September 20, 2017 | Start-ups

Is everything really better in Silicon Valley?

Many German entrepreneurs are attracted to Silicon Valley. They can sell off their companies for billions of dollars there, and are allowed to fail as often as they like. A visit.

Article by Sophie Burfeind published in the Süddeutsche Zeitung

So, we’ve traveled to the heartland of digital progress—to this young and yet already mythical place, where thinking is conducted exponentially rather than linearly and people of all nationalities are toiling to create a brave new world. And by the end of this trip, we have actually come to understand why so many Germans are attracted to this place, but are still slightly concerned about the future of mankind in general and that of Germany’s in particular.

The man we have met up with has also come here because he no longer saw a future for himself in Germany. Jay Habib, 33, originally from Westphalia, is wearing a white linen suit and sitting in an Uber car. We’re in a traffic jam, like there almost always is on California’s El Camino Real. The car crawls a few meters forward every few minutes. As we sit there in this almost total gridlock, Habib tells us a story about maximum speed. Welcome to Silicon Valley.

Habib about his new homeland: “It’s like the Gold Rush here. But it’s also brutal: 100% business. You don’t make friends here.”

The idea behind Shop.co, his very own startup, came to Habib while he was moving house with his family. His wife emailed him a list of things he should order online: a TV, lamp, fridge, diaper changing table—every single item from a different webshop. What a crazy state of affairs, he thought—having to register, enter the invoice address and bank details separately in each shop, endless typing. Why can’t it be easier than this? Just one click? Habib had discovered his mission: to set up a universal internet shopping cart.

Jay Habib: grew up in Hamm, studied for six years, has two little daughters, and is the founder of ten companies. And 2014 saw him start up no. 11: Shop.co. He succeeded in attracting € 6.25 million in venture capital in Germany, which is already quite a sum, but he wanted his company to be a unicorn, a really massive startup valued at over $1 billion. That’s why he signed up to “German Valley Week” in spring 2015, a trip that’s organized by the German Startups Association. German entrepreneurs, SME owners, investors and other businesspeople who visit high-tech and social-media firms, listen to their stories, fish for ideas, and make lots of contacts. Habib did precisely the latter and returned again at the end of the year. Only this time for longer.

Two years later and Habib is merely a guest on this trip. While the others with us are discovering why all the billion-dollar companies sprout here and not in Munich or Berlin, he’s already well on the way to becoming the owner of such a company himself.

America hasn’t been the land of opportunity for a long time already

Habib is one of 60,000 Germans who live in Silicon Valley, the area situated between San Francisco and San José. It’s also the home of Google, Amazon, Apple, Microsoft, Facebook, Tesla and Uber. The number of Germans in the valley has almost doubled over the past ten years. It goes without saying that not all of them work for startups, but many of them do. Many are like Habib—they moved here with their company, leaving behind friends and family. It’s 8,971 kilometers as the crow flies from here to Hamm—a 16-hour flight and 9-hour time difference.

Why do so many entrepreneurs take this step? And weather apart, is it really so much better here?

America hasn’t been the land of opportunity for a long time already, but if there’s anywhere in the country where this is still a valid claim, then it’s Silicon Valley. Back in the 50s, the first research institutes and electronics firms took up residence around an old military airbase. As time went by, the region developed into what is now the most important location in the world for the high-tech and IT industries. It’s become an ideas factory in which the world’s greatest visionaries and most adventurous venture capitalists come together, and the most powerful firms in the world create and manufacture their product. A place where visions are turned into revolutions.

“Think big” and “high risk, high chance”—that’s the mentality here. A mentality that isn’t necessarily typical among Germans. Who knows, perhaps this is precisely the reason why Silicon Valley has become a place German entrepreneurs who want to trip on and tap into the pace of life and business here yearn to be. And this short trip we’re on right now is a quest to find the key and unlock the door.

2.5 million in venture capital in less than 30 minutes

Day 1: Stefan Groschupf, pushing 40, short brown hair, black vest, and good-humored, scribbles the questions asked by the participants on a whiteboard. Looking out of the window, you see spectacular mountains and high-risers—and the sky in California is always just that little bit bluer than in Munich. Groschupf is founder and CEO of Datameer, a startup that offers big-data analytics. He’s one of the most successful German entrepreneurs in the valley and is recognized as a pioneer of big data. He’s there where Jay Habib wants to be soon.

