Music:
Speaker0: Hello and welcome, everybody. This is Joe from Celebrate.io,
Speaker0: your startup podcast, YouTube blog and internet radio station from Germany.
Speaker0: Today, I bring you the second interview with Carsten, the current Business Angel
Speaker0: of the Year for Germany. Hey, Carsten, how are you doing?
Speaker1: Yes, I'm fine here in Zanzibar at the moment. I'm on holiday still.
Speaker0: Yes, we do have a little game going on if you break into sweats before the end
Speaker0: of the interview because you had to turn off the air conditioning.
Speaker0: For this interview. So it'll be interesting.
Speaker0: We may tell our audience that you're the Business Angel of the Year,
Speaker0: selected by BANT, the German Business Angel Association.
Speaker0: And they're usually elected, I do believe, in October and November.
Speaker0: And the special thing about it is that they are awarded on the recommendation
Speaker0: of the startups you invest in.
Speaker1: Yes, and also the Minister of Economy of Germany is head of the jury.
Speaker0: Ah, I see. Which will be subject to change soon.
Speaker1: Yes.
Speaker0: Okay, I see. We already talked about in the other interview that you're a serial
Speaker0: entrepreneur yourself, I love that you currently run Casablanca.ai,
Speaker0: which everybody who's watching this can see how this is working here.
Speaker0: And I want to get straight into your investments philosophy and startup selection,
Speaker0: because you told me when we talked about this, you get up to 10 pitches a week.
Speaker0: How do you cut through the noise and identify opportunities?
Speaker1: Yeah, that's a very good question, and it's not so easy because,
Speaker1: of course, you always fear missing the one hidden gem that becomes the next
Speaker1: Facebook or Microsoft or OpenAI or whatever.
Speaker1: And so what do we do? We have own AI that filters through the pitch decks and
Speaker1: takes out some red flags.
Speaker1: So I at least annotate some red flags so that we easily identify this without
Speaker1: going through the 45 pages of some pitch decks.
Speaker1: So there are some things in there like nobody has had any experience in sales
Speaker1: before or they are emphasizing technology but they don't have patterns and it
Speaker1: seems that it's not patentable.
Speaker1: So there are some things where we say it's probably not interesting to take
Speaker1: any deeper look at the startup.
Speaker1: And so this is just the first filter. It tells about half of the teams that
Speaker1: probably they're not so interesting.
Speaker1: So depending on the time my people have, so I have one and a half people on
Speaker1: the investment side, Roxanne and Christoph, and so they take a deeper look only
Speaker1: at those which were not red flagged by the AI.
Speaker1: So the AI just principally takes the pitch deck and goes through some analysis,
Speaker1: also puts a lot of information into a kind of a database so that we can later
Speaker1: on analyze all the startups.
Speaker1: And so if we miss something which turns out to be very good,
Speaker1: we learn for the next time. So after two years or so when the startup turns out to be a high flyer.
Speaker0: I see. I'm wondering, since when do you start utilizing AI in this way?
Speaker1: Somewhere last year, I think.
Speaker1: So we started programming something in, I think, April or so,
Speaker1: and worked then in summer.
Speaker1: And we want to do more, but right now I have more other projects.
Speaker1: So I didn't program it, but I gave the idea what to do to somebody in my team.
Speaker1: And not in the investment team, somewhere else in my company, in my company group.
Speaker1: And they just programmed this.
Speaker0: I see.
Speaker1: It's mainly an LLM that does the analysis, but you have to do some things around
Speaker1: to convert the PDF to set up a database and those things.
Speaker0: You focus more on a startup's technology than its founding team.
Speaker0: Why? And have you ever been wrong with this approach?
Speaker0: I personally believe a lot of people are saying they're just focusing on the
Speaker0: team because they want to seek consultancy A, B, or C. or university C, D, and E.
Speaker0: That's basically when they get interested in invest or worked at a startup A to Z.
Speaker1: Right. So when they focus on technology, it normally means that they look,
Speaker1: if one of the founders was working at one of the, Batman is, I think, the new thing.
Speaker1: So the Magnificent Eight.
Speaker1: And if one of them worked as a software developer there, then probably the program
Speaker1: is technically good. or the startup is technically well set up.
Speaker1: That's what most investors estimate.
Speaker1: The thing is that most investors come from a financial background and not from a tech background.
Speaker1: So it's much easier for them to analyze financials or teams and take a look
Speaker1: at the founders rather than really telling if this technology is a game changer,
Speaker1: is really something that is –
Speaker1: Really ahead of the competition or if it's just another startup doing something
Speaker1: with a very good idea but not with great tech in the background.
Speaker1: And I'm one of the few ones who are coming from tech and can thus tell something about this part.
Speaker1: So I think this is probably one of my USPs here that I can take a deeper look
Speaker1: into technology. Of course, my
Speaker1: team first analyzes just these standard questions like, is the team good?
Speaker1: Is the plan good? Is the market big enough?
Speaker1: So generally we say we invest in a total addressable market over 1 billion.
Speaker1: So if it's only 100 million, normally we just don't take a closer look.
Speaker1: That's one of the things that our AI also tries to find out.
Speaker1: And that's something that the AI and the team already challenge.
Speaker1: And then when I talk with the founders, I'm also talking about technology.
Speaker1: Of course, if the founding team would be like not somebody I would like to work
Speaker1: with, then we would also not invest.
