According to Local.de, a new startup is founded in Berlin every 20 minutes.[i] Berlin startups are set to independently produce 100,000 jobs by 2020. The city is home to some of today’s startup giants, including Rocket Internet and Zalando, valued at $4 billion and $5.4 billion respectively.[ii] Why the success and exponential growth? Berlin offers a highly beneficial mix of location, living costs, labor, investment sources and community support to attract ambitious entrepreneurs.

First – location, location, location! Berlin is at the very heart of Europe and is the capital of the EU’s economic powerhouse. Germany’s sustained growth has enticed a high amount of skilled workers, considerable investment and has allowed for the development of top technology university programs. It is a short flight or train ride away from most major cities. Incredibly, despite its appeal, Berlin’s living costs have remained among the lowest of any capital in Europe. According to Numbeo.com, you would need around 2,940€ ($3,722) in Berlin to maintain the same standard of life that you can have with $5,400 in Boston (assuming you rent in both cities). The expectation of startup salaries for recent graduates can be as low as 800-1000€ per month! This is approximately equal to an annual salary of $13,600.

How can this be possible? In a nutshell, the lack of a working break between Bachelor’s and Master’s degrees means that the majority of late 20-year olds to early 30-year olds have little to no working experience. Since public universities in Germany are virtually free, graduates don’t have much debt and are open to low salaries for the first years of their careers. Additionally, the Euro Crisis that broke in 2011 sent waves of young workers from Spain, Italy, Portugal and elsewhere that can legally work anywhere in the EU. The abundance of young professionals seeking an entry-level position undoubtedly puts downward pressure on wages.

These factors all play to the advantage of the eager entrepreneur. Applications are numerous and payment expectations are low. Candidates are highly educated and speak multiple languages. Rents are also significantly cheaper than other cities (Numero claims that Berlin rent is 56% less than Boston’s).

In terms of capital, Berlin attracted 173€ million in VC funding last year.[iii] Angel investors, private equity firms, family offices and private wealth management funds hover over the Berlin scene looking for potential to invest in.

Finally, the high-concentration of startups offers great support to entrepreneurs. The community can be a source of cross-pollination of talent and connections to investors. There is a constant line-up of conferences, idea competitions and networking events for founders to meet partners and garner best practices.

However, not everything about Berlin is ideal. Its typical investor profile, mentioned above, means that investments are more risk adverse and come with more conditions. Large sums common in San Francisco and Boston are harder, if not impossible, to find. Because of investors’ relative inexperience with online businesses, they often want to be much more involved in the startup’s decision-making – which can be a help or a hindrance.

Furthermore, although the size of the labor pool is attractive, the inexperience of the workforce results in high training costs and turnover. Graduates need to learn the job’s tasks, but also the basics of office conduct and work ethic. In addition, German labor laws are much stricter than those of the U.S. If not careful with the writing of contracts and the documentation of employee performance evaluations, labor can start to represent a fixed cost.

Finally, Berlin is not a business city at its core. It is a musical, art and political hub – a city known for its laidback culture and edgy attitude. It can be difficult to find business savvy recruits and build a productive working environment.

The US startup scene is slowing starting to take notice of Berlin. Just this past June, Google invested $1.3 million in “The Factory” – an incubator for tech startups. Four IPOs are expected to take place this year. While it has its own set of challenges, Berlin eagerly welcomes entrepreneurs and should be considered a real alternative to the increasingly expensive tech hubs found in the US and elsewhere.


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Relaunching America: Innovation, Entrepreneurship, and Disruption

A group of co-founders shut themselves in a sweltering, dimly lit room and were determined not to see the light of day until they had released their new system to the world. The beta system was currently in the market and users were anxious to see their new release. They had spent the entire summer scripting their platform, arguing over precise features to include, and deliberating over the future implications of this version. They were close to a release date, and failure was not an option. The room was in Philadelphia, Pennsylvania, and the year was 1787.

This story may have conjured visions of the Steves, Jobs and Wozniak, toiling in a Los Altos bedroom, Paul Allen and Bill Gates’ scripting marathons in Harvard’s Aiken Lab, or Zuckerberg’s hacking and face mashing in Kirkland House. However, this story refers to a different collection of founders – now we call them the Founding Fathers. The users were the citizens of newly independent United States of America. The beta release – also known as Articles of Confederation – had become insufficient to meet users’ needs. Now the stakes were high. More than their financial futures and reputations were on the line. Their very lives, and the lives of 3 million citizens hung in the balance. They weren’t just innovating a product or service, they were innovating a system of representative governance.

