Towards the Internet of Everything. Ten minutes with Patrick Gabriёls, Co-Founder and Lead Partner Startupbootcamp HightechXL, Eindhoven. Patrick Gabriels You ve just completed a series of marathon on-line pitch days with high-tech teams for all over the globe. These teams are all competing to be in the final round of the Startupbootcamp HightechXL selection days to be held in Eindhoven over two days October 14/15 th. What have you been learning about the current climate of European startups? Patrick Gabriels Interview Page 1
We've been hunting teams all over the world, like here in Athens. I always find it energizing to talk with new, fledgling companies, especially those in high-tech. It s one thing to develop a new app for the iphone. But is quite another to develop new sensors to be used to stimulate nerves in the brain as part a treatment for Alzheimer s. Or work out a way of fingerprinting and tracking video files for second screen applications. Yet both are examples of highly successful startups operating around 500 metres away from our offices in the Hightech campus Eindhoven. Startups in the so-called Brainport area of the Netherlands have long traditions with high-tech. Open innovation was pioneered by companies like Philips as they re-organized their way of researching at the end of the last century. They realized that they couldn t sit in isolated research labs in the hope of dreaming up what customers might want next. And even if they did guess correctly, how would they turn interest into paying customers? Since then, spin-offs from Philips like Silicon Hive, ASML, and NXP have grown to be extremely successful businesses. People in the high-tech business here smile when the companies in Silicon Valley launch a new phone or tablet. It s always faster, uses less power, better value than previous versions. Much of the technology used to build the chips in those new phones relies on the machines that build those chips. And those come from this region of the Netherlands. Patrick Gabriels Interview Page 2
You have to actively search for teams on-line and in the real world Science is clearly the new rock-and-roll! This eco-system has become a magnet for many of the world s most talented engineers. When you talk with people who have come here from abroad you discover what attracts them. Eindhoven is unashamedly a geek city, embracing both the international technical students studying at TU/E as well as the engineers working with large corporates who see an opportunity to branch out into unchartered waters by trying something new. They thrive on taking risks, taking paths that others have not dared to take. In the past, these new companies have found it a challenge to find the funds. You need deep pockets to turn an idea into a working prototype. And the tendency amongst engineer is to spend too long developing the perfect prototype before taking it to show real customers. Those providing angel funding have been trained in the financial sector relying on a business plan as evidence that the project has a chance of succeeding. We now know that early stage companies are nothing like the established, tech corporates. Whereas the latter are executing a business model developed Patrick Gabriels Interview Page 3
years ago, startups are still searching for their sustainable business model. And since they are often working on virgin territory, few answers are known or at least written down. For early stage investors it is difficult to judge whether this company has both the product and the team to be successful in a global market. People like Steve Blank and Eric Ries have pioneered new ways of thinking about young businesses from their own entrepreneurial experiences in Silicon Valley. We re cherry-picking from their lessons learned when building social media companies like Google, Facebook and Yahoo and adapting them to the Internet of Things. We have identified 8 high-tech sectors that are going through logarithmic growth in the next five years. So how do these global teams really benefit from acceleration? I m very impressed indeed with the finalists that we have selected. Because we started with a global search of more than 5000 young companies that fit our criteria, I have never doubted that we would discover the most amazing talent in our travels. In order to survive and thrive in this environment, young teams need to engage in disruptive thinking. And we have a lot of experience at spotting this raw talent. As an accelerator, we re looking for early stage companies at a very specific point in their life cycle. They are beyond bootstrapping. But they are still some months or years away from generating significant revenue. The majority of teams are between 3 and 6 people. We believe we can help them build a business and marketing strategy in the three months of the program. They need that in order to find launching customers and then to scale. We re tapping in to an unrivalled ecosystem of investors, entrepreneurs, researchers and business people. You have to trigger technical teams to think about building the big idea. Most have realized that you can t build a tech business on your own. But finding the other team members is often tough. You want complementary not competing skills. And I m still amazed that teams think about a CEO, CTO and perhaps a CMO long before they look for a Chief Financial Officer. Patrick Gabriels Interview Page 4
