The United States of Food: The Most Well-Funded Food & Beverage Startups in Each State
While tech startups have always been concentrated in Silicon Valley, new food and beverage companies are a little more diffused. Alternative hotspots have sprung up — Colorado, for example, due in part to the influence of Colorado-based food investors such as Boulder Food Group and Boulder Investment Group Reprise (BIGR).
New York is host to the most well-funded company on our map: All Market, the company behind the coconut water brand Vita Coco. All Market has a long fundraising history, starting with a seed round back in 2006, and progressing to a $165M investment in 2014 by the Reignwood Group (the parent company of Red Bull China) which valued All Market at $665M. Overall, All Market has raised $208M. California ranks second, with its most well-funded startup, cold-pressed juice brand Suja Juice, having raised $196M.
The Most Well-Funded Food & Beverage Startup in Each State (March 2017)
You’re excited to start a business. Maybe you have an idea, or you’re just fascinated with the idea of launching and growing your own enterprise. You’re willing to take some risks, like leaving your current job or going without personal revenue for a while. But there’s onelogistical hurdle stopping you: You don’t have much money.
On the surface, this seems like a major problem, but a lack of personal capital shouldn’t stop you from pursuing your dreams. In fact, it’s entirely possible to start and grow a business with almost no personal financial investment whatsoever — if you know what you’re doing.
Why a business needs money
First, let’s take a look at why a business needs money in the first place. There’s no uniform “startup” fee for building a business, so different businesses will have different needs. It’s important to first estimate how much you need before you start finding alternative methods to fund your company.
Consider the following uses:
Licenses and permits. Depending on your region, you may need special paperwork and registry to operate.
Supplies. Are you buying raw materials? Do you need computers and/or other devices?
Equipment. Do you need specialized machinery or software?
Office space. This is a huge expense, and you can’t neglect things like Internet and utilities costs.
Associations, subscriptions, memberships. What publications and affiliations will you subsribe to every month?
Your first option is to change your business model to demand fewer needs as listed above. For example, if you were planning on starting a company of personal trainers, you could reduce your “employee” expenses by being the sole employee at the start. Unless you need office space, you can work from home. You can even do your homework to find cheaper sources of supplies, or cut out entire product lines that are too expensive to produce at the outset.
There are a few expenses that you won’t be able to avoid, however. Licensing and legal fees will set you back even if you cut back on everything else. According to the SBA, many microbusinesses get started on less than $3,000, and home-based franchises can be started for as little as $1,000.
Option two: Bootstrap
Your second option invokes the idea of a “warmup” period for your business. Instead of going straight into full-fledged business mode, you’ll start with just the basics. You might launch a blog and one niche service, reducing your scope, your audience and your profit, in order to get a head-start. If you can start as a self-employed individual, you’ll avoid some of the biggest initial costs (and enjoy a simpler tax situation, too).
Once you start realizing some revenue, you can invest in yourself, and build the business you imagined piece by piece, rather than all at once.
Option three: Outsource
Your third option is all about getting funding from outside sources. I’ve covered the world of startup funding in a number of different pieces, so I won’t get into much detail, but know there are dozens of potential ways to raise capital — even if you don’t have much yourself. Here are just a few potential sources for you:
Friends and family. Don’t rule out the possibility of getting help from friends and family, even if you have to piece the capital together from multiple sources.
Angel investors. Angel investors are wealthy individuals who back business ideas early in their generation. They typically invest in exchange for partial ownership of the company, which is a sacrifice worth considering.
Venture capitalists. Venture capitalists are like angel investors, but are typically partnerships or organizations and tend to scout businesses that are already in existence.
Crowdfunding. It’s popular for a reason: with a good idea and enough work, you can attract funding for anything.
Government grants and loans. The Small Business Administration (and a number of state and local government agencies) exist solely to help small businesses grow. Many offerloans and grants to help you get started.
Bank loans. You can always open a line of credit with the bank if your credit is in good standing.