Speaker1: And of course, technology is not everything, but then it's not that you have to get every good deal.
Speaker1: Just you have to make sure that many of the deals you get
Speaker1: are good but yeah so
Speaker1: you will always miss out on some deals so
Speaker1: i i had a opportunity to invest very very
Speaker1: early in a startup started by two
Speaker1: pupils they were below 18 years old and
Speaker1: they were starting the company when they became 18 but they were preparing for
Speaker1: it and i said you need two pivots one technically and one the idea is great
Speaker1: but technically and also from the business model, both will not work.
Speaker0: How did they react, given that they're not very old?
Speaker1: No, the thing is, I said, I'm still investing.
Speaker1: But they offered me a low valuation basis, and I said, I'm going to do this
Speaker1: with you, and I think you will do fine, because the technical guy was very open
Speaker1: to learning, and he was already quite great, but just some things he wanted to do would not work.
Speaker1: And from the business model, it would also not work. I calculated this in Excel.
Speaker1: But the CEO also had a very, he was very far for a 17 year old. So I thought I invest.
Speaker1: And then the problem was that we had an appointment at the notary and that was in Stuttgart.
Speaker1: And I had an appointment in the evening with a politician in Berlin,
Speaker1: a member of the parliament.
Speaker1: And the notary called and said, we need to shift this by one hour because my
Speaker1: previous case takes longer.
Speaker1: And I said, then I cannot get my flight and I cannot go on the meeting with a politician.
Speaker1: So I will have to cancel today. Let's find another appointment next week.
Speaker1: And we didn't find it next week. We didn't find it the week after.
Speaker1: And after about four weeks, they came back to me.
Speaker1: We had an appointment in four weeks or so. but they said now our valuation is
Speaker1: more than twice what we had before because we have found some other investors who wanted to invest.
Speaker1: And then I said for two pivots, I'm not going to do it, not going to do it at that valuation.
Speaker1: And we still discussed a bit but did not agree. And what happened is they started
Speaker1: this and they did the first pivot very soon And then they got,
Speaker1: I think, 2 million on a 10 million basis after less than six months.
Speaker1: And that was quite a lot already because we were far lower in our valuation before.
Speaker1: And I'm not so sure how much they finance.
Speaker1: I think they have taken up something like 20 million already or so and are doing very well.
Speaker1: So I did wrong there because I thought with the two pivots necessary,
Speaker1: the new valuation is not appropriate because the risk is still high.
Speaker1: Two pivots necessary and the valuation is not ultra low as it was before just not very high yet
Speaker1: And I was definitely wrong there the other
Speaker1: thing is yes I sometimes I just
Speaker1: sometimes make mistakes in investing of course and that happens to
Speaker1: everyone and there can be two sides of mistakes so one
Speaker1: is you have missed the chance and the other thing
Speaker1: is you invest in a company where where it doesn't pay off and the company does
Speaker1: not do well and I also had this in the past I invested in a company that just
Speaker1: didn't want to grow they were happy after they were slightly profitable and still at a very low level
Speaker1: and yes we can run the company now we don't need any more investors so what's
Speaker1: the problem and that that's also not so good so so even if the company doesn't go broke,
Speaker1: it might still not, by far, not pay off for the investor.
Speaker0: Talking about investor approach here, what is for you a hard no or a red flag
Speaker0: when you are evaluating the startup pitch?
Speaker1: So one is if I can't work with the company, that's a hard no.
Speaker1: Also, if sometimes they think they have invented something totally new and I find out that,
Speaker1: that what the company invented is already there or very easy to reproduce and
Speaker1: you can't get a patent for it.
Speaker1: So that's normally a red flag for me. So, for example, I had somebody with an
Speaker1: invention in chemistry, and they would not tell me what it actually was.
Speaker1: So actually, they had a discovery in chemistry. That's what they told me.
Speaker1: And when they finally told me after I signed a hard NDA and lots of things,
Speaker1: I found out in less than five minutes that the effect was already known.
Speaker1: But under a different name with
Speaker1: a slightly different approach but it didn't make any
Speaker1: difference so it was definitely existing so that
Speaker1: that's a very hard no so what else is a hard no so I'm not so much on this single
Speaker1: founder doesn't work so single founder can work well I don't have a big problem
Speaker1: with that I know it for myself so I started multiple companies normally as a
Speaker1: single founder in the beginning and then took up some people later, but, um,
Speaker1: uh, fact find that I actually grew to a hundred people without any co-founder.
Speaker1: So, and then, then I hired a COO in order to just get me a bit away from management
Speaker1: and let me go back to innovation again.
Speaker1: Because I don't like management. And this guy really loved management.
Speaker1: He was in a 10 times larger company before at sea level and joined us and just
Speaker1: restructured, reorganized how we worked in terms of how we managed the company.
Speaker0: When we talked before, you told me you have currently a portfolio of 15 investments.
Speaker0: First, my personal understanding is that this is usually a big portfolio for
Speaker0: German business angels, right?
Speaker1: Yeah, for business angels, yes. So there are some people.
Speaker1: I have found it also the frequent angel circle, which is a sub-circle or subgroup
Speaker1: in band in the German business angel network Deutschland.
