— An interview with Andreas Spechtler, Founder and CEO of Silicon Castles.
When we think about major hubs in the startup world, we usually think of Silicon Valley, Israel, and Asia. Europe seems to have been surpassed by other regions in terms of building innovative, sustainable businesses. Is this really the case?
I see a lot of activity, creativity and talent across the European startup scene. It is true that if you look to Asia or America, you can’t help thinking that Europe still needs to catch up – but good things are happening. New funds have been made available in recent years, as well as a sharp rise in the number of accelerators, incubators, and companies: there is a positive period coming our way.
My criticism is more about the speed at which things are happening, which is usually not fast enough. In order to improve it, we should ask for more robust and timely investments from both national and regional governments (like in Finland or France). Even if these institutions acknowledge that startups will be the future of this continent, they still allocate too much funding to traditional industries – the coal industry in Germany for example. We need more politicians to support this new ecosystem and take an interest in the opportunities they present. Companies too, must take charge of this, and provide these industries with a better chance by investing more in young and promising startups.
Do European startups have some responsibility for this situation? What are the most common mistakes they’re making?
I believe European startups are thinking too small. Most startup founders follow the idea: if I'm based in France, France is my market. This is wrong. The market is global, your market is the world. This is the biggest difference between the Silicon Valley and other regions; in the Valley, everybody starts a company with the belief that they will conquer the world. This is what we should be doing in Europe too — we should aim at conquering the whole world. Historically, Europe was very successful hundred years ago. But this should not be new colonialism, it should be tech leadership and working together with the world innovation centers!
What are the strengths of the European startup ecosystem?
Europe is the talent pool of the world. If you go to California or Asia you will meet many Europeans. The continent has an incredible history of innovation and, on average, its average education is better than both that of America and Asia. Yes, we could have more top class universities but the average European university delivers hundreds of thousands great educated people. Also, here in Europe, we enjoy a lot of freedom. Freedom is very important because it’s closely tied to creativity. In a dictatorship, you can only be so creative. But here we can move freely, get in touch with different cultures easily and let ideas flourish. All these opportunities put Europe in the best position to be an innovation leader.
Even compared to Silicon Valley?
Well, I wouldn’t want to live in Silicon Valley because – unless you're rich and work in one of the few top companies that are based there – it’s not a good place to live: no matter how cool your job is, it is hard to afford your living and keep your standard. The cost of living is so high that companies have to pay engineers $150,000 a year: that’s too much for starting a business. This is another reason why I think that we need to create an environment like Silicon Valley, but stay in Europe and be based more on European values.
You’ve been involved in every part of the startup ecosystem: you’ve been a buyer, an investor and a founder. Now you are creating your own company which is trying to help startups grow and businesses thrive. What was the motivation behind this shift?
I’ve been in the high-tech business for 26 years, starting in the early 90s. Back then, the fax machine was essential, and the mobile phone wasn’t a viable option until 1995. I grew up in that ‘tech age’, fascinated by new things and by finding new ways to invent the future. At Dolby International, I was involved in M&A of startups and witnessed all sorts of mistakes and successes. After that, I think I wanted to wear a different hat: and switch to the other side: that’s why I started Silicon Castles, trying to help startups generate value, grow faster, and achieve a higher return.
How does Silicon Castles work?
We basically follow three major streams. The first one is investing in promising companies. We’re not a simple VC or business angels: we’re strategic investors. I look for what I call “the diamonds”: companies which have a unique technology that they own and they are able to leverage in order to create a profitable business. Secondly, we help them to really accelerate: we consult them on how to create the right IP, , teaching them how cut deals, improving marketing and sales. Winning the first big deal is so important. All the necessary skill sets to succeed in the industry they work in.
Third, we provide what we call “executive education”: we teach founders and CEOs of startups how to be better startups execs. Most of the time, startups executives come from a tech engineering background, and they have a low understanding of how to do business. This academy teaches founders pivotal concepts and the steps needed to build a great company: how to go to market, how to define their strategy, what business model they should pick, what price is right, how to negotiate etc. All extremely practical things.
How do you pick the right startups to include in Silicon Castles?
I mainly look at three things. I look at the team; I look at the technology and if they have patents; I look at the global market. If they have the right product, if they can sell it globally, if it’s scalable, if they believe in it. These are all things any investor would look at. The key in startup growth is: who is your first customer? It should not be the customer around the block, nor another startup. It’s all about getting a real customer. This is the proof that they can do real business: a signed deal. In my view, the value of startups is created by having great technology and patents and a signed deal. In this world, value is driven by facts.