With one or more of these three options, you should be able to reduce your personal financial investment to almost nothing. You may have to make some other sacrifices, such as starting small, accommodating partners or taking on debt, but if you believe in your business idea, none of these losses should stand in your way. Capital is a major hurdle to overcome, but make no mistake — it can be overcome.
There is a world outside of Silicon Valley. Discover the 10 cities that host the greatest number of the fastest-growing private businesses in the U.S.
1. New York City
The Big Apple hosts 207 businesses on this year’s Inc. 5000, nearly double its closest rival. With cutting-edge firms like behavioral marketer Bounce Exchange (No. 7) and cognitive content platform Persado (No. 16), this city definitely doesn’t sleep.
2. Los Angeles
Yes, other businesses besides Snapchat call L.A. home. Dollar Shave Club just landed a whopping $1 billion in its sale to Unilever. And let’s not forget the Inc. 500’s No. 1 company, Loot Crate.
It’s not only the headquarters for giant companies like Coca-Cola and Home Depot; this southern city is also home to 101 of the fastest-growing private companies in the nation. Keep an eye on Company.com (No. 5), a B2B social network.
Uber and Lyft have been threatening to leave due to the city’s strict regulations for their drivers. Even so, with 95 Chicago-based Inc. 5000companies, there’s no shortage of ingenuity in the Windy City.
The Texas capital is famous for its creative community. It’s also where coffee innovators Chameleon Cold Brew(No. 140) and real estate developerYourPark.com (No. 142) have set up shop. Perhaps creativity is contagious?
6. San Diego
The second-biggest city in California, San Diego represents a vibrant opportunity for entrepreneurs–particularly for those in the real estate and food and beverage industries. Just ask one of the 70 Inc. 5000 companies based there.
This city has long been known for its oil and gas chops, but it’s gaining steam in industries as diverse as technology management and health innovation. This year, 70 Inc. 5000companies call Houston home.
Mark Cuban isn’t the only famous entrepreneur in Dallas. Another is Michael Wittmeyer, CEO of JM Bullion(No. 40). With more than $661 million in revenue last year, his online retail platform ranks first among 61 Dallas-based Inc. 5000 companies.
9. San Francisco
Of course, Silicon Valley remains one of the best places to foster entrepreneurship, especially tech-based. From FormSwift (No. 271) toRobotLAB (No. 273), San Francisco’s software companies are featured prominently on this year’s Inc. 5000.
The Emerald City hosts 54 companies that are on the Inc. 5000. Three years after the launch of “Startup Seattle,” a public-private initiative focused on providing support and resources for entrepreneurs, the city is emerging as a hub for entrepreneurship.
How the startup economy is replacing the traditional resume
A group of five engineers and product people get together, raise some angel funding, build astartup, make little to no money and sell for $10 million. What just happened? Common narratives assert that it’s the tech bubble; it’s a naive acqui-hire; it’s collective irrationality.
Maybe it’s something else altogether: a fundamental shift in how we compensate the extreme top end of the labor pool.
About a decade ago, before the latest tech boom, many of the best and brightest college grads started their careers on Wall Street. Today, they increasingly set their sights on Silicon Valley, the new economic hub of America — where, despite the cultural emphasis on idealism and changing the world, like Wall Street, the promise of money and power alluring young, smart people is widespread.
The similarities don’t end there. Technology, like finance, relies on scale and convexity of returns to thrive. Billion-dollar hedge funds are often run by a half-dozen people. Likewise, a few engineers can build a billion-dollar product. In this way, both industries are incredibly labor efficient. As the saying goes, one great engineer is worth 10 good engineers.
This creates an enormous incentive to hire the best, and, conversely, a massive cost to hiring poor performers. Furthermore, we are still in the early stages of the technological revolution, and in this wild west, where large companies are fighting for relevance and long-term market share, hiring decisions can have long-lasting impacts that cascade into the future.
Unlike finance, however, in tech it’s harder to identify and compensate value drivers — namely engineers, designers and other product people. In MBA-speak, this is because bankers and traders are revenue centers, whereas engineers and designers are cost centers. In the world of banking, your contribution to the bottom line is easily measured. In many cases, identifying stars in your business is as simple as “show me the money.”
