On 22 November 2018, the IHK Academy Munich hosted the Export Day Bavaria 250 participants received advice from German Chambers of Commerce Abroad (AHKs) from over 70 countries on foreign markets worldwide. Two startups from Munich were also present this year. The startups Spyra and Mr Beam Lasers each won a free ticket in the Export Day 2018 startup competition organized by the Chamber of Commerce and Industry for Munich and Upper Bavaria. Christian Neugebauer, speaker in the International, Industry, and Innovation division and member of the Startup Unit of the Chamber of Commerce and Industry for Munich and Upper Bavaria, spoke at the event with Marius Rudolf, Co-Founder, Business Development and Sales. Spyra and Teja Philipp, Founder and CEO of Mr Beam Lasers.
A guest article by Christian Neugebauer, IHK Munich.
Tell us a little about yourself and your startup. What product do you offer? And most importantly, how did you get to where you are today?
Marius Rudolf: At Spyra, we build high-tech water pistols. We launched our first model, the Spyra One, after more than two years of development this year. Summer launched on KickstarterThis is a major milestone for us: Before, it was just an interesting idea; now we have a watertight proof of concept. As of today, we are the most successful Kickstarter campaign of 2018, having raised over half a million US dollars.
Regarding your question about our product: We call it a "water gun" so you know what it's all about. However, the Spyra One bears little resemblance to a typical water gun you'd find at a children's playground. Super Soaker, for example, advertises itself with the slogan "Soak them all — make the others as wet as possible." That was too boring for us, so we developed a completely new game concept.
The Spyra One fires individual water projectiles and has a display that lets you count exactly how many shots you have left in the tank. The refilling and pumping that used to interrupt the flow of play are no longer necessary—thanks to the built-in water pump. All in all, we've simply built a really nice toy for grown-ups.
© Sebastian Widmann
Teja Philipp: Our startup is called Mr Beam Lasers. We build laser cutting machines for home users, architects, schools, and artists. We've scaled the laser cutting technology down to a size that's affordable and fits on a desktop. And third, that it's easily accessible for the user.
How did we get here? I originally built the first laser cutter—it was more of an engraver—as a fun project for myself. I printed the parts myself with a 3D printer; it was just an exciting thing. Then, in 2014, I came across Kickstarter. Back then, it was only available in the US. But I had a brother who was working there at the time, so I was able to take advantage of it. The campaign showed me that there must be a market for my product.
Crowdfunding also taught me a lot about the market, and about what I was doing wrong. I realized I had to start all over again, I had to make a break, I had to scale the whole thing up a bit, I had to look for financing, etc. So I started calling the usual financiers around here. That wasn't very successful. Because I needed money, I ran another Kickstarter campaign. And that showed we'd learned a lot of good things, because this campaign ended up being the second best-funded in Germany. We raised just under a million euros, and that supported our company very well for a long time with five employees. Ultimately, that convinced investors to get involved and enable us to grow further. We now have ten employees.
When did you start thinking about internationalization? How important is internationalization to you right now?
Marius Rudolf: We started thinking about this very early on because a water pistol isn't just a product that can be sold in Germany, but in other countries too. We now know which regulations we have to comply with when selling in certain countries. But of course there are still many legal challenges associated with it. One example is certifications: being allowed to sell a product in Germany, for example with a CE seal, isn't that easy. But in other countries it's completely different. The responsible authorities are different, and they speak a different language. In some areas they are stricter, in others more relaxed than in Germany. These are all things that you have to get used to from scratch.
That's why we're here today at the Bavarian Export Day, with the help of the Chamber of Industry and Commerce, to find the right contacts who can help us with these steps. We have fewer challenges with other issues. Sales, for example, are going well—thanks to our Kickstarter campaign, we already have a good connection with both water fight fans and potential retailers around the world.
Teja Philipp: Too late. We approached it a bit naively. Back in 2014 with the kits, it was relatively easy because the product was worth less than 1,000 euros. This meant we didn't have to file an export declaration with customs and could export the product without much hassle. Handling the warranty was also relatively simple with a kit. During our last Kickstarter campaign in 2015, we shipped a finished product that was worth more than 1,000 euros. Therefore, we have to file an export declaration for every device we send abroad. This is a bureaucratic overhead that surprised us. There are service providers for this, of course, but the cost factor is higher than expected. We are also currently working on solutions for returns, repairs, etc. The fact that it is no longer a kit has made this much more complicated.
Wanted: Sales markets, suppliers & manufacturing partners
Which foreign markets are of interest to you? Are you looking for sales markets or suppliers?