Speaker1: And we accept people who have done 10 invests in their past so you don't need to hold 10 invests now
Speaker1: even if you have only one or two or so right now and you have already exited
Speaker1: or some have gone broke or so and you have done 10 investments in the past you
Speaker1: can join very very few members of Bund have had 10 investments
Speaker1: So, I don't know how many there are in the Business Engine Network Deutschland
Speaker1: who could qualify but it's probably 100 or not so much more and 34 are in our frequent angel circle.
Speaker1: Actually the one with the most investments has done more than 100 investments.
Speaker1: We already have one with 75 who was also nominated for Business Engine of the
Speaker1: Year and we have one more with more than 50 investments and all of those investments.
Speaker1: And so we're talking about investments of 50 K euros and up.
Speaker1: We're not talking about people who are just, um, by a bit by a business end
Speaker1: of the club or so diversify their money and invest 10,000 euros each in 50 startups.
Speaker1: So, um, so it's, um.
Speaker1: Um, so, uh, and we have one who has done also about 20 investments,
Speaker1: but his typical, uh, investment is 1 million.
Speaker1: Um, so he doesn't start with 1 million. He normally starts with 250, 250 K.
Speaker1: Um, but, um, but over time he grows in the companies and sometimes he also starts with a million.
Speaker1: Um, so, uh, there are these people. Um,
Speaker1: and, um, so in the frequent angel circle, I'm rather one of the smaller investors,
Speaker1: but as compared to the typical business angel, I would say, yes,
Speaker1: this is quite a portfolio.
Speaker1: So I've done 21 investments, 15 are still active.
Speaker0: Still active. Exactly. And I was wondering, which one are you most excited about right now and why?
Speaker1: Ah that's that's actually quite a number
Speaker1: of really interesting investments so um so i'm i'm
Speaker1: very positive for valent that's a london investment
Speaker1: i made so outside germany in in the uk um valent v-a-l-e-n-t um they um they
Speaker1: detect social media attacks so you know sometimes a company has a negative social
Speaker1: media, and that's okay if it's natural.
Speaker1: But sometimes a competitor actively attacks the company on social media.
Speaker1: It also happens in politics.
Speaker1: And Valent has a number of customers who are big and who have been under or
Speaker1: who were under social media attack from competitors or political opposing people.
Speaker1: So that means normally there is some truth in the story.
Speaker1: So something has gone wrong with something. So like disappointed one customer
Speaker1: or so, and an attack normally means that somebody takes this story and makes
Speaker1: it huge as opposed to the positive stories.
Speaker1: And this happens. This is not just something that could happen, but it does happen.
Speaker1: There are malevolent people who actively attack their competitors in social media.
Speaker1: And Valent detects this with AI. And they have a very strong AI team, I can tell this.
Speaker0: Actually, when one startup starts to attack another one on social media,
Speaker0: I would be wondering, don't you have anything else to do?
Speaker1: Yes, so there are a number of countermeasures you can do.
Speaker1: And that's a project that Valen can do that cannot be done automatically yet.
Speaker1: So some things are legal.
Speaker1: So you can, if you find out, if the first thing is you try to find out who is
Speaker1: behind it, But if they're really good, they somehow hide it behind a Russian group or something.
Speaker1: But sometimes they can find out who is attacking or who is behind it.
Speaker1: And then there are other measures like how do you work with the press because
Speaker1: normally then the press takes up this and you have to do some countermeasures there.
Speaker1: And how do you deal with the social media and so on. I'm not an expert for that.
Speaker1: So you have to interview Veiland the next time in order to talk about this topic.
Speaker1: But I think it's a great company and a former investigative BBC journalist is
Speaker1: part of the founding team.
Speaker1: But they're also really great in AI. So I admire what they do.
Speaker1: So that's one of the startups. I can tell about more if you want to talk about more startups.
Speaker0: I do have still a lot of questions for you, and we're already running 20 minutes of recording.
Speaker0: Yeah, and keep in mind that the AC is not running right now.
Speaker0: I was wondering what one startup investment, that, can you name one that completely
Speaker0: surprised you with how fast they scaled?
Speaker1: I have one where I was wondering how, I was astonished how quickly everything went well.
Speaker1: I have one startup, I cannot name it if I tell more about it because we are
Speaker1: under a, not too hard, but still I'm the NDA with a buyer.
Speaker1: So, but I invested in a hardware company. which
Speaker1: had a lot of innovation and I was fascinated by the innovation and the hardware
Speaker1: company was they showed me their very first prototype of one part of the of
Speaker1: the hardware they were building and so what happened was
Speaker1: They took in investors, they tried to bootstrap and then found out that it will
Speaker1: not be sufficient. They had some money, but not enough.
Speaker1: And then they took in investors and I was one of the people that they asked
Speaker1: because of AI, because they thought AI will play a big role also in their future product.
Speaker1: And so they had the very, very first prototype of something where you need hundreds
Speaker1: of thousands of in big companies.
Speaker1: And it did not work stand alone. You needed some other components also and they just had this one thing.
Speaker1: But I was fascinated by the height of the innovation they built.
Speaker1: Then it took only 18 months until they sold to a big company.
Speaker1: They were still like, I don't know, minimum one and a half years pre-seed,
Speaker1: so pre-revenue. So definitely what they had built then was a fully working prototype,
Speaker1: but in a very small scale.
Speaker1: So like when you say I'm automating, let's say, a car manufacturing factory,
Speaker1: and you just demonstrate one robot which screws in the screws or something at one place.