On the other hand, the contribution of an engineer to an overall project, and the success of that project to the overall viability of the business, is much more opaque. A trader is worth as much as the money he made on his last trade. How much is a specific engineer on an infrastructure analytics team worth?
Hiring decisions can have long-lasting impacts that cascade into the future.
The tech world is still discovering what compensation for its elites looks like. Never before has a cost center wielded so much leverage and power over the bottom line of an entire industry. The pharmaceutical industry, for instance, also stands on the shoulders of its product (R&D), but the friction and cost of building a pharma startup is typically too high to throw something together in a garage, so while the contribution of the R&D team is high, their bargaining power against their employer is not.
All this creates an interesting incentive system. Employers want to hire the best and are more than willing to pay for it, but information asymmetry and bargaining power of elite employees make that a challenge. The Googles of the world can and would pay exorbitant amounts for a star coder, but when it comes to new grads from Stanford, for instance, they can’t measure, let alone predict, who will be a star — at least not enough to justify a million-dollar signing bonus.
The incentives of young, smart, ambitious people in technology are equally misaligned with conventional labor models. You could join an established company and spend years proving your worth and politicking to ensure that that worth is recognized, and ultimately still likely be underpaid for your contributions should they be extraordinary. Or, instead, you could build a startup, where, if successful, you’ll earn a lifetime’s worth of salary in a matter of a few years.
In these types of cases, startups do not rely on traditional metrics like revenue, because they generally never intend to be full-pledged businesses in the first place. In the best case, they are niche products that can fit into a broader suite of a larger company with a sales team to scale it, but even in the worst case, they are proof points that your team can build product. They are living resumes designed to reduce the information asymmetry of a hire.
In this way, startups are beginning to fill a void in the labor market. They are a way to prove that you’re worth hiring and a way to gain leverage where you can accrue more of the value you create. A company can’t hire someone’s historical trades, but they can acquire a product someone took years to make and the rights to the brain that helped build it.
What’s the most common startup path? If we’re being honest, it’s failure. But among the success stories, blockbusters are rare, and for all the talk of company missions and changing the world, most startup founders just want to make a few million so they can quench their egos and their wallets.
If we judge the value of startups only according to the paths of the high-profile blockbusters, a lot of what’s going on in Silicon Valley looks insane. If we instead look at some startups as a functional addition to the labor market, things start to look a bit more rational.
Challenges of Getting a Product Made in the U.S.A.
Many manufacturers perform a cost-benefit analysis when deciding whether to move production abroad. Others, however, are determined to make their products in the United States, even when the costs are higher.
It was craftsmanship rather than the bottom line that motivated Brian Holmes when he decided in 2010 to start a business and went looking for a manufacturer. He and his wife, Kari, started Pad & Quill, a company based in Minneapolis that makes high-end cases and other products for the iPhone and other Apple products.
“They had to be beautiful,” Mr. Holmes said of his products. “Good art is a beautiful product that is functional.”
To make the high-quality cases he set out to sell, Mr. Holmes needed a bookbindery that could stitch together the protective wood and soft leather he wanted to use. But he found out that in the digital era, bookbinding is a dying industry. He searched overseas and found a vendor in China, but was unimpressed with the results.
“I’ve never seen bookbindery quality better than in the United States because of the tradition here,” Mr. Holmes said. After several months of research, he found one he liked close to home: Trendex, a company based nearby in St. Paul.
Mr. Holmes said keeping production in the United States was not only possible, but that it offered added benefits to a seller. It improved the turnaround time, he said, and customers were willing to pay more for American-made goods (his iPhone cases range from $50 to $110 — about twice as much as a typical case). Plus, it gave him a sense of pride knowing that he was creating jobs and helping the economy.
His efforts come at a time when other American luxury brands are reshoring, or moving overseas production back to the United States, believing that cheaper is not always better.
