Week 158: About the Berlin Startup Scene

Instead of their pilgrimages to San Francisco, startup founders should travel to South Germany to learn from the Mittelstand how to build sustainable companies that benefit their communities as much as their founders.

I have became a technology industry skeptic.

That’s not a sentence I’m uttering lightly. After all, just a few years ago, I would have described myself as a technology determinist, a true believer in the power of technology’s ability to transform the world for the better.

Tech is the new finance industry. I’ve said so before and, unfortunately, I’ll have to stand by this statement. When Entrepreneurship centers are flourishing and universities like the MIT can’t cope with demand of new applicants, when professors teaching at those departments are announcing that young people don’t want to be investment bankers and instead are seeking their luck as tech-startup founders, I feel the urge of pointing to history and reminding us how the same happened before in finance. With its final transformation to a self-observed, self-deterministic sphere in the 80s, the finance industry became a huge magnet for young people who believed in the promise of becoming something bigger than themselves and not minding to earn more money than they could possibly need in their life-time. The demand was so huge, universities and colleges had to invent new departments just to cope with the demand of people wanting to acquire the right qualification to become an investment banker.

The same happens in the technology industry, especially in Silicon Valley. There is no doubt in my mind that it all started with good intentions, but when looking at things today, I doubt that we are on the right track.

Just take a close look at incubators in Silicon Valley. Despite talk of changing the world, they are fundamentally not significantly different from military boot camps. Despite the promise to cherish individuality and creativity, those institutions are rewarding conformity and punishing differentiation from the proposed model of the particular organization. Said models of executing upon predefined processes, usually created by rich, most likely white, males. Again, despite the talk, those processes aren’t there to help founders. Instead they are built around financial risk assessment models. Those rich, white men do want their money back. And then some. All of this is by no means an accident. It’s an elaborately designed system, which is in place to ensure and increase inequality. To put that into numbers: “between 1992 and 2007, the income of the 400 wealthiest people in the United States rose by 392 percent”.

All of this is surprisingly Ford’esque and I’m not one of the people who are saying that as a compliment.

I find this all especially appalling when I hear the talk about and by Berlin’s tech scene. In recent years, Berlin was pushed into becoming a potential place of investments. So far, with only mild success. A flourishing new industry is by itself not a bad idea for a city with above average unemployment rate. That is, when this industry has the potential to contribute something meaningful to solving the problems of the environment that it’s becoming part of.

While there are significant factors why Berlin is a great place for new things to emerge – still fairly cheap, high quality of living – it is by far not because so many potential employees for a technology startup are among Berlin’s unemployed. This is not exactly news. Most founders and CEOs are openly talking / complaining about how hard it is to hire good people, how they have to lure people to Berlin. Apparently Eastern European developers are in high demand.

Said startup hype lead to a furious emergence of new initiatives and new incubators. Seemingly any company with some change to spare and the desire to become part of the new gold rush. The saddest part here is that all those companies don’t even try to create a romantic, technology deterministic narrative like their Californian counter parts. Their language and footprint is corporate, they are here for the profits.

Which begs the question: what would be the virtue of welcoming this industry into the city with open arms? Klaus Wowereit, Berlin’s mayor in his third term, thinks that he has an answer. Recently, McKinsey published a pro-bono study for the city of Berlin. “Berlin gründet – Fünf Initiativen für die Start-up-Metropole Europas” (Berlin founding – Five initiatives for the european start-up metropole). Therein Wowereit postulates in a forword that the tech industry can have a significant contribution as a tax payer and employer. This comes from the man who sold out this cities real estate to the highest bidder without any regard for cultural and societal impact. With no significant contribution to fight unemployment, he leaves the city with a future promise for tax income. An unlikely scenario.

Unfortunately, there is no way out of this. Pressured by overwhelming attention from around the world, the city governments is cornered into shaping legislation or at least appearing authentically as if it can contribute something of significance to a development that mostly emerged because there was little to no regulation at all.

With pressure rising from investors waiting to be wooed, the government does what most governments would do and that is looking at so called best practices. Despite the fact that there is an overwhelming body of theory to the fact that is impossible to copy same models and various, failed attempts to copy Silicon Valley else where. Before anybody points toward Tel Aviv, let me say this: There is a strong correlation between a long-standing, overwhelming presence of huge facilities by US tech giants and the success of Tel Aviv’s tech scene. There is also a geo-political factor that can’t be replicated and it doesn’t hurt having a man of Yossi Vardi’s stature in your corner either.