Speaker1: So they could show a smaller part of everything, but you could see that this
Speaker1: is going to change the world in this special aspect.
Speaker1: And then they already sold. So that went very fast, and it was still far beyond
Speaker1: before they could sell the product to any customer.
Speaker1: And we thought that we have, in the current situation, we thought that we have
Speaker1: to have the first customer. and we tried to get some customer who signed LOI
Speaker1: or so, which was also very difficult in the current situation.
Speaker1: But actually they had some inquiries from big companies who wanted to invest
Speaker1: in them or rather buy them.
Speaker1: And we went fast with one of them. And so after only 18 months,
Speaker1: I could sell my shares again and was very happy with the multiple I got.
Speaker0: You learned a lot when you do so many startup investments.
Speaker0: I was wondering, what was one of the counterintuitive lessons you learned?
Speaker0: You said you're still open to invest in single-founder companies and not teams.
Speaker0: What else did you learn?
Speaker1: Oh, that's a difficult question. Maybe you have to skip that if something was
Speaker1: counterintuitive and I still had a gut feeling, you mean, kind of, right?
Speaker1: So it's not like normally you do this, but in this case, I'm going for it. Yeah.
Speaker1: But nothing comes to my mind at this moment. Sorry. So for counterintuitive
Speaker1: investment, or counter-rule investment.
Speaker1: So, I mean, normally what I said about this, so what I said about this hardware
Speaker1: company right now was also normally when you invest in hardware,
Speaker1: you think it takes 10 years until they have an exit.
Speaker1: And in this case, it was not necessary because it was so clear that this is
Speaker1: very disruptive for the industry.
Speaker1: And they were so far ahead of anybody in this field.
Speaker0: I see. When I talk to many successful investors, they do have personal investment thesis or rules.
Speaker0: Do you follow some of them? Do you have some and you follow them before making a deal?
Speaker1: So we have a list of a few things we check, But these are the things that Roxanne
Speaker1: checks when she talks, or some of the AI checks, some Roxanne checks.
Speaker1: And so the general thing is that we are always ready to learn and maybe still
Speaker1: invest if something is not according to our list,
Speaker1: but if some other parts are overwhelmingly good.
Speaker1: So in general, for example, we invest pre-seed.
Speaker1: So that means if the company is already running and just wants to grow,
Speaker1: normally we don't invest. Still, I did this once.
Speaker1: So I invested in a company called Hybrid LiDAR.
Speaker1: And so they're not really running, but they have first customers who have done
Speaker1: tests, runs with them and paid for that and so on.
Speaker1: And but this is already quite a big company and but I thought this innovation
Speaker1: is also very high so I invested also.
Speaker1: I do a new type of LiDAR of the distance measuring which is used for self-driving
Speaker1: cars except by Tesla who is only using cameras but it's also a great application
Speaker1: for manufacturing and robots and everything.
Speaker1: And they have a much higher resolution at a less costly LiDAR device.
Speaker1: And they're currently going to the first prototype.
Speaker1: So not prototype, the first production run. So for the first customer.
Speaker1: I'm preparing for that right now. But they're already quite big.
Speaker1: So normally I don't invest on valuations over 5 million.
Speaker0: Every investor is currently getting giddy when they hear AI,
Speaker0: which was in the past something like blockchain, quick delivery, and so on and forth.
Speaker0: Except for those current technologies, if you could only invest in one emerging
Speaker0: technologies in the next five years, what would it be?
Speaker1: So, half a year ago, I would have said deep reinforcement learning.
Speaker1: So, that's one part of AI.
Speaker1: But it's AI that was underestimated for a long time.
Speaker1: In my prediction, in the beginning of 2024, I said deep RL, deep reinforcement
Speaker1: learning, will do a lot in the coming year, in 2024.
Speaker1: And actually it only did now with DeepSeq,
Speaker1: everybody could see that deep reinforcement learning is still a very important
Speaker1: factor because this was basically the foundation of why they could be much faster
Speaker1: and much better than other approaches in the past.
Speaker1: So it's a combination of this transformer technology of LLMs with this deep
Speaker1: reinforcement learning.
Speaker1: So there was some deep RL also in the previous LLMs, but it had only a minor role.
Speaker1: And now it became part of the core of the innovation of DeepSeek.
Speaker1: So that's what I've said then. And right now, I think what is totally underestimated
Speaker1: is robots, even though they already have some hype.
Speaker1: But I think people cannot see how big the disruption will be in five years.
Speaker0: I actually talked to Jan Lippert, another interview that we just published.
Speaker0: He is Frankfurt-born, even though he was raised in the US.
Speaker0: He is working currently on a company that combines robotics with large language
Speaker0: models, which is also pretty interesting.
Speaker0: And it's something I haven't heard a lot about before.
Speaker1: So definitely you need to combine them if you want to have practical applications
Speaker1: in smaller scale companies.
Speaker1: So in bigger scale companies, when you need like 200 robots doing the same thing
Speaker1: in a factory or so, you can train the robots by other measures.
Speaker1: But if you want them to just take over any kind of small job that helps you,
Speaker1: you need to also be able to give them commands in that national language.
Speaker1: Like when you have them, let's say, at the building site, and it's a helper for the mazen.
Speaker1: So then you want to tell them, like, just hand me over five more of those stones.
Speaker1: Hand me over this tool and so on.