The retail stalwart Brooks Brothers has three factories in the United States that make 45 to 50 percent of the company’s clothing, according to The Business of Fashion, an industry publication. And Walmart announced its commitment to American-made goods by pledging to purchase $250 billion in products by 2023 that support the creation of American jobs.
Reshoring is more suited to the luxury goods market, according to Jeffrey Silberman, the chairman of the textile development and marketing department at the Fashion Institute of Technology in New York.
“Reshoring will happen, but not in the way people expect it to,” Professor Silberman said. “It will happen in a smaller way. It’s a high-priced, luxury niche market, at this point at least.”
Consumers looking for luxury products are often drawn to a company’s dedication to craftsmanship. As part of Pad & Quill’s marketing strategy, its website includes videos of cases being made by hand. A blog also allows Mr. Holmes, his wife and others to ruminate on a range of topics, such as how to repair leather scratches and what it’s like to turn 48.
That aspect of tradition carries over to Pad & Quill’s suppliers. Trendex has nearly a century of bookbinding experience, according to Jeff Polacek, the company’s president, who took over the business in 1985 with his brother Tom. But it was facing a shrinking industry, and the company had to move into packaging materials to remain stable.
“When I got into the business, every paper was stored in file cabinets or ring binders,” Mr. Polacek said. “Information was stored that way; now, information is electronic.”
With a bindery in place, Mr. Holmes was able to build the rest of his supply chain. To do so, he borrowed from skills he learned while working for a medical start-up.
He kept a lean staff of himself and three others, which meant he outsourced jobs like customer service and accounting to consulting companies in the United States.
But even with a trusted supplier in place, it took a while to get the product right.
“Our first iPad cases were total bricks,” he said. “So huge, so ugly.”
So he rethought the design and began looking for better materials that would provide a longer life span for his products. And despite his efforts, he realized that some production facilities he wanted to use could only be found in other countries.
For instance, he works with a company, Saddleback Leather in Fort Worth, that makes leather products by hand at a factory in Mexico. And after three years of searching for an American company to manufacture a case constructed of wood and Kevlar, Mr. Holmes had to turn to a company in China.Seventy percent of Pad & Quill products are made in the United States, Mr. Holmes said, and reaching even that level was not easy. “Manufacturing is getting harder and harder in the United States,” he said. “But if you plan well, you can make products in the United States.”
Seventy percent of Pad & Quill products are made in the United States, Mr. Holmes said, and reaching even that level was not easy. “Manufacturing is getting harder and harder in the United States,” he said. “But if you plan well, you can make products in the United States.”
As the quality of his products improved, so did sales. But his business was outgrowing his cash flow, and he needed investors. So he reached out to his business partners at Trendex.
“I wanted an investor in the supply chain because they would be vested in my success, not an angel investor,” Mr. Holmes said.
Mr. Holmes negotiated in 2011 to sell the Polacek brothers a 35 percent stake in Pad & Quill. In return, he was able to get a line of credit and pay off some old debts.
The deal was a good growth opportunity, Jeff Polacek said, adding that it was the first time that Trendex had taken a minority stake in another company.
“I think it’s been a good match; he is very quality-conscious,” Mr. Polacek said of Mr. Holmes. “He knows what his customers are buying and why his customers are buying, and he’s good at filling their needs.”
Mr. Holmes said it was important that he found investors who shared the same ideals. “You have to look into them and find out as much as you can, because you are married, and divorces are ugly,” he said.
Pad & Quill struggled in the beginning, but became profitable in 2011, Mr. Holmes said. The next year, sales of the leather and wood cases shot up, and revenue grew 50 percent over the previous year, he said. This year, he said, the company is projected to bring in $2.5 million in revenue.
Mr. Holmes acknowledged that his company might have been profitable sooner if he had moved manufacturing overseas. But “we learned so much about manufacturing by working with American companies” that it made better sense to keep it in the United States, he said.
The next step for Pad & Quill is to enter the retail mass market. Mr. Holmes said he was considering approaching Best Buy, which is based in Richfield, Minn., because it carried some luxury goods already and would be a good fit for his cases.