Just last week I heard Joachim Bühler from BITKOM – an tech industry lobby group – say that he discusses many initiatives with city officials and all of them are trying to emulate Silicon Valley. One of the various observation documented by the McKinsey study states that there is lack in funding for technology companies seeking A & B investments rounds. There is plenty of seed money to go around and it hasn’t been easier to get some cash and hack away for six month, but when it comes to financing your dream to become bigger than Facebook things eventually get tough. The only reasonable hope that bureaucrats in this city can have to change something about this is fact is by luring financially strong and successful investors into the city. That, in turn, means luring in more US-based funds to the city.

There are three most likely outcomes for startups these days. Die unsuccessfully, get acquired by an US based technology company, or IPO. Most tech startups end up in the first category. This is by design and has been a long standing practice in the technology sector. Only the most successful of all companies end up in the last category and there is no reason to believe that the Berlin tech scene will produce a likely contender for a big tech IPO. That leaves the second category, acquisition by an US company. It’s that category that will ensure that neither qualified people, nor tax income will be left in the city as soon as something of significance will emerge here. This will not stop Berlin’s government walking down this path, because of the lack of courage to come up with a unique, feasible and realistic approach for a city in need and because those US investors will make everybody work according to those risk assessment processes that they teach in their incubators.

This is a dangerous path and one that is not only being applied in Berlin. All over a financially unstable Europe with high youth unemployment numbers, technology and startup culture is en vogue in city, state and federal governments. The same mistake of attempting to copy our spying American friends is happening everywhere.

We stand at the crossroads. We have a generation of founders that are unwilling and unmotivated to pursue anything else than world fame and the attempt to become the next Mark Zuckerberg. Those desires are fueled by investors who don’t care about fame, but about the returns on investment that is associated with finding the company that can become the next Facebook. And as addition to the team of people who will not help us get out of the financial crisis, we are seeing politicians completely incapable of coping with a rapidly changing world that are eager to build up those “ecosystems” that seem promising enough to help them campaign in the next election.

The technology utopia transformed itself from a hippy’esque LSD dream where technology will solve all of humanities problem to a well oiled machine in which the brightest people in the world are busy building new features that will make advertisers spend more money on the information that those apps gather about us and in which only a small fraction of the extremely hard working people can say for themselves that they are in fact Mark Zuckerberg.

I don’t want to leave you with the impression that I am a staunch opponent of anything tech, on the contrary. It is now that we have to debate how we want to see the technology industry evolve beyond its Californian Ideology model. I am all in favor of Berlin becoming the new startup capital. The question is: what kind of startups do we want? What kind of people do we want to start them? This is far more about goals and demeanor than about market opportunity and finance. We in Europe have the privilege to learn from companies that are building products and solving problems for generations now. Germany’s Mittelstand is still the backbone of its economy. European founders should stop traveling to San Francisco and instead focus on their national and European markets, the problems that those markets experience and how they can be part of the solutions to issues like massive youth unemployment. But foremost, they should concentrate on building a company that can stand on its own feet, that is not setup to race from one venture round to the other with the sole goal to exit as quickly as possible and be part of a machinery that never seems to be interested in being sustainable in itself.

Let me finish with a question: what do you think who employs more people? A company like Facebook with a world-renown brand that is worth about $100 Billion on the stock market or a hundred companies that most people have never heard of which are each worth a billion dollars each?

What we read this week (8 Mar)

A Weekly Reads tribute to Seed Magazine.

Quote of the week

Religion as augmented reality?

Justin Pickard

Articles of the week

We found this week that the great Seed Magazine is no longer running. Mysteriously, we couldn’t find any press releases or posts saying why or when this happened – content on the site just stops in early 2012. This is a Seed tribute edition of the Weekly Reads.

  • Seed Magazine: On Early Warning Signs
    Theoretical biologist George Sugihara talks about the intricate dependencies between systems in economics, biology and the climate, why instability is inevitable, and how complex systems show warning signs before huge changes happen.
  • Seed Magazine: Humans, Version 3.0
    On how culture will allow our abilities as a species to evolve, and on the processes of harnessing nature and recycling neurons.
  • Seed Magazine: World Wide Mind
    A beautifully written (and quite long) piece introducing a book on the possibilities that physical integration of the internet into human bodies could allow.
  • Seed Magazine: The Living City
    On defining and understanding cities, and the paradoxes of urban growth.
  • Seed Magazine: The Web is Not a Gadget
    A piece on Jaron Lanier’s controversial thesis that the web impedes human creativity.