Speaker1: Can you just go downstairs and carry up two more sacks of the cement or something? Yes.
Speaker1: And you want to command them in that way, and you don't want to show them every
Speaker1: step, which is the normal way of learning for the new robots,
Speaker1: so they observe and they copy.
Speaker1: But also for their internal reasoning, for understanding what you're doing,
Speaker1: I think they're also using maybe not large language models,
Speaker1: but the same kind of foundation models with some transformers inside or so who
Speaker1: do represent what the person is doing.
Speaker1: So you can reason what is it that it's doing because you don't go like,
Speaker1: okay, now the hand moves 20 centimeters in that direction, then the fingers grab.
Speaker1: Rather, you want to do something like he's grabbing the tool,
Speaker1: he's taking the tool, putting it to the screw, turning the tool.
Speaker1: So you want it to understand what is happening.
Speaker1: And for that, it already needs some knowledge representation internally.
Speaker1: And that's easier with language, as it seems, than with most other things.
Speaker0: I was smiling when you started to kind of combine this robots with learning,
Speaker0: with what came to mind are the apprenticeship models.
Speaker0: Because if you're an apprentice in Germany, they will play some practical jokes
Speaker0: on you in the start. But I also was a victim of that.
Speaker0: And I was wondering what jokes the people will play with the robots.
Speaker1: Robots, yes, certainly they will.
Speaker1: People will want to play tricks on the robots and then laugh at them.
Speaker0: Yeah, I see. I'm getting a little bit more on the bird's eye view.
Speaker0: What do you think is the biggest advantage that European startup founders have
Speaker0: over Silicon Valley entrepreneurs?
Speaker1: So, you mean the founders in Germany or the small investors in Germany, the business angels?
Speaker0: I would rather go for the founders because if they do have advantages,
Speaker0: also the investors who invest in them have advantages, right?
Speaker1: So I cannot tell exactly about the US scenery, but what I would say is that
Speaker1: probably the founders in the US will get money more easily. but then they have
Speaker1: to deliver more on KPIs more quickly.
Speaker1: And when you're in Europe, probably founders who have more of a longer time
Speaker1: until they will reach results probably have a bigger chance of doing this with
Speaker1: German investors and European investors, so business agents especially,
Speaker1: than in the U.S., I think, because we're not so hard results-driven as most of the U.S.
Speaker1: Investors I've talked to so far, but there might be others also in the U.S.
Speaker1: So maybe some more disruptive innovations, which take a bit longer,
Speaker1: can emerge in Europe more easily because the founders will not have so much
Speaker1: pressure to get results quickly.
Speaker0: I see. Before we go into a very small ad break, I was wondering,
Speaker0: how do you manage to run Casablanca plus all the companies, all the startup investments you have?
Speaker1: The secret is people. So you have to have the right team. You have to have the right people.
Speaker1: And I'm very happy about my PA, Wenke.
Speaker1: Also very happy about the other people in the team who actually manage a lot on their own.
Speaker1: And I don't have to say okay to everything before they do it.
Speaker1: They just do it and ask for forgiveness rather than for permission before.
Speaker1: And normally everything's right. And, of course, in Casablanca I have a COO
Speaker1: who runs the daily business and he's also an experienced entrepreneur.
Speaker1: So this is his third company. He was also at Accenture.
Speaker1: And so it's Marcus Vollmer. He also was a CEO of some other German smaller companies,
Speaker1: which were not startups.
Speaker1: So he knows how normal business runs.
Speaker1: And so I have a very experienced person at my side, and he's running everything
Speaker1: in sales and normal daily business in Catablanca.
Speaker1: And the same is true for Omicron Data Solutions. I have Albert there,
Speaker1: who is also very experienced and a great operative Geschäftsführer.
Speaker0: CEO. Okay. We'll be back after a small ad break.
Speaker0: Gerring, thank you for staying with us, guys.
Speaker0: We're talking with Carsten Krauss, Business Angel of the year 2024,
Speaker0: current Business Angel, because the award is only the award ceremony.
Speaker0: It takes only place in late fall.
Speaker0: So he's the current Business Angel.
Speaker0: Talking about this winning Business Angel of the year 2024 is a huge honor.
Speaker0: What does this award mean to you?
Speaker1: I was quite astonished when I finally got it. So in the beginning,
Speaker1: I thought, yes, I'm doing very well and probably I have a good chance.
Speaker1: So like 30% or so. And then I saw who got into the short list.
Speaker1: And out of, I think, 83, they selected seven.
Speaker1: I was one of them. And the others were so great.
Speaker1: So one of them had 75 investments and so on. And then I thought my chances are
Speaker1: like below 10% to get elected.
Speaker1: And when they finally, I didn't hear anything before.
Speaker1: It was on the event, and when they finally called my name, I was really so shocked
Speaker1: and astonished, and so it somehow resonated with me so deeply.
Speaker1: Wow, I got this with these great people around me.
Speaker1: So, yeah, so I felt very, very happy. And now what does it mean?
Speaker1: So for one thing, it means that we get even more startup inquiries, of course.
Speaker1: And not all of them have really read what I do.
Speaker1: So I'm focusing on AI, I'm focusing on technology, and some people just say
Speaker1: I'm addressing the business age of the year and I don't care what he does.
Speaker1: I just send out my pitch deck and so on.
Speaker1: So some of them do their research quite well before they address me, but some don't.