But moving into the wholesale market is “fraught with risk,” he said, and comes with added expenses, like maintaining a larger inventory and paying a distributor.
Before undertaking such an expansion, Mr. Holmes said he was looking for another round of investment. Another alternative would be to sell the company outright — an option Mr. Holmes would consider only if he found the right buyer.
“I would want a good buyout because my investors took risks,” he said, “but I would want a good fit.”
Pad & Quill was established as a quality brand, Mr. Holmes said, but it’s also part of his identity, so it would be important to find a buyer with values similar to his own.
“I think a lot of entrepreneurs are narcissists,” he said. “And that’s normal to have an inflated view of yourself.”
Austria: The up-and-coming early-stage investment capital of Europe
Austria: The up-and-coming early-stage investment capital of Europe
To many, Austria can seem like a country of the past, one whose very charm lies in the fact that its best days are behind it. The Austro-Hungarian Empire collapsed almost 100 years ago, and, with it, the aspirations this landlocked, Central European nation of 8.5 million had to control the global stage.
Perhaps that’s why the Austrian startup scene has been so easy to overlook. With Germany to the north and the high-tech Netherlands beyond that, few have paid attention to the rapid changes taking place on the other side of the Alps.
Austria, this country of old charms, is beginning to position itself as one of the most attractive bases in the world to launch a new company. And in light of recent successes, including the biggest exit in Austrian startup history — Adidas’s $240 million acquisition of the fitness app Runtastic — there’s reason to believe the startup scene could take on a big role in Europe’s future.
Austria has a number of natural advantages its entrepreneurs are hoping to channel into a lasting infrastructure. It’s located in the heart of Europe, within a three-hour trip of every major capital on the continent. Costs of development are low, meaning it’s cheaper for companies to make mistakes early on — which is why various mobile phone carriers use Austria to test and roll out services. And while investors have been hesitant to embrace the startup market, Austria, a traditionally wealthy country, won’t lack for resources once the overall mindset catches up to that of the emerging entrepreneurial generation.
Many locals feel there’s no better place for businesses looking to raise early-stage capital. Though perhaps a bit exaggerated, that boast is substantiated by a recent study by the Global Entrepreneurship Monitor, which found Austria to be the strongest country in Europe for public pre-seed investment.
In 2015 the government devoted €289 million (about US$325 million) in grants to 3,715 startups, a commitment that has in turn encouraged a number of potential entrepreneurs and students to start new ventures. Last year, the most recognized venture capital firm in the country, Vienna-based Speedinvest, raised €90 million (about US$101 million) for its second fund.
The startup culture is young, especially in light of its historic surroundings. But Austrians sense they’re on the cusp of a qualitative leap forward, and as long as private backers continue to build on what the government is supporting, they very well might be right.
The origin story
There had always been a collaborative spirit in the Austrian startup scene, but 2011 marked the start of something different.
That was the year some of Austria’s foremost contemporary entrepreneurs met at Startup Week, an intensive two-day workshop and VC pitch forum put on with support from Speedinvest, whose initial $10 million fund had opened that same year. Participants went their separate ways following the conference, but several leading startup founders later described it as the first time the Austrian scene felt like a real ecosystem.
A second milestone came in 2012, when Johann “Hansi” Hansmann co-founded the Austrian Angels Investor Association (AAIA), along with Selma Prodanovic. One of the world’s richest countries per capita, Austria didn’t lack for money. But “there weren’t enough people who knew about how nice it is to invest in startup companies,” Hansi explained.
The group started as a gathering space for those few who did, but has expanded to bring together more than 200 investors from across the country to discuss promising opportunities at monthly meetings.
Change is coming to Austria, whether the country likes it or not.
As interested investors have multiplied, so too have the events showcasing emerging Austrian businesses. Founded in 2013, AustrianStartups is a nonprofit startup association that aims to increase the visibility of local entrepreneurship and improve the ecosystem. It started connecting members via a Facebook group, and later published a 40-page “vision paper” on the future of the country’s ecosystem.
