00:09:13 · Uwe Horstmann, Andre Degler
That's why we have those 100 people. [00:09:16] S0: Mhmm. This sounds a tiny little bit Rocket Internet esque to me, having this sort of back office that can be shared by a startup that you invest in. Is this this on purpose? Is this something that you learned would make sense? [00:09:31] S1: I mean, we we... At Rocket, we definitely saw the power that you can have by combining great entrepreneurial talent with a good workbench that they can also build upon. But that's also where the similarities end. So for us, we only invest in companies that are stand alone, that are successful, that are great, and then we offer them the optionality on top if they want to. We never would like to take over control of a company. Companies always, of course, have to build their own culture, have to build up their own teams and so on. We can help, but we will only help basically, obviously as much as we need it, but then as little as possible. Right? Because we don't want to create companies that are somehow dependent on us. And the really good entrepreneurs, they wouldn't be interested in that. Entrepreneurs are interested in getting specific support here and there on specific challenges, and then they build up their own stuff. And that's totally what we want to do. And that was, of course, different from what we did at Rocket almost a decade ago.
00:10:29 · Andre Degler
[00:10:29] S0: Yeah. Yeah. I get it. Absolutely. So, in the conversation that preceded, this interview, one of the things that, we discussed is the ecosystem in Germany, and I will just quote what was written in in this interview pitch. The risk of the VC ecosystem in Europe and how and why it is now ready to explode. The only missing ingredient is that German bureaucrats need to make share option planning easier for high growth startups. So what do you what do you mean by the fact that it's ready to explode, and then from there, we can unpack the rest?
00:11:03 · Uwe Horstmann
[00:11:03] S1: So I think exploding an explosion in a good way, a good explosion, a Cambrian explosion, you will, I think we are we're about to see... Or we are already seeing that all over Europe. And I think it's just a result of some really, really good developments that are kinda combining... That are being combined with each other. So it's a positive cycle of more talent, more capital, more good companies, more exits, more investors, and they all kinda push each other. And we've been seeing that now for the past years. We are seeing that entrepreneurs from more diverse backgrounds, hopefully more and more, because it's still a big problem, are tackling challenges for more and more complicated fields of business, if you will, as well. Not only more e commerce, more e commerce, me commerce, but people are really getting into health care and industrial production and the future of work. But that is great. That is happening in Germany, that is happening all over Europe, and that self reinforcing effect is only getting faster. At the same time, European companies can now much easier tackle international markets as well. There's no reason anymore why a European software company shouldn't become a market leader in The US also. So that, of course, adds a whole another aspect, to that whole startup journey, and that that can make them much more successful. Yeah. Full stop. I I think that's that's the answer to the question about, you know, why is the explosion now? Think I it's a continuation and a culmination of a lot of positive trends, and it will only continue that way. Now valuations, you know, the way how we price startups, of course, are very high. That being said, I think maybe we'll see some correction, but the fundamental general trend I think is correct. Because startups can become more successful, they can become larger also at an exit, so I think it's okay if they also get more quote unquote expensive for investors when we invest. And now you wanted to ask specifically about that that stock option issue in Germany?
00:12:57 · Andre Degler
[00:12:57] S0: Yeah. Yeah. Yeah. Yeah. Go ahead.
00:12:59 · Uwe Horstmann
[00:12:59] S1: Mean, one of one of the one of the beautiful things about startups is that they are inherently more democratic than a lot of old established companies. I think, you know, it's best practice that startups really share ownership among employees even wider than they used to do. It's not something that is... That has a big tradition in Germany so far, but I'm hoping that it changes. But it also means, of course, that we are careful around how we treat those stock options, so those elements of ownership in those companies for employees. And one risk that we see from time to time is that there will be tax on dry income, for example, in Germany. Right? So that could be problematic. Now there's another question on how should they be taxed? Should they be taxed as capital income and should they be taxed... Or should they be taxed as a salary? Hopefully, listeners haven't fallen asleep by now, but that is a different discussion. I think the big problem is, you know, should they be taxed before there's actual money flowing? And that should not be the case. We can have a discussion about whether there are capital That's a different question. But dry income, so you have to pay tax on something that is theoretically worth something, but you haven't seen any money yet, that will be a problem. Because that could be a factor that kind of slows down that positive effect, the positive self reinforcing growth of the ecosystem, because you're taking out one important aspect, which is that capital not only flows back to large investors but also to very small investors, and those people can turn into business angels, and that is what drives progress of the ecosystem, because business angels can become experts for new industries. They can become experts for underrepresented groups of entrepreneurs and so on. So I think we need those business angels, and so we need to make sure that the leading contributors in companies also are able to benefit from the economic growth that is being created because we know that they're channeling it back into the ecosystem. And that way, the pie gets larger for everyone.
00:15:05 · Andre Degler, Uwe Horstmann
[00:15:05] S0: No. Yeah. That that that is true. And just to finish off with this question, when you talk about explosion, how do you actually envision it? Do you envision it as more startups being launched or more funding being raised or more exits being, well, publicized, announced? [00:15:23] S1: I think all of that. So I think all of the combination, because that that just defines the attractiveness of an ecosystem. And then I think the core is that we see more good talent also tackling new tough challenges. Yes, capital is important. Yes, exits are important. But the best thing that we can... That can happen, of course, is new smart minds saying, I want to do something entrepreneurial. And either if I'm a founder or a contributor, it doesn't even matter that much in the beginning, but I want to get into that ecosystem. As opposed to taking the easy route in a large established company, I wanna do something entrepreneurial. That's that's the core, I think, that's driving all of this. [00:16:02] S0: Alright. Right. I understand. K. So, usually, it's a it's a popular question, I think, when talking to VCs, but I still wanted to ask. What about your portfolio and anti portfolio? So, like, the best investment decisions, the worst investment decisions over the ten years?