Speaker1: So that's one thing. Then, um, then there is some, there was some interest from,
Speaker1: from, um, Format's press podcast.
Speaker1: I think you also came through, through, uh, Bandnet Network.
Speaker1: Um, but actually, uh, because I'm a well-known AI expert in Germany already,
Speaker1: uh, I was in the press, uh, anyway.
Speaker1: So it's not nothing new that suddenly, uh, erupted and I was not prepared to,
Speaker1: to give interviews or so.
Speaker1: So I was in Süddeutsche Zeitung, FHZ, uh,
Speaker1: many other formats, four times on TV last year for AI topics and so in general,
Speaker1: it was not a new thing for me to get press inquiries, but suddenly from a new
Speaker1: side because before people did not interview me on the topic of investment,
Speaker1: but rather on the topic of what is AI going to change in our world.
Speaker0: I've read through why, by the way,
Speaker0: we need to point out again that you get only into the group to be nominated
Speaker0: as Business Angel of the Year because the startups you are investing in recommend you.
Speaker1: Yes.
Speaker0: Yes. And you got the award you were recognized for, I quote,
Speaker0: building bridges between startups.
Speaker0: What is your approach of network and collaboration there?
Speaker1: Yes. So, I mean, as a business angel, what can I do for the startups?
Speaker1: So I can give them money, yes, but money is not everything a startup needs.
Speaker1: Very often they also need advice.
Speaker1: But also I think interchanging ideas between startups and good practices between
Speaker1: the startups and so on, that's also very helpful.
Speaker1: And we do this actively. So we meet with startups online, we bring them together.
Speaker1: We also have done some forms like do AI together,
Speaker1: exchange your knowledge on AI, exchange your experience,
Speaker1: maybe also exchange some code and some
Speaker1: other things together and also we have a format called
Speaker1: the Startup Future Days which takes
Speaker1: place once a year in summer and we invite
Speaker1: all startups so we pay the general hospitality except for their own travel and
Speaker1: so we have a conference room and pay all that and invite some guests and so
Speaker1: And so we bring all the startups together,
Speaker1: the C-level, and they do, we start with a bar camp format.
Speaker1: So that means people can spontaneously say,
Speaker1: I could tell something on this best practice I have, or I want to discuss with
Speaker1: other people on the topic of how to get good talents or whatever,
Speaker1: so many typical startup things.
Speaker1: And the second day we have prepared workshops. So, somebody from the startups
Speaker1: prepares a workshop which is then going on for four hours.
Speaker1: And because that's prepared, there's a lot of theory, theoretical knowledge
Speaker1: and so on they can convey or they have prepared practice.
Speaker1: So you have to do something, some tasks, you have to work on your own to do something and so on.
Speaker1: And my startups actually value this very, very positively every time we do it.
Speaker1: And I have not heard of any other business agents who does this.
Speaker1: It's quite an investment also in time not only in money but I think this is
Speaker1: something that really brings the startups forward.
Speaker0: Talking about bringing the startups forward, you often help startups to optimize their AI models.
Speaker0: I was wondering how hands-on are you?
Speaker0: Are you sitting in front of the desk together with one of the senior developers,
Speaker0: I say, ah, do it like this, do it like this, like on the vertical screens.
Speaker1: Like background.
Speaker0: That's what I had in mind there.
Speaker1: So the last time I programmed myself is about five years ago before the pandemic.
Speaker1: So I'm not as practical as you now described, but last year I actually went
Speaker1: into some details and we built a a new kind of loss function for one of the models.
Speaker1: And I was deeply involved in that. And I think,
Speaker1: so, I mean,
Speaker1: this sounds like a bit bragging, but I'm quite sure it would not have worked
Speaker1: by far as well as when I joined and helped them improve that. So sometimes I go deep.
Speaker1: Sometimes I do go deep. I normally don't, I have not coded for a few years.
Speaker0: It ain't bragging if it's true. You are an AI specialist. So I was curious,
Speaker0: how will AI impact startup investing in the next five to 10 years?
Speaker0: Will AI start picking winning startups?
Speaker0: And will this be a reinforcing circle?
Speaker1: Yes, it definitely will. So already right now, a lot of professional investors,
Speaker1: so funds who invest with other people's money,
Speaker1: are already using AI tools to scan the market, to discover potential startups for their deal flow
Speaker1: so that they don't have to wait for those startups applying,
Speaker1: but rather can go actively and tell them, oh, we're interested in investing, so please tell us more.
Speaker1: And this is already happening right now. Also, for selecting out of the deal
Speaker1: flow coming in who is interesting and who is not so interesting,
Speaker1: I'm not the only one who has built own AI for that.
Speaker1: As far as I know, there are no tools who do everything yet.
Speaker1: There are some tools who we have taken a closer look at the frequent angel circle in Bund.
Speaker1: We've taken a closer look at some tools who promised to help you invest better
Speaker1: and select the good ones from the bad ones.
Speaker1: But the tools were actually producing a lot of paper or non-physical paper,
Speaker1: long PDFs with so many research items
Speaker1: and did not really help invest rather
Speaker1: help justify investments once you had decided because if some investor and LP
Speaker1: in a fund asks you why did you invest there then you can send them the 75 page
Speaker1: rationale in the PDF and the the LP will probably not go through all the details
Speaker0: I'm very confident he will have an AI to give him five bullet points out of that.