From my background with EY, we ve been looking at the overall competency of the teams. It s not just about having a world-class idea. It s everything about building a strong, motivated team that is able to tackle enormous challenges, adapting fast to whatever comes at them. This sector is global from day one. Is the South of the Netherlands still the best place to build an international company? In the so-called Brainport sector of the Netherlands, the investments have actually been very strong despite the uncertainties around the Eurocrisis. The demand for new technology and innovation inside all kinds of devices has never been greater. We are only just starting to see the advantages of connecting devices together. In the next decade, I believe we ll move from the Internet of Things to the Internet of Everything. And it is precisely that kind of expertise you ll find in this region of the country. Rapid Scaling Essential When you re starting a company and want it to expand globally as fast as possible, then the choice of where you put the headquarters is extremely important. The Netherlands has always been a trading nation, putting legal and tax agreements in place to make it easier to do business both in and outside the country. For instance, reciprocal tax agreements with a many countries mean it is much easier to grow a new company internationally. We can see that s important because neighbouring countries are adjusting their own tax and visa agreements to make them more attractive. The Netherlands would do well to examine these moves, especially when it comes to attracting highly talented startups. But, in general, when it comes to doing business in the Middle East, Asia or Africa, few countries offer a better infrastructure than the Netherlands. The form of the company is also less restrictive than elsewhere. We re just as happy with a Ltd as with a BV construction. The recent introduction of forms like Flex BV have really simplified the process as well as lowered the cost for early-stage companies. And there are banks as well as large corporates Patrick Gabriels Interview Page 5
operating their global or regional offices from here. That s where EY contributes to the Startupbootcamp HightechXL program. We ve been able to tap into the global network that EY has opened up for young entrepreneurs, adapting it to suite the very specific needs of high-tech startups. What are some of the secrets about the High Tech Campus that others don t know? We are extremely fortunate to have a front row seat in the heart of the High- Tech campus in Eindhoven. We have Philips, Intel, NXP as next door neighbours. But with over 60 nationalities on site, it's one of the most inspiring ecosystems I have ever worked in. I do a lot of travelling and work inside other companies. But this spirit of open collaboration is very strong and extremely productive. Remember this region generates most of the patents for the Netherlands, on average one every 20 minutes. And the campus is expanding rapidly so 10,000 people will be on site within a couple of years, 2000 more than now. Everything is in place at the Hightech Campus Eindhoven Adapt, but don t just copy ideas One lesson we learned very early on was that you should always adapt the ideas to fit the local culture. For example, we've taken the lessons learned from Eric Ries and Steve Blank and adapted quite a few things. We see their Lean Startup Methodology as a framework rather than a recipe book. Patrick Gabriels Interview Page 6
European VC's usually have a financial background rather than experience in running a start-up themselves. So in our Mentor Master Classes, we have been explaining that a Business Model Canvas needs to come well before anyone things of a business plan. That is a different approach for many, especially those who worked in research units that were spun out into their own companies. Companies invented for you, making huge guesses behind high walled fences. Contact with paying customers for the product or service often came much too late when the product was already being manufactured. Plenty of friendly faces at the recent Expat meet and greet in Eindhoven We're seeing in the South of the Netherlands much less of the arrogance that you see in big cities. May be it is because they have to try harder to find and keep the international talent. But it is also because Philips and others were some of the first to adopt an open innovation approach based on trust and collaboration. What still needs to change presentation & media Getting start-ups to present their idea in a clear, logical, interesting format is much harder in Europe than in the US. Sometimes it is the language barrier - you write a news story in French or Dutch in a different way to English. It is more like a zoom in rather than a zoom out. Which is why English VC's shout at many European startups to get to the point. The other challenge is the mainstream media. Science reporting has been seriously neglected by many European public service broadcasters. It is either Patrick Gabriels Interview Page 7
event journalism with no substance, or foreign material (often excellent) reworked into a local language. That means that local ideas and developments never get the credit they deserve. The work that the Dutch have done with wifi, bluetooth, and chip design are known only too few. That may be because companies like ASML make the machines that make the chips, but there is never an ASML inside label on the outside. So startups in this part of the Europe may have world-class technology. But they have to work 3 times as hard to get the attention of the public as well as investors. Fortunately the better accelerators realise this challenge and help the start-ups build a media strategy as well as finding a context for the new product or service. We understand that content is king and putting the ideas to work in a new context is probably King Kong. We are not just fans of open innovation. We are actively practising it. And we're always willing to share our experiences with others in this vibrant community. Patrick Gabriels Interview Page 8