4 Conditions that drive the Success of a Startup-Hub

IT Startups act on a Global Market

Some time ago I came from a conference about startups in the world and the place of Berlin within the Startup-World. As I am working in that field and with IT Startups for many years now, I already heard a lot about it. There were not many new topics, but at least, some that support thinking further, like the Basic Conditions that form the Spirit and Melody of a Startup-Hub.

A basic question of that conference was:
Why has Berlin with a population of 3.5 million only the 15th biggest startup hub in the world, behind Moscow, London, New York and 11 others like Tel Aviv. How can a city with a population of 0.4 million people in a country with a population of about 8 million have a bigger startup scene than Berlin in a country with a population of about 82 million people?

Follow me to understand 4 Basic Conditions that can form the Spirit and Melody of Startup-Business Success.

1) Cultural influences define the Product Launch

Basics of Cultural Dimensions

Cultural differences cause differences in behavior. Each person is different. Also you are different to the person next to you and probably even more different to a person on the other side of the world. Evaluations like from Hofstede or Schumpeter are focusing on pointing this out. These evaluations are not about defining a each person from a country as equal, but to show a direction which a culture targets. It is about showing a general attitude differences of different cultures, in which also these attitudes develop further, permanently.

The best Time to Market can already be the Key to Success.

How does the culture influence the Time to Market?

Let me show you an example: I already experienced, working with people from totally different countries from all over the world and trust me: It is fun and challenge at once to work in international Teams. The Key decisions are usually made by the Top-Management, just like the decision, when to launch.

One Team was led by people from Germany (just like me). They were proud of and focusing on the Product. They decided to launch, when the Product stands without any bugs. The product (or at least the key modules) needs to be perfect. The development takes longer and longer and the competition enters new markets and gets stronger and stronger.

Another Team was initially based in Brazil. The lead comes from Brazil as well. Of course, they were also proud of their product and they can be, but the no-bug-policy was not so important to them. They wanted to launch as soon as the product is ready to run (at least in the basic processes). Bugs can be eliminated later, they want to benefit from being early on the market.

As a Result: Chances and Risks either way

While Team Germany does not lose potential customers by offering a bad Product, does Team Brazil already early know the requirements of the market and can adopt the product to it. Both strategies are common today. Both strategies have risks, like being too late or even prematurely. There is no guarantee that either way is the better way. It depends on the Market Conditions, on the specific Product and much more. The individual case will show the success.

Nowadays product development never ends, as also the knowledge is never finished. What we know might be the earth, but what we do not know is the universe. There will always be something to optimize. This is why from my point of view companies should enter the market as soon as the product could bring a benefit to the customer. The Product Development goes on anyways and I prefer to proceed the Product Development with the feedback from the market.

It is important to know what the market wants as soon as possible, not only when the product is perfect (from a daily decision point of view). The Product needs to be Developed and Optimized continuously. This doubt about entering the Market early Product Stage might be a reason why many people stop entering the market before they even try to enter.

2) The Uncertainty Avoidance is the Actual Risk Taker

Entrepreneurial Decisions every single day

This issue directly influences how to live as an entrepreneur. Entrepreneurs start their own business. They have to make important decisions each single day. Not only the time when a product is Ready for the Market, but also about starting and executing Advertising Campaigns, about Product Prices, about which (regional) Markets to enter, and so on. The decisions and Entrepreneur makes are Depending on his Experience and Character. He takes these decisions more or less easy. Holding decisions back or doubting about the market readiness might cost important time and / or money. Either startup business is very fast and highly competitive or the niche is very small. Possibly, it is also a mix of all of this. The degree of uncertainty avoidance might be one of the pillars to success.

Regional differences of the Influence of Uncertainty Avoidance

Uncertainty can be a Good or a Bad Chance. Avoidance steals your Experience.

I think, in the startup-scene in Berlin, as also with German investors, the avoidance of uncertainty is very big. People like it more the save way, also, if this changed a lot since 2007 when I started my first company. Startups develop the Product until it is great to use with no nearly bugs. This way they risk, entering some markets, but this is the way they feel the best.