Today it has a presence in all nine federal states across the country, with regular events that draw hundreds of entrepreneurs, investors and curious members of the general public. AustrianStartups was founded by Christoph Jeschke, Vlad Gozman, Patrick Manhardt, Adiam Emnay and Can Ertugrul.
Startup Week itself has since become Pioneers Festival, a world-class conference hosted in Vienna’s Hofburg Imperial Palace. This year, more than 2,500 entrepreneurs from around the world came to talk up their ideas with more than 400 investors. Pioneers Festival co-founders Jürgen Furian and Andreas Tschas also launched the venture fund Pioneers Ventures, and are two of the most recognized members of the country’s ecosystem.
Runtastic, the fitness app acquired by Adidas last year, was already up and running by 2011. But many of Austria’s most dynamic companies are more recent. Bitmovin, founded in 2013, is a Y Combinator-backed transcoding service.
that improves the quality of online video. Crate, an intuitive SQL interface that sets up distributed database clusters, was founded in 2013 and won TechCrunch Disrupt Europe just a year later.
Last year, the government appointed Harald Mahrer as State Secretary, the individual tasked with fostering the development of Austrian entrepreneurship. A former angel investor himself, Mahrer has earned the nickname “Mr. Startup” for the ambitious agenda he’s set for the country’s trajectory. Earlier this year, he brought together more than 400 policymakers, scientists, business leaders and civil society figures for an Open Innovation Strategy Stakeholder Workshop to chart the course for Austrian innovation going forward.
With a population of 1.8 million, Austria’s capital is the European Union’s seventh-most populated city. It’s sometimes referred to as the City of Dreams, in homage to Sigmund Freud, who expounded his theories on psychoanalysis through his clinical practice in the city. But the title could just as easily be a reference to Austria’s startups, roughly two-thirds of which anchor their visions in Vienna’s cosmopolitan business scene.
Vienna was the logical choice when serial investor Oliver Holle returned to Austria in 2008 looking to found a Silicon Valley-minded VC fund with a distinctly local feel. Speedinvest, the firm he founded in 2010, set itself apart with a “Work for Equity” approach, whereby the investment team takes hands-on roles in the startups they partner with. One such company, wikifolio, an alternative investing platform also based in Vienna, recently completely a €6 million round of fundraising.
Part innovation lab, part incubator and part community center, Impact Hub’s Vienna outcrop is another local pillar with an international perspective, offering everything from accelerator programs to scaling mentorship and social impact awards — all oriented toward promoting sustainable solutions to pressing issues through startup entrepreneurship.
The co-working space sektor5, which includes a community of entrepreneurs, is also recognized as a central part of the city’s startup ecosystem, in addition to MetaLab, a hacker space.
Vienna is home to much of Austria’s public startup infrastructure.
This city’s startup community is known to be collaborative. “People are willing to share their experiences and help each other out. You might notice this when visiting one of Vienna’s traditional coffeehouses,” said Can Ertugrul, a co-founder of AustrianStartups. “They would go unnoticed from the outside, but as you sip your ‘Wiener Melange’ you could find yourself sitting next to founders, investors, corporates and now also increasingly government officials, discussing ways to help improving the startup ecosystem.”
As is usually the case with national capitals, Vienna is home to much of Austria’s public startup infrastructure. The Austrian Research Promotion Agency (FFG) offers national funding for industrial research on both the national and European levels. Austria Wirtschaftsservice (AWS) is a finance service that disperses first-stage, pre-seed and seed funding to companies, including through specific science and creativity grants. Some of these subsidies are quite small (about €5,000), but on the upper end, they reach as high as €1 million. In 2015, the AWS funded 3,613 startups with €218 million and the FFG funded 102 startups with €71 million. AustrianStartups provides a list of federally available grants here.
For the local city government, the Vienna Business Agency is a point of contact for national and international companies.
Leaders in Vienna’s startup community include Daniel Horak of Conda, Stefan Kalteis and Bernhard Lehner of i5invest, Harald Katzenschläger of Dreamacademia, Andreas Klinger, CTO of Product Hunt, Yves Schulz of sektor5, Matthias Reisinger of Impact Hub, Tim Röhrich of Pioneers and investors Michael Ströc and Michael Altrichter.