Speaker1: So definitely we will do it better. So with the things we are doing,
Speaker1: we are already doing it better because our AI helps us decide.
Speaker1: Some other investors have also built their own tools to help them decide rather
Speaker1: than produce a lot of PDF paper.
Speaker0: What is one area of the German startup ecosystem that needs some major change
Speaker0: to stay competitive globally?
Speaker1: So there are several things which need to change in Europe.
Speaker1: So for one thing, the AI Act has to be reduced.
Speaker1: And currently, I'm not so confident that this is going to happen because it's
Speaker1: not because of the startups, because startups can adapt to bad conditions as
Speaker1: well as to good conditions.
Speaker1: The problem is that if people are afraid of using AI because they might violate
Speaker1: the AI Act and might get punished, and I see this a lot in the Mittelstands,
Speaker1: so the mid-sized German companies which are very important in Germany,
Speaker1: that they are very insecure what they are allowed to use and what they're not allowed to use.
Speaker1: And so the market breaks away. People are reluctant to use AI.
Speaker1: They are afraid to use AI, partly because of this AI act, partly also because
Speaker1: they don't understand it.
Speaker1: But even if you get them educated, the AI act still is not precise and very
Speaker1: difficult and is subject to be extended very easily.
Speaker1: And we need to get rid of this threat of what we call it, the Democles sword,
Speaker1: so the sword that's above the head.
Speaker1: In order to also get the market better in Europe for buying AI tools.
Speaker0: And given the current political situation that we are likely to see a new government in pretty soon,
Speaker0: what role do government policies play in making Germany more or less attractive for startups?
Speaker1: I think it does play a big role for several reasons, actually.
Speaker1: So I'm not so much a friend of state financing everything.
Speaker1: But if you hinder it by the state, that also does not stand for a good ecosystem.
Speaker1: So in Germany, we need to get down with a lot of bureaucracy.
Speaker1: And when I started my first company, I think I remember that we had to do the VAT only once per year.
Speaker1: And now as a new founded startup, you have to do it every month.
Speaker1: You have to do the VAT calculation.
Speaker1: And the VAT tax and so on. So that has had to be done for some
Speaker1: Fraud or so that had happened.
Speaker1: But so it would be much better if like when you just declare that you are still negative.
Speaker1: So you're not making money or so. Then you maybe can just omit all the tax things.
Speaker1: So you just say I declare by I vow.
Speaker1: So if you could just say I vow that that we have no profits or even we have no revenues.
Speaker1: And then you can just omit everything in the tax regulations.
Speaker1: That would take a lot of pressure from new startups, so starting from the beginning.
Speaker1: Because in the first time for Casablanca, it has taken like four years until
Speaker1: we had the first revenues. And we're far away from profits right now.
Speaker1: So, of course, this is an exponential curve. So, I hope that soon we will be
Speaker1: very profitable. But for the first years, we had to develop,
Speaker1: develop, develop, develop.
Speaker1: And then we also had a lot of paperwork to do. And that's not so nice.
Speaker1: You want to focus on your innovation. You don't want to focus on paperwork.
Speaker1: And Germany is very difficult. So when you start a company, it takes like six
Speaker1: weeks until you can start the company officially.
Speaker1: So a limited company.
Speaker1: And I think politics can do a lot of good for the startup ecosystem by just
Speaker1: reducing all these obstacles.
Speaker0: They can.
Speaker0: I like to have you as a guest because you're known for making bold predictions.
Speaker0: What's one thing about the startup world in 2030 that only a few people are seeing coming?
Speaker1: Yes, the start-up world in 2030.
Speaker1: So I think what few people see coming is that probably the economy will change a lot until 2030.
Speaker1: So I fear that the German car industry will go down by 50% until then.
Speaker1: So I hope that I'm completely wrong, but it might happen. and the car industry
Speaker1: is so central for Germany.
Speaker1: So what will happen is that we have many people who are unemployed at that time.
Speaker1: And if we continue to just say, okay, if you're unemployed, the state will care
Speaker1: for everything, then we will not get power into the startup ecosystem.
Speaker1: But if the state rules change and you really, for one thing,
Speaker1: empower the people to start a company, on the other hand, and also drive them
Speaker1: to take up either work or start a company,
Speaker1: then maybe we will have a lot more founders because they're very talented engineers and other people
Speaker1: who will suddenly be out of business in their big companies.
Speaker1: And I have seen an engineer of...
Speaker1: 48 or so, leave his company and start a new manufacturing company for glasses.
Speaker1: So he had some idea on how to improve that. He was in that industry before,
Speaker1: and he's quite successful with that.
Speaker1: And also the startup I told you about before where I had the exit within 18
Speaker1: months was also founded by two people who were at the end of their 50s.
Speaker1: So now they're both over 60.
Speaker1: And who had left their traditional careers actually a few years ago,
Speaker1: built another startup, and then started this one.
Speaker1: But so it's not that startups can only be started by 18-year-olds or 25-year-olds
Speaker1: who just left university or so. That's not necessary.
Speaker1: Also, older people can be very innovative and very inventive.
Speaker1: And we will get all this knowledge from the engineers coming into the startup world in a few years.
Speaker0: I've once heard that statistically speaking, the most successful entrepreneurs
Speaker0: found the company with 45.
Speaker0: By the way, what came to me, most people listening to this already speak German.
