Stuck at the mid level

Sure, Berlin is in the startup-hype-phase. And that attract many foreigners. But some voices raise the question of why that is, making the really interesting point on that there have been very little huge success stories with unique and interesting ideas and inventions here for a while. While some argue that is because of a lack of innovation in the blood of germans, I argue it is a very comfortable market size that holds them back. If you think about it makes perfect sense and doesn’t only explain why so many German Companies never expand above the border but also why some countries, like in the north or south of europe, have unproportionally many big successors.

I came across that thought the first time, when reading Startup Nation in which Saul Singer and Dan Senor investigate why Israel has “startup in its DNA”. Aside from others, he makes the point, that the market is simply to small. With its 8 Million people, for many businesses cases you wouldn’t be able to sustain in the home market revenue. So once you’ve launched and tested the product in your market, you have to move abroad and start selling it there just to simply survive. And as all countries around them simply don’t allow Israel to export their products there, they have to go far. And if you are already going far and have to make quite the effort, they directly head to the biggest economy earth has to offer - the US. That is why so many israeli startups are in the US half a year after their initial product launch and often their initial launch already was in english.

Something that is rather rare in Germany. Because the German market with its 83+ Million people has actually a nice mid-level size: you can’t only launch but also grow for a while in this market. There is no immediate need to move. But then what happens is, that you get comfortable with it: your product is German, your whole team is in Berlin, you adapted your product to work in this market (and that market only). And in two or three years, when the investors knock to ask, what your expansion plans are, you have a product that needs a lot of revamping before you can export it. And exporting isn’t that easy; do you go to France/Spain/Italy/Poland/UK? Each of those markets requires quite some intial investment at least in the translation and probably in sales and it easily takes a year before you know whether it was worth it.

But what if it wasn’t? If you launch an english product in New York and it doesn’t really catch on, you can still try in Austin, Silicon Valley and half of the rest of the world without too much investment. While if you expanded to Poland and you are not able to generate enough sales, that can easily break your neck. And German founders know that¹ and that makes them afraid and not try at all. As in “why should I want to”?