As you probably know, Entrepreneurship is at the very core of my current professional life. On one hand, as an investor, I constantly get to meet young men (yes, according to a KMPG study called “Deutsche Startup Monitor” the average age of founders at their first incorporation is 27 years and from my perspective, that qualifies as young-), and secondly yes, according to the same study, over 86% of the entrepreneurs in Germany are men, who define themselves as entrepreneurs. On the other hand, by establishing Audeamus Capital nearly two years ago (it is incredible how time flies), I became myself an entrepreneur.
Having said that, when Dr. Henrik Meyer-Hoven - Professor of Organization and Personnel at the Hamburg School of Business Administration (HSBA) and Managing Director of Pawlik Consultants- asked me to participate as guest speaker in his seminar “Entrepreneurship” in HSBA, I decided to talk about the “myths” – and the hard, sometimes even bitter “reality” behind Entrepreneurship, from my double perspective as investor and entrepreneur.
Here are the five theses I presented to, and discussed with, Dr. Meyer-Hoven’s students:
- Although when talking about entrepreneurs we (mostly) think of the Steve Jobs, Larry Page or Mark Zuckerberg of this world, the real fact of life is that very few make it to that level. It’s true, that according to the Wall Street Journal “The Billion Dollar Start-up Club”, there are currently 154 Companies valued at $1 billion or more by Venture Capital firms. Looking at the figure, it seems that the concept Unicorn might be a little bit outdated, but in reality, while 91 of those companies are based in USA, just 16 have headquarters located in Europe, and, more specifically, just four are based in Germany: Delivery Hero, Hello Fresh, CureVac and Auto 1 Group. All and all, four such startups in the country with the fourth largest economy of the world, does not seem so high either. Furthermore, reality for the over 1,000 German start-ups participating in the above mentioned study, is that external financing to date in 80% of then is lower than €1.0m, and, in fact, in each second (52% to be more precise) amounts to less than €150,000.
- Everyone will tell you “all you need, is a great idea” BUT although a good idea is definitely important; momentum, implementation and a flexible team are equally critical. Proof is that copycats also work, and if not, ask Rocket Internet a cross between a venture-capital fund and a consulting firm that focuses on copying successful e-commerce businesses and transplanting them to emerging markets. Off the record: Rocket Internet, who starred in October 2014 the largest IPO ever of an internet Company in the German Market has seen over the last 2 years its market capitalization to go down from over €8.0 billion to “just” €3.5bilion.
- Although Entrepreneurs (or at least the real successful ones) aim to change the world, for the “regular ones” it’s more about an alternative career path – one that in the last years is gaining in attractiveness and recognition: flat hierarchies, highly international workforce (42% of the employees of Berlin startups are not German citizens), with two out of three start-ups supporting social engagement and more than the half attaching value to sustainably developing their start-up.
- Entrepreneurship per se is not a new phenomenon: John D. Rockefeller and Andrew Carnegie at the beginning of the XX century or Amancio Ortega and Warren Buffett in the last decades of the last century were/are truly visionaries and by all accounts extraordinary business men. What might be new about the new is the profile –twenty-something drop-offs of Ivy-league Universities, the look (hoody and flip-flops are the new norm) and visibility (dating some of the most famous women (marketing influencers should I say) of the world.
- Although the unprecedented technology acceleration we are living in opens unlimited opportunities –and reduces drastically the time and money to start a venture-; one premise is specially truth for the digital world: “The winner takes it all” (see one of my previous Blog for more insights on that).
Myth or reality, Entrepreneurship, is a good thing; as the report of the OECD “Entrepreneurship at a glance, 2016” underlines, Entrepreneurship’s impact in terms of job creation, economic growth, poverty reduction and formalization of the informal sector is huge by all measures.