We spoke to founder and venture capitalist Nicolas Berg about unpurchased Facebook shares, the enriching effect of gamification apps such as Quest.li, the DNA of successful startups, and why true venture capitalists also invest during times of crisis.
Oliver Gassner: Hello Nicolas, would you please introduce yourself to our readers?
OG: Is the present a good time to invest in startups?
NB: It’s always a good time to invest in startups – except perhaps during extreme hype phases, because insanity is contagious.
OG: So you’re saying we’re not in a hype phase (yet)?
NB: No, definitely not. If anything, the mood in soft-currency countries like the U.S. and the euro zone is somewhat reserved. But true startup founders and venture investors don’t care very much about that. We want to innovate and turn the world upside down.
OG: What are the signs of a hype setting in? Or do they creep in gradually, like the proverbial frog being brought to a boil?
NB: You can see it on the stock market when even the pros toss proven formulas such as price-earnings ratios overboard and start waffling about user multiples or Internet fantasy. It happened in the tech sector in 2000 and in Japan in the 80s.
OG: What’s the web or mobile app that changed your life or work the most?
NB: In the 90s it was e-mail, the AltaVista search engine, and financial platforms. In the past decade, Facebook, Skype, Google, YouTube, and a number of iPhone apps such as maps, phone books and messaging. At the moment my favorite is Quest.li, an app that offers web and location-based treasure hunts. And Connex.io, an app that intelligently synchronizes and merges all my address books, telephone directories and social networking contacts.
OG: Can such treasure hunts also serve marketing purposes, or are they pure entertainment?
NB: Either is possible. Anyone who plays Quest.li can also build their own quests. Quest creators can choose whether to run them locally or globally, and whether to make them free or require a stake. The company already has inquiries from major brands such as food chains and tour operators for quests to be built by the crowd, in which dedicated, informed brand consumers can win coupons.
OG: Can a web project that does not have a gaming, dating, or (ultimately) selling character ever be financially viable?
NB: A U.S. investor once said that social networks are always about finding more love or better business opportunities. That’s a bit of an oversimplification, though. Dating, “social” shopping and gamification are certainly important trends. I like the trend toward gaming best, because I feel that it’s becoming increasingly difficult to attract attention. Gaming is a state of mind in which not only children learn more effectively or are open to selling. I think people who are only into bargain-hunting don’t make sustainable new customers for brand partners, while smart gamers or Quest solvers are more committed, tightly networked, and probably more loyal.
OG: connex.io is “free for 60 days” (that always puts me off a bit). Others offer free accounts without time limitations but restricted functionality for their web apps. What’s better?
NB: For the first 60 days, connex.io lets you sync, merge and clean (dedupe) your data free of charge. If a clean contacts list isn’t worth $50 a year to you and you can do without the service, there’s no need to sign up as a premium customer. But many users with valuable networks of contacts, on LinkedIn or XING for example, will.
NB: They’re certainly a good thing. We’ve had good experiences with them in Switzerland. Awards such as venture kick, Heuberger, De Vigier, Venture, and Technopark let the best new or aspiring startups collect seed money to the tune of CHF 100,000. They also facilitate contacts to the investors on the jury. But once they’ve won two awards at the most, founders really should focus on building their businesses rather than entering competitions.
OG: How many startups does Redalpine support? And how many do you add every year?
NB: Redalpine looks at about 1,500 business ideas annually, or around five per day. We have invested in 16 European startups since 2007 and support them very actively. Previously, we invested privately in a similar number of startups from 2000 to 2006. Starting in 2012, Redalpine 2 is going to invest in another 20 to 25 startups.
OG: To get going, startups need a prototype and a good team – what do they need most urgently from the outside? PR? Connections? Money? Advice?
NB: Three things are important: an innovative, disruptive idea, a suitable business model, and a team of at least two highly talented entrepreneurs who are truly capable of realizing the vision on the market. We help as coaches and of course with our network, which includes co-investors, customers, partners, media, telcos and other potential team members.
OG: The CODE_n Global Innovation Contest offers 50 finalists exhibition space in a special CODE_n hall at CeBIT 2012. What’s your killer tip for startups on how to make the most of such an opportunity?
NB: I recommend that the winners put plenty of time, creativity, and diligence into how they are going to attract their target audience (customers, employees, journalists) to their booth before CeBIT. They should remember that trade show visitors are like moths: they’re drawn to light. They should also allow enough time and manpower to follow up the contacts after the show.
OG: In which startup (other than Facebook and Google) you would have liked to have invested and why?
NB: We were in fact offered Facebook shares back when the company was still valued at only $4 billion. But normally, we focus on ambitious start-ups based in German-speaking Europe. We haven’t really missed any deals in Switzerland that we regret, and in Germany it’s only been a few. We’re pleased with our portfolio: 100 insiders recently ranked the top 100 Swiss startups, and five of our portfolio companies were in the top 13 places. In the Life Sciences category, we even held the first through fourth places.
OG: Care to give us a name? It doesn’t have to be a deal that was offered to you.
NB: I would like to have invested in Apple in the 70s, because the company is now truly innovative and disruptive in three industries. I’ve loved Apple’s products since 1983.
OG: Thanks for taking the time to speak to us.
NB: You’re welcome, talk to you again soon.