Before Groschupf answers the questions, he briefly talks about his eastern German origins: Born and bred in Halle an der Saale, at the age of 17 he organized the biggest hip-hop party in eastern Germany, at 18 he published a rap magazine, after which he then went on to become a programmer. He founded five firms, some more successful than others, and when he was short of cash, mommy brought round some noodles for him. “Mommy no longer has to bring round noodles,” he says with a grin.

Many years before big data even became a talking point, he developed software capable of analyzing huge amounts of data. In 2009 he founded his startup Datameer. When he went to German investors for money, their reply was, “Your parents have a house. Why don’t you sell it?” Groschupf, who’s English back then was almost non-existent, flew to the US and pitched his product to a number of VCs, i.e. venture capitalists. “Within 30 minutes, I’d got 2.5 million.”

Fake it, until you make it

He moves on to the questions: What do the Americans do better than the Germans? “We’re incapable of selling ourselves. The Germans focus too much on the technology and too little on marketing,” says Groschupf. He’s seen many German entrepreneurs who’ve gotten half way to achieving their goal only to be cast aside for precisely this reason. “You have to stick your neck out as far as possible without getting your head chopped off.” In other words: Fake it, until you make it.

So, what’s so different here? Venture (i.e. risk) capital and risk-taking, the network, 5,000 meet-ups every year—people talk openly about their ideas instead of keeping them to themselves. The technologies, the know-how. “Everyone’s worked for everyone. It’s like a washing machine that continuously leaches out all the colors and blends them together.” The speed. “In Germany we’re still talking about mechanical engineering, but in a few years’ time there’ll be autonomous cars on the streets. Where will our competitive edge be then?” Groschupf gives talks like this one every other week, mostly to the bosses of DAX corporations. He wants to help, but he’s also issuing a stern warning.

Day 2: We learned that thanks to artificial intelligence, there’ll be machines around in 20 years’ time that are more intelligent than humans and will become more and more intelligent over time (“the technological singularity”).

Even if this hypothesis is controversial, you get the feeling that over here, the world is in the process of being reinvented, while in Germany we’re still trying to save the diesel engine.

Angst about one’s data? Not in the USA

Day 3: Jay Habib is sitting in the restaurant of the Rosewood Hotel in Palo Alto and explaining how Shop.co works. The Rosewood Hotel is a luxury hotel, with a pool and roof terrace, and the hotspot of the Silicon Valley investor scene. That’s why so many entrepreneurs (and young women) hang out here. “Shop.co is supposed to make online shopping easier. The universal “Buy” button lets you purchase whatever you can see.” Signing up, signing on and passwords? Completely superfluous. Habib lists some more advantages: You have an overview of all your orders, invoices, the delivery status, and you get things cheaper. “We sit live in your browser and see that you’re just about to purchase an LG TV. We then offer it to you for cheaper.” Because this way, the shops selling the stuff can target their advertising with pinpoint accuracy. “We’ve got the data to facilitate this. We know what you buy, how much you spend and how much money you have.” In the States, no-one’s fazed by this, says Habib—after all, people here even willingly upload their own DNA. Shop.co has been online in the US since the start of the year. They want to start turning a profit from 2018. “The logic behind this is that revenues slow down growth. First capture 10 to 20 percent of the target market—this stops others from copying your model. Then move on to making money.” In concrete terms, this means they’ve already spent $440 million before they even start to earn money. In Germany, that’s unthinkable.

That’s why firms like Uber emerge here, while in Munich we have My-Taxi.

What’s missing is unshackled capital

Day 4: So, what has to change in Germany? A big group is seated in a circle at the hotel, in the middle is Germany’s Minister for Economic Affairs and Energy, Brigitte Zypries. She’s brought a packet of screw-shaped gummi bears along with her. “What’s missing at home is unshackled capital,” she says. She then interprets ideas pitched in by those present as ideas for the next legislative period. “In Germany, people who come up with a crazy idea,” says one entrepreneur, “already know beforehand that they’re not going to find a backer. That’s why they don’t even bother searching for one in the first place.” Other positions expressed include: fewer data protection laws; make presentation-holding part of the school curriculum; big companies must collaborate more with startups; introduce incentives to bring German entrepreneurs back home.

Others take the opposite angle: Do we really want to take this Silicon Valley mentality on board? To turn visions into revolutions that then destroy entire industries? German entrepreneurs tend to find themselves their own niche. Isn’t that more sustainable, anyway? Or will the others mow us down all the more if we go down this route?

Day 5: At the end of the trip, before everyone flies back to Germany, Jay Habib shows us photos of his daughters on his cell phone—two and six years old. “Aren’t they cute?” the proud father asks, smiling. 8.971 kilometers, 16 hours. He can’t wait to see them again.