Big Lessons from HackFwd
hackfwd.com
hackfwd.com
Wow. It required starting an entire incubator to realize that? Given the number of European born innovators in the US it should have been obvious that being European itself is not a hindrance. If they'd looked to Y Combinator that would have noticed Paul Graham's heritage; they might also have noticed Paul Graham residence.
"3. We Underestimated The Bureaucracy. We all knew that bureaucracy in some European states, and across Europe was high."
See above.
They thought they could do the same in Europe, immediately running into problems as they quickly found they would need a distributor in each country which would take a rather large chunk out of their margin. They still proceeded and found that everyone had different tastes, the Italian's liked something flamboyant, the French preferred something classy, the English wanted something Iconic and the German's wanted something Minimalist. In the US, everyone wanted the same thing. In short, the company went bankrupt in both regions due to the errors made in Europe.
There are language differences, cultural differences, tax and regulation differences, additional costs of multiple companies to be setup during expansion and the list keeps going on. Startups stuggle to scale in Europe for very clear reasons, it's much harder to do so. With a small team and little resources, a company can address the entire United States, in Europe they simply can't (of course there are a few lucky exceptions).
So as a European, what has Europe needed for the last two decades to be competitive? Quite obviously, it is to level the playing field and remove those barriers to zero. Until that happens, European Startups will never be able to scale to the size or with the speed of their US competitors. While I think European founders are as smart as American founders, by the points above, does that even matter?
Easier translation such as http://www.reverbeo.com (Friends of mine) will take care of the language barriers on web businesses. Higher levels of customisation on both software and hardware will take care of the stylisic differences. But the regulation challenges require EU intervention and we've been waiting a long time for them to do anything.
My favourites are by Tom Hulme, Rob Fitzpatrick, Mikko Jarvenpaa, Paulina Bozek, Mike Butcher and Florian Heinemann.
The statement regarding innovation isn't meant as a sudden realisation that is the result of an experiment, more as an motivational piece. Europeans (and again especially germans) often have a self-esteem issue if they are to draw comparisons to the Silicon Valley hackers, going as far as "time spent in the valley" is a metric some people measure their worth in.
HackFwd is one of Europe's best incubators and it is only in their best interest to keep the brain-drain of top-talent to a minimum, statements like this are meant to help here and in other areas. The people behind HackFwd are well-known names that will have the same interests going forward so this comes as no surprise.
When I first heard about HackFWD I thought it was the ideal program to join. They were well positioned as accelerator program specifically looking, optimized & engineered for techies.
I was not part of their program but in the last few years I learned to know a bunch of the HackFWD mentors and met a few teams that went through the program and only heard the best about it. So I was curiously following what they did and also encouraged a bunch of teams I met to apply at HackFWD if they fit their profile.
I still believe that their hypothesis to focus on technical founders is very smart for an accelerator program (it is way easier to teach marketing & business skills to engineers than the other way round). Also the better you can specify your target audience/hypothesis the better you can focus and build an environment around it and it felt like they did a great job there (even when they ultimately hit some (european) barriers that were hard to overcome).
On top of that (besides their focused hypothesis) Europe has an amazing pool of brilliant engineers that at the same time lack a bit of the business savviness if you compare them to founders in the US. So it's not only a great global strategy, I believe it especially works well for the local (european) environment, same with having Germany as the base rather than the UK.
HackFWD also reminded me a lot of philosophically aligned efforts like Fred Wilson's MBA mondays, what Google Ventures do with their lab and 500Startups with their amazing mentoring program/bootcamp on UX and distribution.
We ourselves (Blossom.io) ultimately were lucky to get into Seedcamp (one of the leading european accelerator programs) and we're very grateful for all their support but it is sad to see another bright star of the european scene gone.
Hat tip to Lars for sharing his thoughts and lessons learned. The great thing about building an environment/a community is that even if you 'fail' you leave something that lives on, and it definitely touched/helped/accelerated a lot of people in the european startup scene that certainly will continue to leave a trail and go on to do great things.
Would love to hear from others who were more tightly involved with HackFWD.
bow
"Within the first couple of years, we realized that,
on average, any exit required between 5 and 7 years
to be worthwhile, longer than the average time we’d
hoped and planned for. This stands in sharp contrast
to the US, where exits commonly happen within a year
due to talent acquisition hires."
Also missing from the discussion is the fact that they took a massive 27% in equity for a tiny investment which meant that many talented founders wouldn't even consider touching it. As the accelerator market has become more competitive taking that kind of equity is unviable even for below-average startups.
Their website implies - at http://hackfwd.com/dilution - that they invest a substantial amount, ranging from €91,000 for a single founder to €191,000 for three founders (although another document - http://hackfwd.s3.amazonaws.com/system/documents/4bd586/e2e8... - says that they invest "up to" these amounts).
It would be interesting to hear from some actual HackFWD alumni how much they actually invested.
EDIT: If they did actually invest those amounts, taking 27% in equity would not be unreasonable. If, however, they were invoking the "up to" qualifier and offering to invest much smaller amounts in return for the same amount of equity, then that would raise a question mark.
I was hoping it would set an example for the European ecosystem (...)
but [we] decided to join another incubator instead.
We ourselves ultimately were lucky to get into Seedcamp
(it is way easier to teach marketing & business skills
to engineers than the other way round)
While I find the passion, generosity and appetite for risk behind HackFWD more than commendable: it looks like it would have taken a larger vision (possibly even larger & more costly than YC) to carry a tech-focused EU incubator forward. I understand that the decision to cut losses is probably the right one, but if he's unwilling to stick it out for 5-7+ years - YC was started in March 2005! -, maybe he shouldn't have started HackFWD in the first place. The way it stands now, the one who benefited most seems to have been Lars through publicity and reputation (cf. European Commission etc.)
I'd suggest 2 more why's:
1) Consumer Web is very difficult in Europe. It requires scale and scale isn't as easily achievable than in the US
2) Because of 1) Dev-centric teams only don't make the cut. In Europe more than in the US. Devs can make good CEO's but teams need more on the biz dev level
@michuk
The programme was not without its flaws. Yes, the amount of stock HackFwd took was significant, and the communication between everyone involved could have been better between the Build events, but overall I cannot imagine a better place to start my first business than here and I'm very sad other young entrepreneurs won't be able to experience this anymore.
Europe is losing one of their best startup schools and I can't see on the horizon anything that will replace it anytime soon. Let's just hope TechStars grows outside of London and Seedcamp gets even bigger, or maybe someone some time will try to create a new geek-friendly accellerator machine without making the same mistakes. Fingers crossed!
@michuk
If you have specific questions about any of the startups, let me know, I'll be happy to help.
@michuk