Marius Rudolf: Both are important to us. The USA is a particularly interesting sales market. As for suppliers, we are currently still looking to Germany because we started our first pilot production there. However, as things stand, we believe that in the medium term there is no way around having our product manufactured in Asia. Not even because of lower labor costs—while they are important, Eastern Europe is actually cheaper than Asia in some cases. The big advantage in Asia is that you can get all the parts there within a manageable delivery time. In the electronics sector, there are special parts that have a delivery time of 50 to 60 months here, which is simply not possible. In China, the world is completely different. You go two streets away and get the components directly from the customer. The dealer network there is much denser.
Teja Philipp: In terms of sales markets, we're currently focusing primarily on Switzerland. Suppliers from abroad are also an issue for us. On the one hand, we already source certain components from Asia. So far, this has been relatively smooth. Common platforms like Taobao or Alibaba work quite well and take care of a lot of things for you, including shipping directly to your doorstep, including handling all customs formalities and port fees. Otherwise, we're currently looking for manufacturing partners in Eastern Europe because we're reaching capacity limits here in Germany due to a shortage of skilled workers.
© Sebastian Widmann
Own local lawyer is an advantage
For which internationalization issues do you rely on external support?
Marius Rudolf: We try to be as intensively involved as possible in all areas of the project – if only because we want to ensure that everything is implemented according to the high standards we set for our work and our product. But that doesn't mean, of course, that we do everything ourselves. For production, we are currently looking for a supporter with production experience who will regularly check our quality, take samples, and test the finished products on site in China. In the medium term, we will be looking for distribution partners in certain target countries so that we can concentrate on the core markets. Another topic is the legal area. Especially in legally complex markets like the USA, topics such as product liability or taxes inevitably come up – having our own local lawyer is a huge advantage in this case. We also work with lawyers for patent matters who are familiar with the legislation in the respective country.
Teja Philipp: In customer support. Because we no longer offer a kit but a complete device, we have reached a buyer group that is significantly less educated. This applies primarily to language: The people who bought on Kickstarter back then spoke English, so that wasn't a problem at first. But now we export to 48 countries. That means people all over the world watch our product video and think: Great, I can use this to engrave my wooden signs in the Saudi Arabian hinterland, for example. Unfortunately, they only notice later that our product has an English user interface. People then call us, they can hardly speak English or German, and would like customer support. This presents us with challenges. One solution would be to translate our instructions into other languages. There are now great services for this that are quick and inexpensive. But it is much more important to solve problems of understanding.
We've discovered that certain target groups have very different comprehension issues than others. An architect, for example, has a basic understanding of laser cutters and knows that there's a relationship between speed, laser intensity, and the cutting result. But if I have someone who wants to engrave their snack boards as a hobby and has absolutely no idea about physics, we sometimes encounter problems we've never considered before. We haven't had much contact with such user groups either. We need to provide these people with support. You can do a lot with YouTube videos, but you have to make them, too. Moreover, it's not that easy to explain the facts without talking about them. Another area where external support could be helpful for us is the certification of our device. What are the technical specifications? Which testing centers do we need to contact? Take-back regulations for old electrical devices are also an issue. Fortunately, this is regulated fairly homogeneously within the EU, but if it is in non-EU countries such as Norway or Turkey, then there is certainly a specific national regulation there.
Was the Bavarian Export Day helpful for you today?
Marius Rudolf: The discussions with the AHKs were great for getting to know each other for the first time: We now have a contact person, an email address, a cell phone number, and a face to go with it. It's always much easier to get in touch with people once you've met them in person. What we've discussed so far has been very interesting and gives me confidence. The next steps will follow in the coming weeks.
Teja Philipp: Yes, it was definitely helpful. The most urgent issue for us was Switzerland, because it's a very attractive market with affluent customers. I hadn't realized until now that it was actually so complicated to deliver to Switzerland. I have to admit, I was a bit naive there. I once walked through Konstanz and saw that there were a whole series of parcel services at the border. I thought to myself: OK, Switzerland isn't in the EU, and of course there's work to be done at the border if you want to deliver into or out of the country. In reality, however, it seems that Swiss people rent an address in Germany to have their parcels delivered privately. For example, in the case that an online shop doesn't ship to Switzerland—which was the case with Amazon for a long time. In discussions with the AHK Switzerland, it became clear that these parcel services aren't suitable for us as a company to push all of our deliveries and returns through there. We really need a different solution for that. I hadn't previously considered this issue in Switzerland because the country otherwise adheres relatively closely to other EU regulations.
Thank you for the interview.
What do you need to be successful abroad?
Take part in the Startup International survey of the Chamber of Industry and Commerce for Munich and Upper Bavaria: http://bit.ly/ihk-startupinternational
For all questions concerning international business, please contact International, Industry, Innovation Division of the Chamber of Commerce and Industry for Munich and Upper Bavaria and the IHK Startup Unit with advice and support.
