German serial entrepreneur, investor, and TV personality, Frank Thelen has over two decades of experience in founding and investing in disruptive businesses in Germany. On the prime-time TV show, Die Höhle der Löwen, Frank is known for his sharp wit and quick ability to judge which team has the potential to turn an idea into gold. No wonder, as CEO of e42, a VC fund with portfolio companies like Wunderlist, myTaxi, kaufDA and Little Lunch, he has seen loads of companies thrive and fail. We sat down with Frank to find out what it takes to be a founder, and what’s his take on Germany’s digitalization initiatives.
You live and breathe the German technology scene since 1994. In your experience, what has changed over the last two decades?
The whole industry has just started to emerge at the time I started to get involved. When I launched my first business, the term startup didn’t exist yet. However, entrepreneurs have always been around. As for me, it might be in my genes. I started off at high school by buying books and selling them at a higher price. When I was 18, I founded my first real company that produced high-end multimedia CD-ROMs. When we started producing a profit, all of a sudden our business became an attractive target for investors. Honestly, back then I had no clue how this investment thing was supposed to work, but I received an appealing offer, so I decided to sell the company.
It was around that time that I was introduced to the local startup scene, but if you think about it, this scene has just recently started to take off in Germany. Now we have a strong VC community, hubs like Factory, startup mentoring and accelerator programs – these simply didn’t exist before. It’s astonishing to see how fast Germany has been developing in this department, but we have to put this development into perspective. We’re on a good path but this is just the beginning. Silicon Valley is decades ahead of us.
Do you think Berlin has the potential to become the next Silicon Valley?
No, I don’t. I think if we try to copy Silicon Valley and paste it in Germany, it’s not going to work. We have our own investment culture, we come up with different ideas. There’s something unique about the local founders and companies, so we need to identify how we can leverage that and find our own way to standout.
Wired recently published an interview with you, where you made critical comments on Germany’s digitalization initiatives. What needs to change from your point of view?
First of all, we have to face it that we missed out on all important trends so far. There were multiple technology waves over the past decades, like search, mobile, streaming and social, but Germany didn’t play an important role in a single one of them. Our digitalization efforts have failed. So, what now? We have to be prepared for the next big trends, may those be artificial intelligence, virtual or augmented reality. We have to encourage founders who dare to think big and allocate more capital to support them. This is an industry where the winner takes it all, so only those who become global leaders will eventually succeed. Soon Xing won’t exist anymore, there’s only space for one player in that market. If you think e-commerce, the first company that comes to mind is Amazon. Search? Google. Social? Facebook. We have to build more of these global champions.
All of us, founders, VCs, politicians, have slept through the times when we had the opportunity to build companies like the aforementioned giants. Sadly, our economy is still trying to survive from the Boschs, Porsches, and Siemens of the world. This is where our money comes from, which might be comfortable for now, but we have to start shifting towards the new economy soon, or else our we will suffer.
You’ve seen loads of companies thrive and fail. What do you think makes a good founder?
You don’t automatically become an entrepreneur once you’ve registered a company, that’s just a wrong way to look at it. Good founders have a killer instinct. They are stubborn. They work on things that no one believes in. They breakdown walls. Usually, those who are nice and understanding are just too soft, so I found that often times good founders have difficult personalities, which doesn’t make my job very easy [laughs].
You’re an advocate for failure...
Failure is a huge topic among startups, and if I’m being honest, I also failed big time. My own experience has led me to believe that we have to see failure as an option. I see big companies neglecting innovation because they can’t be certain about the outcome of their investments, and their shareholders expect them to handle their budget “responsibly”. This means they cannot take the risk to fail. It’s just not an option. That also means their company will slowly die… However, there’s another extreme, the celebration failure which I think we should also avoid.
You’re leading e42, a VC focusing on seed and early-stage investments. Your portfolio includes companies like Wunderlist, myTaxi, kaufDA and Little Lunch. How do you decide which company is worth investing in? Does gut feeling play a part?
First of all, we decide on the founding team and assess their ability to stay determined through sick and thin. This is important because we know that eventually, every startup will go through hell— no matter how fabulous things may look from the outside… Once we have the team, we need to identify what I like to call the “unfair advantage”. This could be for instance that they have an understanding of good design no one else has, so their product will look better than any other product on the market. Or, that they worked for DHL for a decade, so they can ship their product faster than anyone else. You need this unfair advantage to even have a slight chance to win. If all of this is there, we still need to look at the idea’s potential to generate millions. You might have the team with the unfair advantage in a niche market and still fail because the niche is so small.