A letter to The Economist: Your article “A slow climb – Business creation in Germany”, Oct 5, 2013

Sir,

your account of tech entrepreneurship in Germany is mostly true. In the biggest e-commerce country in Europe though, there are more home grown internet ventures then in any other, and the vast majority in Berlin. The reason for them not being the next Google are not of German, but rather European origin. If I found an e-commerce or tech company in any European country today, I have to “take it international” to expand in Europe, with a lot of complicated legislation in every country, tons of languages and currencies. Most companies (like Zalando) focus on 5-10 major markets only. The US competitors start operating in one huge market, with one language and one currency. By the time they make it in their home country, they are big, financially strong, and with a vetted business model. If Europe wants to produce the next Googles, it needs to put companies from every single EU country in conditions to build a European home market in all 28 countries, to then go “abroad” and conquer the world.

There is one exception in Europe though, and you write about it, although in a limited way. The Samwer brothers’ Rocket Internet is the only startup factory in Berlin, Germany and Europe, that has produced huge firms, both copycats as well as own inventions (Jamba/Jamster). One can think about the brothers whatever, complain about their business practices, blame them for the copycats, cry because somehow in their ventures they always walk away with the biggest cash on an exit leaving the people who get the business done often without fair proceeds. But regards to the copy cats: look at the offline world, isn’t it full of the same? And didn’t Schumpeter teach that the world of entrepreneurs consists of recombining existing practices and products to innovate? I have worked with the Samwers several times, and I can assure you their companies are far better managed, more efficient and cost effective and profitable than any of the bigger (usually US firms) they get sold to, for big amounts. Since the amazing success of Citydeal (sold to Groupon), where the Samwer-founded territories outgrew and outperformed the original US business in almost any important KPI before they left, it has become clear that the next step is no longer to sell to the US companies, but to go global alone. And that is happening, from Berlin, where you write about a lack of entrepreneurs.

Regards,

Boris Hageney

Co-Founder of Citydeal, currently travelling (www.eurasia2013.com)

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