From entrepreneur to venture capitalist – Falk Strascheg, a native Austrian and resident of Munich, can look back on an exciting career. His path initially led him from Graz to Augsburg, where he worked as an electrical engineer from 1962 onwards. A few years later, he entered the laser sector in Munich, where he eventually founded his own company in 1971 – entirely without venture capital, but self-financed with a start-up capital of 30,000 DM. The company, profitable from the outset, developed into a success story with subsidiaries in Brussels, Paris, and Milan. Today, Falk Strascheg is a venture capitalist in Munich. Munich Startup caught up with him for an interview.
Mr. Strascheg, you built your first company with your own seed capital. Should startups generally follow your example and initially seek self-financing options?
No, absolutely not. Nowadays, there are plenty of other financing options, both on a smaller scale in the form of public support and, of course, through venture capitalists. None of that existed back then.
What motivated you to become a venture capitalist after your exit? And how do you go about finding new investment opportunities?
The decision was made quite quickly, simply because I wanted to invest in young companies again. I made my first investment back in 1984. The company I invested in back then still exists today. Initially, our search for suitable investment opportunities was largely based on chance discoveries or personal recommendations. However, we now have a fairly large deal flow. We receive approximately 500 deals per year, which we review. Events like the business plan competition can also help us discover investment opportunities.
Which sectors do you invest in?
Actually, in pretty much all industries, except for biotech. There's a very simple reason for this: we lack the expertise there. Otherwise, our portfolio is very broad, ranging from navigation systems to e-commerce.
And what criteria do you use to make your selection? Do you consult with experts, or do you make your decision based on gut feeling?
Here and there we consult experts, but by and large we make our own decisions based on the founders' business plans and pitches.
In your opinion, what does a startup or its founders need to bring to the table to be of interest to you?
Three pillars are important here:
First, the business or service idea should offer certain advantages over existing offerings. Second, the market for this idea must not only be large enough but also offer growth prospects. And third, the founders must be good managers. By this, I mean people who are flexible enough to lead a company to success. People who continually rethink, check whether they're on the right path, and correct course if necessary.
Suppose you meet this type of founder with real management skills but are not 100 percent convinced by the idea and/or the market: Do you still sometimes allow yourself to be tempted to invest?
Not really, but in many cases, startups start out in a certain direction and with a specific product idea, only to realize that the market isn't there after all, and the product should actually be different. They change and improve their concept and ultimately succeed. Most founders eventually realize, once the company has truly grown and become large, that their original idea has changed quite a bit. This is where flexibility comes into play again. That's why sometimes all it takes is a few adjustments to the concept for a startup to become interesting for us after all.
Do you offer startups coaching or mentoring in addition to financial support?
Yes, we offer both, but that's not our main focus. But of course, it's also important that our experiences are shared.
Have any startups particularly stuck in your mind during your investing career?
I am thinking of two unicorns here: One is Intershop, which was at times worth up to 10 billion, or at least traded at that value. And the other is brocade, which were at one point worth up to 5 billion, but are now bankrupt. Ultimately, this company failed because it was overly ambitious, and a large loan of 120 million was taken out. The creditors weren't willing to make concessions for these bonds, and ultimately, no one was willing to take over the company, which was ultimately fatal. However, all of this only happened after we were out again.
Which sector or industry do you consider to have a promising future?
It must be said that venture capitalists no longer consider e-commerce the Flavor of the Month But if there are good concepts, something truly new—and by that, I don't mean the 10th hotel platform—then e-commerce can of course still be very interesting.
People always say that Berlin is much more advanced than Munich in the area of e-commerce. What do you think about that?
Yes, that's right. (laughs)
But your heart beats for Munich and Munich-based companies. What do you like about Munich as a business location?
It must be said that we have a very good infrastructure in Munich with many experts. Furthermore, there is traditionally a large pool of people working in technology companies, from whom people can be recruited for startups. Last but not least, Munich boasts a strong higher education landscape with the Technical University of Munich, the Ludwig Maximilian University, and the Munich University of Applied Sciences.
In 2002, you founded the "Strascheg Center for Entrepreneurship" (SCE) at the Munich University of Applied Sciences. What was the intention behind it?
The SCE aims to help students understand entrepreneurial thinking and a startup culture. Young people have many good ideas, but they sometimes don't understand that a company needs to be not just built, but also grown. This may sometimes be due to the personal attitude of the people involved, but often also to a lack of know-how. Mentors can be very helpful here.
I always considered and still consider a more technically oriented university like the Munich University of Applied Sciences, with its many engineering and business administration graduates, to be a good fit for this institution. However, this would never have been possible without the support, commitment, and positive attitude of the university's management.
You said mentors can be very helpful. How important do you think networking events are?
A very big one, because people who have similar problems and/or have a certain amount of experience meet there. You can exchange ideas and collaborate with each other at networking events. I think that's great.
In your opinion, is there anything missing in Munich as a startup location?
Every now and then it looks as if the dogs have to be carried to hunt. (laughs) The environment for startups in Munich is very favorable, yet the ambition to do so is often lacking. Of course, not everyone is comfortable taking on a certain amount of entrepreneurial risk.
For anyone who would like to start a business but is still hesitant: In my opinion, we have many institutions that also impart know-how, such as the various entrepreneurship centers at universities. These not only impart knowledge but also bring decision-makers together. So, in Munich, no dog has to be afraid of hunting.