Austria’s second-most important startup hub is its third-largest city. Linz has just 200,000 residents — but what it lacks in size it makes up for in deep industrial traditions and a flourishing creative economy. Named Europe’s Capital of Culture by Unesco in 2009, Linz is well-known for its flair for the digital arts and industrial engineering, in particular.
It should perhaps come as no surprise then that Linz produced what is by far the country’s most successful app. Launched in 2009, Runtastic started as a school project at the University of Applied Sciences Upper Austria. At the time of its acquisition in 2014, it had more than 140 million downloads.
Runtastic is still being run by co-founders Florian Gschwandtner, Christian Kaar, René Giretzlehner and Alfred Luger.
Also located in Linz is accelerator startup300, which was founded by Michael Eisler and Bernhard Lehner and includes a network of close to 100 entrepreneurs who are active in the city’s ecosystem. Tabakfabrik also is a popular hub for startups and creative people.
The same concentration of capital and innovation that makes Vienna such an attractive location for entrepreneurship has left the rest of the country largely bereft of meaningful startup culture. There are signs, though, that things may be shifting.
Bigger than Linz but not as wealthy, Graz is an old city with a young feel. The Unesco World Heritage site is home to six universities and a thriving student population. The challenge of integrating modern buildings into the historic city has elicited world-renowned urban design innovation. Close proximity to, and deep cultural ties with, Slovenia presents unique opportunities for the city’s startups. Ideen Triebwerk is a prominent local organization promoting entrepreneurship in the city, and Managerie, run by Maria Reiner, is a popular space for startups and cultural activities.
Innsbruck is an interesting startup city because of its location. Located 150 km from Munich and 40 km from the Italian border, it is positioned in a key location for trade. The people of Innsbruck are from the mountains, where the winter is much longer. It is harder to survive there and the people are said to be the ideal entrepreneurs. Skinnovation, the first startup event on skis, has become a popular event.
Situated on the German border with a population of 150,000 and home to Red Bull’s headquarters, the state of Salzburg is regarded for its co-working space CoworkingSalzburg, founded by Romy Sigl. The investor community is very limited in the region; however, the initiative Startup Salzburg was founded to foster the community. Promising startups include Symptoma, a search engine for doctors that was recently named the most promising e-health startup in Europe.
Some of the prominent difficulties facing startup culture in Austria are what you would expect in any developing scene. Apart from Speedinvest, there’s a lack of large venture funds past the seed stage of funding. Few entrepreneurs have experience growing companies at the pace demanded by international VC, so up-and-comers are often left to find their own way, without strong examples to point to or thought leadership to draw from.
Austria will also need to compete with startup capital Berlin, which is bound to pull entrepreneurs from the neighboring nation. Many of the most successful startups with Austrian co-founders are now based in Berlin and London, including NUMBER26 with Valentin Stalf, and Qriously with Christopher Kahler.
Said Robin Wauters, founding editor of Tech.eu and one of Europe’s most well-regarded technology journalists, “While it’s increasingly true that great companies can be built anywhere, I believe the reality in Europe today is that for most companies based in small ecosystems are often better off looking for a nearby major hub to scale up, which requires a large pool of talent to tap from, a wide range of investment options, and the ability to attract senior management.”
Austria could offer those things, as well, but much of what’s preventing it from doing so, paradoxically, is its own more generalized success. Low unemployment saps the incentive for rapid economic change, and Austria’s otherwise abundant wealth has congealed around a set of relatively conservative investment values. Many people in the scene humble-bragged that Austrians just don’t have enough experience dealing with failure to survive the entrepreneurial gauntlet.
But change is coming to Austria, whether the country likes it or not. Recovery from the 2008 financial crash has been slow and thus far incomplete, placing acute pressure on policymakers to devise new approaches to unfamiliar economic hardships. The European refugee crisis also has had a particularly jarring effect on this tiny, mountainous country, which flirted with complete political upheaval during its most recent nationwide elections.
