Friedrich A. Neuman of MAKERS

For nearly ten years, Friedrich A. Neuman has been founding companies or helping companies to boost their growth. In 2013, he teamed up with several experienced serial founders and experts to found MAKERS, a network of eight portfolio companies with a turnover of 60 million euros. In our interview he discusses key factors for launching a startup, explains why founders should not let themselves be misled by astronomical company valuations from the US and tells us what makes Berlin the perfect startup city.

Mr Neuman, you’re a serial offender, as it were. While others are proud to have founded one startup, since 2006 you have founded serveral companies, including, in 2012, “Run a Shop GmbH”, a company specializing in price search engines, which has received several awards for its rapid growth. What are the three most important factors when it comes to founding a company with only little starting capital?

First, it is important that the idea is “cash-close” and has the ability to monetize quickly, as it will be difficult to bootstrap without income. Second, it is important to focus 120 percent on the product, as a product will lose its appeal quickly without regular product updates. Third, it is important to try and do most the work yourself and employ staff at a later stage.

In October 2013, you teamed up with several experienced entrepreneurs to found MAKERS. You use the company to invest in exciting startups as well as implement your own business ideas, similar to an incubator. What sets you apart from other venture capitalists?

We are investors, but at the same time we are entrepreneurs. We know what it’s like to be an entrepreneur which is why we want to cater to the needs of founders first. Our network at MAKERS offers founders perfect conditions for creating sustainable business models. Whether you need experts in online marketing, HR, finance or IT – we have them. We maintain a culture of sharing and exchange. This approach will eventually increase the probability of success for the company. 

And what are your plans for the next two years?

We intend to expand our platform and keep supporting special and sustainable business ideas from the areas of B2B and B2C. 

Berlin is said to be Europe’s startup capital and has even outpaced London when it comes to venture capital. Corporate groups, also, show an increasing interest in innovative Berlin-based startups and launch accelerators or innovation centres. What is your take on the ecosystem in Berlin and the development that has taken place in recent years?

There’s a lot more venture capital available which leads to an increasing influx of both specialists and knowledge to Berlin. Berlin is a very attractive city for many people – whether they are from San Francisco, London or Tel Aviv. One reason is the fact that living costs in Berlin compared to other startup centres are relatively low. Another reason is that Berlin has a wide range of cultural offerings which other cities can’t offer. It is this combination that makes Berlin an unbelievably exciting and unique city which is why corporate groups show an increasing interest in the city.

You are not only an entrepreneur but an investor as well. There are still those who say that the investment climate in Germany is much more risk-averse than in the US. How are the chances for Berlin-based startups to get a good company rating in a new financing round with local investors?

The company valuations in Germany have little or nothing at all to do with the implied risk aversion of local investors. Instead a certain degree of risk aversion reflects in the ideas that receive financing in Germany. There is a tendency for German investors to avoid so-called “moonshots”. Founders should not let themselves be misled by reports of astronomical valuations from the United States. Eventually being valued at over a billion dollars must never be the objective when founding a company.

It is important for Berlin as a tech city that a sufficient amount of risk capital is made available to finance startups. The ecosystem for investors in Berlin and Germany seems to be more robust than it was a few years ago and there has never been more risk capital available than today. In the last twelve months alone more than a billion euros have been invested into German venture capital funds. The circumstances for founders in Germany have never been better than today to start their own companies and find an investor quickly. It seems that we are on the right track. 

At the same time the tech economy is developing into one of the most important industries in Berlin. Startups do not only create jobs, they also rent office spaces or make use of agency services – restaurant owners, too, can benefit from bigger lunch crowds. How important are startups for Berlin economically and how sustainable is the current development?

Startups are very important for Berlin. Along with the tourism sector, administration and the culture scene, startups are a major driver in the city. This year alone our sector will generate 50,000 new jobs and I am convinced that we will see many new successful companies spring up in Berlin and across Germany in the next few years.

Finally, could you please complete the following sentence: Berlin is ...

... the best city to launch a startup.