What we read this week (1 Mar)

Culture’s effects on cognition, “good smart” vs “bad smart” technology, the Borg Complex, print-digital hybrids in publishing and tiny chips and the Internet of Things.

Quote of the week

There is absolutely no inevitability as long as there is a willingness to contemplate what is happening.

Marshall McLuhan

Articles of the week

  • Pacific Standard: We Aren’t the World
    A long and fascinating read about how culture affects cognition, and how the research of three academics is calling some of social science’s fundamental principles into question. The upshot: We are perhaps not all as alike as we think.
  • Wall Street Journal: Is Smart Making Us Dumb?
    Evgeny Morozov classifies sensor technologies into “good smart,” which usually simply provide information and allow us to make our own decisions, and “bad smart,” which use external forces like peer pressure to push us to make certain choices. Here he describes his worries about “bad smart” tech, and what implications might arise as these types of product become more common.
  • The Borg Complex: Borg Complex Symptoms
    Michael Sacasas recently defined the Borg Complex for “self-appointed evangelists of technological assimilation” who “would have us all abandon any critique of technology and simply adapt to the demands of technological society.” This list of symptoms is a good guideline and yes, we can see traits of the complex in ourselves. Acceptance is the first step…
  • desktop: New Publishing Hybrids
    An interview with Dan Hill on the merging process of digital and print media, and the design considerations that need to go into media that move between physical and digital.
  • Wired: Freescale’s Insanely Tiny ARM Chip Will Put the Internet of Things Inside Your Body
    Freescale makes tiny, tiny computer chips, that may have some interesting applications in a field that sounds a little outlandish: swallowable computing.

What we read this week (20 Jul)

Our articles of the week talk about brands in science fiction, startups in the Philippines, mobile vs mobility, predicting violence with algorithms, and empathizing with machines.

Quotes of the week

The invisibility of something [doesn’t imply] its lack of being.

Werner Herzog

What if the “posthuman” isn’t being a cyborg but instead being a cell in a giant’s body, helping to enable a vast consciousness that you’re never aware of and that is never aware of you?

Alan Jacobs

Articles of the week

  • The New Yorker: A Word From Our Sponsors
    Science Fiction got it right again. It’s interesting to consider, in light of brand power struggles at the London Olympics, what impact marketing and corporate culture are having on everyday life. This is a good example of how speculative fiction can bring us to question such situations and ask ourselves: do we want that?
  • SGEntrepreneurs: The Philippine startup scene: Asia’s best kept secret?
    An in-depth article on the current state of the startup scene in the Philippines, particularly the cultural and economic factors that influence the choice of field for new companies.
  • David Armano: The Future Isn’t About Mobile; It’s About Mobility
    Throwing yourself out there isn’t enough anymore – this also applies to the mobile web ecosystem. David Armano recommends that we get acquainted with patterns in modern digital behavior and advises us to learn how to differentiate between mobile and mobility.
  • LA Times: Computer analysis predicted rises, ebbs in Afghanistan violence
    A group of friends, who happened to be computer experts, decided to make something out of the endless data on war in Afghanistan released by WikiLeaks in 2010. Based on the data they extracted by using simple code, they managed to predict fluctuations in the country’s violence.
  • Olivia Rosane: the ROOMBA whirrs for thee
    Reading through the @SelfAwareROOMBA Twitter feed has an uncanny effect: you begin to empathize with a machine. (A vacuum cleaner, no less.) Olivia Rosane does a beautiful job of analyzing the mechanics that cause us to experience genuine emotion in response to tweets from this lonely and perceptive character, and how a Twitter feed comes to take on a personality we can identify with.

We’ve put this week’s reads into a Readlist for your mobile perusal. Enjoy!

What we read this week (25 May)

Our reads this week: whether Facebook can be successful in the long term, how the mobile internet affects our approach to healthcare, what companies should focus on when recruiting, a new community for maker-minded kids, and insights on businesses operating at the intersection between technology and culture.

Quote of the week

The Singularity has always sounded to me like a secular version of the Rapture. It seems to fit very neatly into that same God-shaped hole.

