Frankfurt frustrates the Fintech startups
The first article by FAZ is based on Bloomberg’s interview of people familiar with the startup scene in Frankfurt: Frank Niehage from FinTech Group AG, Anders Hackethal from E-Finance Lab, Martin Hillmich, Frankfurt School of economics, Markus Frank from City of Frankfurt, Jochen Siegert from Traxpay and Maximillian Voigt from Gruendermachine.com. They list four main problems that make Frankfurt a less attractive city for startups. The existing banking sector pays higher salaries than the startups can compete with, high cost of living, conservative cultural atmosphere and last but not least the lack of IT skills among the financially knowledgeable employees. Startups establishing in Frankfurt have a hard time competing against Berlin due its perceived high cost of living and non-hip vibe. Frank Niehage has been discussing with universities to create a dual study and training program for young people that would combine the two banking & finance with IT & programming knowledge.
The global ecosystem ranking 2015 The second article is by Compass, a San Francisco-based benchmarking software company has published a report that identifies the top 20 startup “ecosystems” in the world. The report ranks cities in five categories: performance, funding, talent, market reach, and startup experience. The German city Berlin has made it on the list and was ranked 9 up from 15 (2012). What Berlin has is a well functioning ecosystem that consist of:
- The A team: the accelerators and the angel investors, they invest not in ideas but people. Vast majority of investments are made via trusted human relationships or networks therefore investors and founders need a well functioning local ecosystem to find each other.
- Right personality type: right combination of vision and execution, risk taking profile and fear of failure motivation, leadership qualities and listening skills to be successful on a small startup team.
- Talent that is needed for startups is rare, even in Silicon Valley 70% of the software developers are foreign born.
- Single Geography you need face-to-face contact to be creative and sitting around the same table enables you to sort out all the issues.
- Different inputs: such as access to customers, possibility to structure usability sessions, access to mentors who’s role is vital and increases the chances of success of a startup substantially. The culture and people that encourages startups.
What 3 things does Frankfurt need to do before it is too late?
- Establish a functioning ecosystem by supporting accelerators to help startups refine their business ideas and facilitate the contact with investors.
- Create a culture of innovation and creativity by encouraging sharing of ideas and knowledge in the form of seminars, startup pitching events and hackathons
- Ensure talent for startups by focusing the education on skills needed: entrepreneurship, IT and programming
As the compass report puts it, even if it is not proven that a good ecosystem improves the success rates of each startup individually, it does enable production of vast numbers of startups by facilitating each step of the process. As the success rate of startups is low, one needs to produce them in quantities. Many of them will be successful and some of them will make us dream of IPOs.