The Founding Fathers followed a proven tech startup model of learning from others’ mistakes, refining the best ideas of early adopters, and creating something familiar, yet completely new and disruptive. Think Google, iPhone, Tesla, etc. The early product launched by the French, Romans, and Greeks provided excellent user testing and case studies, while thought leaders like Montesquieu and Locke provided some key insight for experimentation.

However, just like any high-performing startup, over time this governing system has experienced growing pains. The user base has grown approximately 10,000% since that hot Philadelphian summer, while user satisfaction toward elected representatives – particularly Members of Congress – has remained remarkably low. The executive leadership and board of directors have been able to increase the opportunities for user participation incrementally over the past two centuries; however, as technology has dramatically improved over the past two decades and the ability to send communication has increased exponentially, the elected official’s ability to absorb, respond, and leverage these tools has remained relatively static.

Technology’s rapid development, and Congress’ slow adaptation, has crippled a system that is predicated on the idea of citizen engagement. Thomas Jefferson’s maxim that “eternal vigilance is the price of liberty” illustrates the power of network effects that bolsters online startups. Ultimately, the system functions more effectively as more users join the process.

According to a recent Congressional Management Foundation survey, over one-third of congressional staffers feel their office spends too little time on online communications. At the same time, 64 percent of senior staff believes Facebook is “a somewhat or very important tool for understanding constituents’ views and opinions.” The number is 42 percent for Twitter. Congressional offices seem to understand the importance of using new technologies, but they are unwilling or simply unable to maximize the potential of these innovative technologies. This story becomes even more concerning when looking into the future.

The United States is witnessing a growing disconnect between elected officials and its next generation of citizens. As the number of social technologies continues to grow, the connection between Members of Congress and younger constituents continues to shrink. The 2012 Institute of Politics Survey of Young Americans’ Attitudes toward Politics and Public Service found that “young people of all ages, races and political persuasions care deeply about their community and their country… [However] young people continue to lose faith in the institutions and the leaders elected to govern our country and shape their future. And now, through this project, we have learned that potentially millions of young people will stay home on November 6, not participate in the election — choosing instead other paths of civic engagement, or nothing at all.” These young Americans are living their lives online through technology, and effective engagement depends on the ability to connect in this new digital world. They care about their country and they want to be involved if their elected officials can learn to speak their language.

This year I founded Connected Congress and held a bipartisan tech series for Members of Congress and senior staff on the Hill. The goal was to help Members understand not only what technology is available, but also how they can use technology more effectively. (http://ConnectedCongress.org) With over 20 speakers from Google, Facebook, Twitter, think tanks, House, and Senate, I realized perhaps the future is not so bleak. Not all Members of Congress are opposed to adapting technological advances into their offices. In fact, digital staff, administrators, and a handful of tech-minded Members are trying to influence behavior in the institution.

In a recent interview, Congressman Darrell Issa, Chair of the House Oversight Committee, described this “technology-centered approach” as “disruptive to the government bureaucracy and many in Congress because it demands experimentation, data-driven analysis and actually listening to our users — the American people — about how to make government work better for them. That’s why social media and innovation are so central to my work: we in Congress do not have all the answers, but we can have a relentless drive to adapt technology to let taxpayers re-engage with government on their own terms.”

Now it’s our turn. My goal is to channel some of the innovation our system was founded on over two centuries ago to disrupt this market of representative and participatory democracy.

More Reading

Congress’ Wicked Problem. Lorelei Kelly, New America Foundation
http://oti.newamerica.net/publications/policy/congress_wicked_problem

Can Congress Work Like A Tech Startup?
http://www.techdirt.com/articles/20120509/03041418839/can-congress-work-like-tech-startup.shtml

Does Anyone in Congress Get Technology? Joshua Lamel
http://www.huffingtonpost.com/joshua-lamel/does-anyone-in-congress-get-technology_b_1465743.html

‘Virtual Congress’ Would Weaken Deliberative Process – Rep. David Dreier (R-Calif.)
http://www.congresslink.org/print_expert_virtualcongress.htm

Congressional Management Foundation
http://www.congressfoundation.org/projects

Congressional Management Foundation: Communicating with Congress Project
http://www.congressfoundation.org/projects/communicating-with-congress

Dawn of a revolution (Bill Gates at Harvard)
http://news.harvard.edu/gazette/story/2013/09/dawn-of-a-revolution/

Connected Congress series highlights struggle of digital staffers. Colby Hochmuth
http://fedscoop.com/connected-congress-series-highlights-struggle-of-digital-staffers/

Connected Congress: Tech for Members
http://ConnectedCongress.org

Harvard University Institute of Politics (IOP) Public Opinion Project Survey
http://www.iop.harvard.edu/survey

