelines watching the game and hoping that my advisc, tips and voice might be heard and used by the team.

Seen it – done it

However, let me point out one important quality a VC should have. This insight is based on my work with VC’s as an entrepreneur as well as my experience working as a VC over the last two years:

• A good VC should have an entrepreneurial background.

Sure, there are exceptions, but statistics show that a good VC usually has a background which includes growing companies and/or developing and marketing products and services. Why? Because he will understand the needs, the problems, the daily work of a startup much better than a VC who has only seen it from the sideline and wasn’t part of the game.

Is the entrepreneurial background and experience enough to make a good VC investor? Definitely not! Venture Capital is a detail driven business, which demands additional talents and skills (e.g. curiosity, networking, accuracy, gut feeling, readiness and a lot more).

Conclusion: It was the right move

During the last two years I have enjoyed working with driven and enthusiastic entrepreneurs. I have seen interesting business cases and some not so interesting ones. I will focus on this chapter in an extra post.

This month (March 2009) the World Wide Web will turn 20 years old. Sir Tim Berners-Lee invented this world-changing layer on top of the Internet in 1989. It’s hard to overstate the impact this young technology has had already and it’s even more exciting to think about where it’s going in the future.

Tim still has great ideas about where the web should go next. His vision is of a major advance that could serve as the foundation for innovations that we can’t even imagine today.

One year ago Berners-Lee said that all the pieces needed to build a new Semantic Web are now in place. Last month he gave an impassioned talk about a related concept called Linked Data. The gist of the idea is that we need every institution that can do so to put raw data in a standardized format up on the web.

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