Speaker0: They speak three to four languages. But for everybody who wants to practice
Speaker0: German, the monthly VAT filing you were referring to is called Umsatzsteuer
Speaker0: Voranmeldung. One word.
Speaker1: Yes. Yeah. So the German words, yes, very bad.
Speaker0: Oh, don't worry. We only have two more questions left. So you are a mentor and invest in AI startups.
Speaker0: If you were to start a fund today, what would its focus be?
Speaker1: If I would start a startup now?
Speaker0: A fund, a VC fund.
Speaker1: I should have prepared that one.
Speaker1: There were so many questions. I prepared some, but most I didn't.
Speaker1: So anyway, so if I were to start a startup fund, what would I do?
Speaker1: So I think what I would do is I would try to spot the – I would use – so if
Speaker1: I would start a startup fund now,
Speaker1: I would use a lot of AI and I would use a lot of data because in a fund,
Speaker1: you always have to justify also what you're doing.
Speaker1: And because you're working with other people's money, currently I'm just investing my own money.
Speaker1: So gut feeding is not so good for a startup fund.
Speaker1: So what would I do? I would use a lot of AI. I would try to get hold of many
Speaker1: startup stories and analyze them and see how the market shifts and changes.
Speaker1: So which startups get good valuations at the next stages over time and how this changes.
Speaker1: And then I would also try to identify which business angels benefit the companies,
Speaker1: and I would try to get into startups they invested in,
Speaker1: or try to get them on board also if I'm investing.
Speaker1: Because when I started my first company, if we had had a business angel,
Speaker1: we would have avoided so many mistakes.
Speaker1: It's not just because of the money, but we did so many things wrong,
Speaker1: like not having a proper packaging for our first product, for example,
Speaker1: which was sold also in stores and so on.
Speaker1: So there are so many things which we can learn from an experienced business person.
Speaker1: So I would probably take the business answers more into account than I have
Speaker1: the impression the current startup funds do.
Speaker0: To close this interview, and by the way, we will ask you where all the startups can pitch you.
Speaker0: I was wondering, startup founders often chase VC funding without considering other options.
Speaker0: When should they not raise VC money?
Speaker1: So I think that people go for money because they think money is the most important part of a startup.
Speaker1: But I think it's if you get the wrong investor in too soon.
Speaker1: They can destroy your company because they
Speaker1: so I think you have
Speaker1: to be wise in selecting the investor so so you
Speaker1: should not take seed seed funding from somebody
Speaker1: who is not helping you but just
Speaker1: pushing you in in their direction and
Speaker1: you don't like this direction or you don't you're
Speaker1: not convinced also you shouldn't do that at the
Speaker1: startup founder um uh what
Speaker1: else um so i
Speaker1: think you should do some part of
Speaker1: your innovation before you go out for money there are some people who seek money
Speaker1: when they have just an idea um and um so of course if you have worked for Or
Speaker1: as a whatever CEO or a co-founder or something in a well-running company before,
Speaker1: then you can probably get a lot of money already very early.
Speaker1: Also when you work for Google or something before, then you probably also will get some money early.
Speaker1: So but if you try to get money, whatever it takes, then it takes a lot.
Speaker1: So, and you have to make many concessions with some people who are just investing
Speaker1: early at their high risk actually also,
Speaker1: but then they will take a lot of shares from you at a low valuation.
Speaker1: And for some founders, that's maybe not so necessary to secure this so early.
Speaker1: But generally, people rather take up an investor too late than too early.
Speaker1: So in FactFinder, I bootstrapped FactFinder.
Speaker1: And in 2007, 2008, 2009, we had over 40% growth.
Speaker1: And while we were still 5% to 10% EBIT positive, not EBITDA, EBIT positive.
Speaker1: So we were making real money and also cash flow positive.
Speaker1: And we were growing over 40% and investors were coming and asking,
Speaker1: so can we invest, can we put some money on the table?
Speaker1: And I did not do it because I
Speaker1: thought, well, 42% to 47% growth rate is already so huge If we grow more,
Speaker1: probably the company will do wrong or bad things because we cannot control all the growth.
Speaker1: But I think I made a mistake because if I had taken some money at that time,
Speaker1: probably we would have done the international expansion much faster and maybe much better.
Speaker1: And in the end, so I'm not allowed to tell the exact amount we had for FactFinder,
Speaker1: what it was, let's say, a middle double-digit million,
Speaker1: and Deca, our U.S.
Speaker1: Competitor, sold for $1 billion to Oracle, and even though the founder,
Speaker1: Steve Papa, only had a minority share at that time,
Speaker1: he still definitely had more than 10%,
Speaker1: and that means he definitely made more than
Speaker1: a hundred million for that so probably it would have been better to
Speaker1: uh just to the international expansion especially to
Speaker1: the us with investors money and also maybe with some investors guidance so choose
Speaker1: the investor well but do not say i don't need money i don't need investors uh
Speaker1: if you actually should or do need them you know to do the next step to do the next real growth step.
Speaker0: Karsten, thank you. Thank you very much for answering for two interviews,
Speaker0: taking up two evenings of your vacation.
Speaker0: Thank you very much. Greatly appreciate it. Hope to have you back soon.
Speaker1: Thank you very much.
Speaker0: That's all, folks. Find more news, streams, events, and interviews at WWW.STUK.COM.
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