 


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To compete with the marketing budgets of traditional retailers’ ecommerce startups have found a way to cheaply acquire customers: provide interesting content on their website. Those who enjoy the blog are most likely their target demographic, and once on their website it will be easy to convert these readers into paying customers. However, these visitors are first and foremost consumers not customers, and the conversion from consumer to customer may be more complicated than imagined. Content driven commerce is an age-old concept; advertisements are paired with relevant media content in magazines, in newspapers, on television and alongside search results. Yet, for ecommerce businesses this new model challenges them to simultaneously create interesting content and a viable business. One company in particular, Huckberry, has been extremely successful in meeting this challenge.

Huckberry is a startup ecommerce site designed for the urban male professional who spends his weekend’s outdoors. Co-founders and college friends, Andy Forsch and Richard Greiner lived this life during their investment banking days and thus know their consumer well. Huckberry is equally a blog and a shop, you can seamlessly toggle between the sections via tabs at the top of the page. Counterintuitive to traditional merchandising, Huckberry intentionally drives traffic from the shop to the blog; products are featured next to blog posts, and blog teasers are placed in the shop. Last month I sat down with founder Andy Forsch and learned their blog strategy is as crucial as their merchandising strategy; they are constantly aiming to improve the customer’s experience by not only providing more interesting products, but also more relevant content. With email communication, their rule is three content pings for every commerce pin, and to date the strategy has worked as they have incredibly high open rates on their emails.

Huckberry’s consistent aesthetic and voice results in seamless integration between their blog and shop, they maintain this consistency by keeping all of their writing and photography in house. Even their product descriptions read like a story, In 2008, Swedes Alexander Palmgren and Henrik Lindahl found themselves in an American hotel room with lost luggage and— even more upsetting— no clean underwear. No, this isn’t The Hangover 3. But it was the beginning of an idea: Bread &Boxers.” Not quite the typical product description for undershirts and boxers, but each of these descriptions builds and maintains their brand.

The question remains, how will they convert these content driven sign-ups into paying customers? Further, does Huckberry need to turn every one of their consumers into a customer? To date their sales have supported the bootstrapped company (they have taken no venture fudning) and everything from article writing to order fulfillment is done in their SOMA garage style office. Without the pressure of growth targets they are waiting for the right opportunities to scale their business or pivot their model.

With a blog as valuable as Huckberry’s I wonder where their future lies. Are they going to continue to sell a curated collection of luxury plaid shirts and masculine candles? Are they going to fundamentally change media content’s monetization and distribution? Their articles are as interesting as GQs, but their turnaround time is seven days, not seven months, so it is no wonder why traditional media outlets, such as Outsiders magazine, have begun to seek partnerships with them. Huckberry delivers timely and interesting articles to their consumers’ inboxes with interesting products for sale folded into the mix. As a consumer and a customer that sounds better than getting an email from Details filled with display ads and veiled behind a subscription fee.


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So, How Exactly Do You Find A Tech Cofounder/CTO/Coder??

There have been countless posts and discussions around the topic of “If I don’t know how to code/am not technical, how do I launch my website/startup?” (such as hereherehere, and here), but an in-depth discussion in class the other day prompted me to share a summary of insights and actionable suggestions that I thought would be valuable to others.

Last Tuesday, instead of the usual case discussion, we had an interesting group of guest panelists (Brandon LiuAnna PalmerJim Psota, and Hugo Van Vuuren) in class to discuss the very topic of “Hiring Tech Talent” (translation: How do I find a tech cofounder/coder???), and the discussion kicked off with a glance of the infamous tumblog MBA Seeks Code Monkey.

The biggest takeaway, surprisingly, is that finding a (tech) cofounder is VERY similar to dating (a panelist plugged OkCupid’s blog as a resource with nuggets of wisdom that are as applicable to dating as to startups/cofounder relationships). Below is a summary of tidbits from the discussion that resonated most with me:

How to attract/find tech talent:

  • Present yourself as resources, and know how to frame your skill set as an MBA (see more below)
  • Develop personal relationships
  • Be a magnet – attract, not attack (especially at networking events)
  • Get yourself a few technical advisors
  • Plug yourself into the UX/UI/design community – they would know good technical people whom they’ve worked with
  • Have a conversation on what they (engineers) are looking for, and how you can contribute – “What matters to you?”