Israel in contrast is with a population of about 8 million people a small market. Startups there have to internationalize. Israeli entrepreneurs usually (have to) decide to enter the market faster. They like more taking the risk. The spirit is to take the chance, and not to lose the opportunity. It is either a good or a bad chance. You will never know before and you will never know if you do not try.

I was supporting startups in different Stages and in more than 40 countries for some years. For me it seems like you get the best chance in starting in around five Key Markets and make those strong. These should be chosen wisely, depending on the Market Conditions and potential Competitors decisions. It is not smart to wait too long, until the competitors, possibly with more money and ability enter first. You have a great chance when you are the first. You are the first the people see and can Develop the Product with the Feedback of the Market. Your brand could be on the mind of the people.

3) The right Investor can also boost or break a startup success

Investors of any kind, want to invest into Success

The right Investor can boost or break your success.

There are Angel Investors, Family Companies, Venture Capital Companies, Funds, Accelerators and possibly other institutions investing into companies, like also startup companies. If you imagine the cultural aspects from the first two bullet points, what does this mean for the willingness of investors to invest, especially in the Seed Stage?

I already had some talks to possible Investors and it is hard. Even if they tell you, they believe in the idea and the success, they still do not invest and possibly tell you to try to get some traffic first. During the time you lose, competitors can develop the same software and roll it out even faster. All you can do is work hard and hope, that you are good and fast enough. If you do not have the Cash on your own, you will have to work even harder. Uncertainty Avoidance and perfectionism are OK, but they make it even harder to enter the Market. The Berlin Startup Market seems to be very careful in many ways. Investments will be realized when they see good results, great traffic, but until than, the best chance might already be lost.

Choose your Startup location wisely

As a result, beside the Time-to-Market and the Entrepreneurial Spirit, also Investor behavior and Investor decisions influence the Spirit of a Startup hub. If you want to start a company on your own, I can recommend you to choose your headquarters location wisely, especially when you are still in the Seed (companies try to sell their Vision & Mission, maybe a first Prototype, already with traffic) or Early Stage (the product is ready for the market. Traffic and revenues will be generated). You should look for Investors not only in your country. Global Networking events or funding Websites might support to get started.

4) What about the (human) infrastructure

The Technical and Human Infrastructure can boost potentials

Many startups have cheap offices or go into Cafes to work in the beginning. Shared Co-Founder offices are even getting more and more popular.

When I compare Berlin to Tel Aviv, there are at the moment some differences directly visible:
– There is free wifi in nearly each corner of Tel Aviv, while this is a long dream still in Berlin.
– In Tel Aviv you see people with their Mobile Phone in the hand even more than in Berlin.
– Going out and partying in Tel Aviv is more about networking. Seeing and being seen is most important. In Berlin, you come and enjoy the music, dancing. The people are more in the background. Business networking is rare in Clubs (of course you have special meetup and conferences in either city)

With these three small, but basic differences you can see that the technical and human infrastructure together with the culture is impacting economical development of a location. You can form the basis smooth for business to grow, or you can have it challenging.

The Startup-Mentality on Top

[The Technical and Human Infrastructure facilitate Startup-Business.

I think Tel Aviv is much higher developed in something I would call “Startup Mentality”. A Mentality supporting getting investors anywhere, even in Clubs. A Market where people actually are open to new products and try it immediately. Israeli companies that are going to the market quickly, get feedback very faster than slower competitors.

Furthermore, Israeli travel the world after the army and spread innovative solution anywhere. Nowadays we are talking about global markets, not about regions anymore. Free Wi-Fi allows creative minds to develop new solutions anywhere. No matter, if in a Park, at the Beach, at Home or in a Cafe, Innovation comes where you feel the most innovative.

I see some reasons why Berlin has some challenges to master, compared to other regions.

As described above: A startup metropolis needs from my perspective smart thinker and cool minds. It needs entrepreneurs entering the markets, a supporting infrastructure and a general “Startup-Mentality”. It needs decision makers and no decision takers / followers. You need an aggressive Marketing and Globalization strategy. Being the first gives you the best chances. Trust in your project. It will be worth it, at least for experience and know-how. Finally I think, it is just the way it is: The right spirit plays the melody of success.



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