William Gibson

Articles of the week

  • Bud Caddell: Emerging Bets at the Intersection of Technology & Culture
    Bud Caddell from Deutsch LA took his team of innovation strategists to SXSW this year to study all the startups launching there. They aggregated all their insights and put them into this report. It’s a great overview about current trends in the US startup world and what marketers can learn from them.
  • Fred Wilson: Culture and Fit
    Fred Wilson, head of Union Square Ventures, discusses some common mistakes made in companies’ hiring processes, and where the focus should really lie: culture and fit should be prized above talent and renown.
  • Technology Review: The Facebook Fallacy
    Michael Wolff explains how Facebook is not only on course to go bust, but will take the rest of the ad-supported Web with it. A controversial and compelling case on the state of affairs of ad-based online business, and why current methods cannot be successful in the long run.
  • O’Reilly Radar: Parsing a new Pew report: 3 ways the Internet is shaping healthcare
    Pew Internet and Life Project recently coducted a survey on how people inform themselves about health. Alex Howard breaks down the study’s findings into three key trends: Quantified Self, participatory medicine and what he calls the ‘new digital divide.’ Mobile health data, it seems, is particularly helpful, but in the hands of people who aren’t as likely to need it. The article prompts some interesting questions about how we could make this kind of information more accessible.
  • New York Times: Disruptions: A Beacon to Silicon Valley, From a Start-Up for Children
    Since our conversation with Zach last November, we have been eagerly awaiting the public appearance of his new venture. DIY is here and it is shaping up to be an interesting community for kids who make things. The kids post pictures of their work online, and can find inspiration in users’ projects, from melted crayon paintings to soda bottle rockets. It’s nice to see the Internet evolving in a way that appeals to a different age group.

Week 55

New client, new office, new roommate, new talk – and some thoughts on our company culture.

We’ve been pretty much heads down, working on a number of short-term projects as well as a big one that’s going to keep us busy for more than just a few weeks.

New client!

We had only been hinting at it for a while. But last week, we were finally able to announce officially that we have taken on the Postbank AG as a new client, with a project that’s quite big for our little three man shop. Thanks again for all the nice words and congratulatory tweets – What a nice way to celebrate our first anniversary!

New office!

What’s more, we’re really settling into our new office space. You saw the basics on some photos in last week’s weeknote, but this is just the beginning. The whole Makers Loft still needs some renovations, but it’s going to be huge. Expect an opening party of some sort or another later this year.

New roommate!

Speaking of the new office, we are also very happy to welcome a new roommate, so to speak. Our friend Matt Patterson just moved over from London and is going to be working from our HQ.

New talk!

Igor spoke at WINnovation, an event organized by our friends over at Brainjuicer in Hamburg. We’ll post the video once we have it. Until then, enjoy Igor’s write-up.

Pick it up-culture

We always enjoy studying and discussing organization cultures. Every company is completely different based on the cultures they nurture (or don’t), encourage (or discourage), let emerge (or try to squelch). As anectodal as it is, read Steve Yegge’s post about how the corporate cultures of Amazon and Google differ – it’s fascinating!

So, we talk about this a fair bit, and like to try out new things. One of the things that has emerged over time is a certain kind of “pick it up” culture: When one of us notices something that needs to be done, we try to never just say “we should do this!” Instead, you either do it yourself, or if you can’t, you ask one of the others. No task shall go unassigned!

This is something I can highly recommend; it needs nurturing, especially when there’s pressure and deadlines and whatnot. But once you get to this point, stuff just gets done so quickly, it’s like a breeze. And it helps prevent all kinds of overhead and organizational clutter.

In an earlier conversation, Christoph Fahle – one of the founders of the fantastic Betahaus – mentioned one particular culture the Betahaus team follows: When you notice someone’s not getting all their stuff done, you may remind then to do it (if you must), but then that person loses their right to finish that task, and you are allowed to pick it up. How awesome is that? Tasks not as duties, but as privileges. It’s the next level of what we’ve been practicing here at Third Wave, and something to work up to. Anyway, I love the idea.

What’s next?

We’ll be splitting the week between Berlin and Bonn – before a series of trips kicks off basically all through November. Also, as this post goes live we’re trying out a topic sprint, a half-day of concentrated work on one topic. Expect more on this soon, once we know how well it works.