How to identify top tech talent:

  • Best programmers work on side projects – they keep themselves abreast of the latest technical trends and learn from these side projects
  • Leverage your technical advisors to help vet candidates and ask the right questions
  • Best quality to look for (in the context of startups) – smart, tenacious, cultural fit, and can just “figure things out”

Sources for top tech talent that you can realistically attract:

  • Develop undergraduate students (especially at the inflection point – when they are about to graduate) – they are looking for “personal growth” (you can’t compete on cash/equity comp with Google/Facebook anyways)
  • Poach top talent who are working at good tech companies – especially when startups get acquired and/or they are at the end of their vesting period
  • Talented folks who do NOT live in prime cities/startup hubs – e.g. SF/Silicon Valley, NYC, Boston

What technical people value in a potential non-technical cofounder:

  • Tenacity, not getting stalled by not having a tech cofounder – e.g. testing hypotheses and validating the concept via MVP/customer feedbacks
  • Charisma
  • Network – leverage your network to recruit respected advisors, and offer your tech team the opportunity to work with these advisors
  • Leadership – have a vision and lead by example
  • Understanding in distribution/sales – how to get USERS (not a task engineers want to spend time thinking about)
  • Time is the most valuable thing in startups – skill in managing “time” and keeping people accountable

Tech product management/how to manage working relationships with your tech team:

  • Frequent, weekly communications
  • No surprises, small milestones
  • Take “time” and chop it up – e.g. set short-term, medium-term, long-term goals; 2-week product development “sprints”

How to get technically fluent:

  • Understand components of technical architecture – e.g. Web development stacks
  • Focus on means to get to understand code, not necessarily learning how to code – only spend time learning how to code if you enjoy it
  • Ask questions – don’t pretend you understand everything
  • Sit next to your tech team and observe how they work

There’s no “one silver bullet” and it takes time to find the right technical cofounder/team, but you can start building relationships and technical fluency now.


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Many review websites, such as Yelp, are based on the premise that the wisdom of the crowds can help a user to select from anywhere and everywhere purely through wading through ratings and reviews. However, it can certainly be the case that when making a selection, the user is looking to specifically avoid crowds, harkening back to the day when recommendations were started with a friend saying “I know this great little place…”

Greatlittleplace.com focuses on identifying locations where “charming and individual is the order of the day.” The company originated as an idea on Facebook to share ideas for spots in the London area, and quickly grew to provide charming choices in close to 50 global cities with around 250,000 followers. The founders point to the viral nature of the concept, content creation, and the catchy name for the explosive growth through only a year and a half of existence. In fact, the company was literally founded on the backs of their users, as the company crowd-sourced funds to start operations rather than approaching VCs or private investors from the start. The users, seeing the value in not having to wade through seas of reviews to find memorable places, quickly responded. However, as they look to take their rebellion against chain restaurants from simple Facebook groups, Twitter feeds, blogs, and a newsletter into a money-making endeavor, they face many challenges, not the least of which is expanding the user base across new markets. The new website will include some new features (geo-location, communities, events), but the brand itself is the only true differentiator.

One of the fundamental issues in growing to scale is that the company relies on co-creation but exists on the strength of its brand. Currently, the company’s website is continuing its organic growth and focused solely on the London area. Around 1% of their base makes suggestions for the next great little place, and the founders work closely to edit suggestions and provide color commentary around each location to protect the brand they have founded. Though the website continues to gain users, it needs to expand its reach outside of the London area in order to hit a mass big enough to monetize.

The other 40+ cities with a “I know this great little place…” group on Facebook are being led by volunteers. Without extensive knowledge of many of the markets, the company’s founders are relying on these selected volunteers to carry on the same charming criteria used for the London site. Since Facebook communities do not expect the same level of editing as a formal website, this model has worked to grow followers. However, the company faces the risk of distilling the brand and knows that it needs to bring on the global communities when it launches the formal website in January. Thus, a key portion of the new website design will be centered on an algorithm to ensure that a highlighted location is indeed a great little place.

Rather than rely on the masses like Yelp, the company will continue to verify each location to match its branding and user expectations. Currently, only 40% of suggestions make it to the site, but the selection process is very manual and the selection criteria are very qualitative. The founders are looking to mechanize the process of capturing user sentiment instead of user ratings. Since their website will be very binary (either the location makes the cut or it doesn’t), they are shying away from a star rating system leveraged by many other sites. Similar to Digg, they envision a holding area for suggested locations wherein a spectrum based rating system will allow users to comment on how memorable and charming they have found the location. In order to make the cut, a location will have to pass some hard metrics (such as a view to review ratio), as well as softer metrics (such as the tone and diction used in the comments). They clearly understand that the website is only as good as the locations it includes, but without knowledge of the entire globe, their very emotional brand is going to rely heavily on a very functional algorithm.


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