Refugees Work, an Impact Hub Vienna-backed job-listing platform that pairs employers with the more than 30,000 refugees already seeking to enter the Austrian labor market, is just one illustration of how the innovation sector can rise to meet these and other challenges. It will take continued support from the government, and greater engagement from the private sector, but don’t be surprised if we start seeing many more like it.
Seemingly overnight, we have become Europe’s next great tech hub. As a startup founder, I love the scene that has sprouted up here. It channels the city’s creative energy — which has contributed to vibrant art, film and TV, gaming and publishing industries — into solving problems through technology.
We are fortunate to enjoy a relatively low cost of living compared to other tech hubs like Silicon Valley and London. Living costs are 43 percent higher in London than Berlin, for instance. Berlin’s cost of living is very conducive to the early-stage startup salary (or lack thereof), and it helps that office space can be acquired for a reasonable price.
Before Berlin can stake its claim as Europe’s undisputed No. 1 tech hub, however, I believe there are several things that could be improved. Here are three in particular:
Forming a startup must become a streamlined process, not a complex bureaucratic exercise. As previously mentioned, Berlin is the world’s fastest-growing startup city. To put that in perspective, one startup is founded every 20 minutes in Berlin.
When my co-founders and I were incorporating BuddyGuard, however, I was mystified by how time-consuming and bureaucratic the process was. It took us roughly nine months from our first appointment with a notary until we finally got our VAT number from the tax authorities. During that time span, we had to navigate lots of appointments and a mind-numbing amount of paperwork, the majority of which needed to be signed in the presence of a notary. The laws are simply suffocating during this initial phase, and the exhausting effort to get our company up and running could have been better spent developing our product.
We need to follow London’s example, where a company can be registered online. If we hope to be the de facto European city for technological innovation and continue enticing entrepreneurs to establish companies here, legislators need to drastically simplify this process and eliminate bureaucracy from the equation.
Investors need to develop an increased appetite for risk. Investors poured more than €2.1 billion (US$2.3 billion) into Berlin-based startups in 2015, outpacing London (€1.7 billion) and putting us atop the European leaderboard. Still, the investor climate here is tough, especially for early-stage hardware startups like mine where capital is critical.
Whereas SaaS startups are booming with $5 million seed rounds and often face the luxury problem of picking their investors, young hardware companies are struggling to scrape together $200,000. Naturally, physical products are a riskier bet than software development, but the gains are much higher and the markets are way less saturated.
We are grateful to have found investors who believe in our vision to make home security easy and intelligent, but the difficulties of raising funding reaffirmed that venture capitalists and angel investors in Berlin tend to be very risk-averse. If you have an out-of-the-box idea, it tends to be greeted with caution rather than interest. Most investors prefer to play it safe, which partly explains their willingness to fund startups like Rocket Internet that borrow from proven business models.
The silver lining in all this is that it teaches startups to be extremely prudent from Day One. While Silicon Valley startups have only recently started to realize the importance of cutting their burn rates, building a profitable business has been engrained into our operations from the very beginning.
The talent pool needs to expand, and the work approach could be refined. While Berlin is coming into its own as a tech hub, finding high-quality programmers and engineers remains a major challenge. This is obviously not unique to Berlin, and the hope is that as tech becomes an even more central part of Berlin’s identity, more people, whether they be Berliners or immigrants, will be inspired to join the movement here.
I also wonder how much faster our tech community could grow if we became a bit more industrious. Unlike Silicon Valley, working long hours is not a source of pride in “Silicon Allee.” Approach to work is heavily influenced by “der Feierabend.” While there is no direct translation for this term, it essentially promotes a lifestyle outside of work in the evenings. While I’m very supportive of work-life balance, this mindset makes it very difficult to get things done during those times when you need all hands on deck.
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Both startups and big companies are bringing connected sensors and data analytics into commercial offices.
Motion sensors driving light switches used to be state of the art in office buildings, but now startups and big companies are bringing connected sensors and data analytics into commercial offices that will make building management look a lot more like IT.