"European Geeks Are As Talented As American Ones. Innovative thinking is not the natural birthright of US-born coders alone."
Wow. It required starting an entire incubator to realize that? Given the number of European born innovators in the US it should have been obvious that being European itself is not a hindrance. If they'd looked to Y Combinator that would have noticed Paul Graham's heritage; they might also have noticed Paul Graham residence.
"3. We Underestimated The Bureaucracy. We all knew that bureaucracy in some European states, and across Europe was high."
Interesting case study of a company that was a leading trophy company in the US in the 70's or 80's that had a model that worked. They had a single production location that shipped nationally across the United States.
They thought they could do the same in Europe, immediately running into problems as they quickly found they would need a distributor in each country which would take a rather large chunk out of their margin. They still proceeded and found that everyone had different tastes, the Italian's liked something flamboyant, the French preferred something classy, the English wanted something Iconic and the German's wanted something Minimalist. In the US, everyone wanted the same thing. In short, the company went bankrupt in both regions due to the errors made in Europe.
There are language differences, cultural differences, tax and regulation differences, additional costs of multiple companies to be setup during expansion and the list keeps going on. Startups stuggle to scale in Europe for very clear reasons, it's much harder to do so. With a small team and little resources, a company can address the entire United States, in Europe they simply can't (of course there are a few lucky exceptions).
So as a European, what has Europe needed for the last two decades to be competitive? Quite obviously, it is to level the playing field and remove those barriers to zero. Until that happens, European Startups will never be able to scale to the size or with the speed of their US competitors. While I think European founders are as smart as American founders, by the points above, does that even matter?
Easier translation such as http://www.reverbeo.com (Friends of mine) will take care of the language barriers on web businesses.
Higher levels of customisation on both software and hardware will take care of the stylisic differences.
But the regulation challenges require EU intervention and we've been waiting a long time for them to do anything.
You can have infinite asumption about the Bureaucracy in Europe, especially in Germany and still be overwhelmed by it. On the scale of an incubator like HackFwd you reach entirely new levels of legislation that simply don't exist in other countries and which don't become visible until you approach them.
The statement regarding innovation isn't meant as a sudden realisation that is the result of an experiment, more as an motivational piece. Europeans (and again especially germans) often have a self-esteem issue if they are to draw comparisons to the Silicon Valley hackers, going as far as "time spent in the valley" is a metric some people measure their worth in.
HackFwd is one of Europe's best incubators and it is only in their best interest to keep the brain-drain of top-talent to a minimum, statements like this are meant to help here and in other areas. The people behind HackFwd are well-known names that will have the same interests going forward so this comes as no surprise.
While most of these seem reasonable learnings, some of them still show major holes in understanding. For instance:
"Within the first couple of years, we realized that,
on average, any exit required between 5 and 7 years
to be worthwhile, longer than the average time we’d
hoped and planned for. This stands in sharp contrast
to the US, where exits commonly happen within a year
due to talent acquisition hires."
Even a decade ago anyone could tell you that an startup will typically take 7+ years to IPO or make a decent size trade exits (Seven year is the generally accepted median time to exit for a US VC funded startup). They seem to be confusing "real" exits with talent acquisitions, most talent acquisitions rarely involve a significant amount of money being returned to investor. Almost never at the 10x+ levels that most funds are looking for.
Also missing from the discussion is the fact that they took a massive 27% in equity for a tiny investment which meant that many talented founders wouldn't even consider touching it. As the accelerator market has become more competitive taking that kind of equity is unviable even for below-average startups.
It would be interesting to hear from some actual HackFWD alumni how much they actually invested.
EDIT: If they did actually invest those amounts, taking 27% in equity would not be unreasonable. If, however, they were invoking the "up to" qualifier and offering to invest much smaller amounts in return for the same amount of equity, then that would raise a question mark.
Just as Mikko hinted, most startups took 191k for 27% of shares. The thing to remember is that HackFwd gets diluted in next rounds together with the founders, there are no anti-dilution clauses in Geek Agreement (which is public, btw).
To be frank, I don't share the excitement (or now sadness about loss) either:
I was hoping it would set an example for the European ecosystem (...)
but [we] decided to join another incubator instead.
We ourselves ultimately were lucky to get into Seedcamp
That's 2 for 2 against HackFWD - apparently, the setup wasn't as great as the marketing made it look?
(it is way easier to teach marketing & business skills
to engineers than the other way round)
Looking at the HackFWD companies, that doesn't seem to apply with the broadness that the statement suggests. Could it be that someone who actually went through the steps (Paul Graham, developer - built, founded and exited Viaweb) is in a better position to pass on knowledge on that than someone who didn't (Lars Hinrichs, business guy - hired developers, founded and excited Xing)?
While I find the passion, generosity and appetite for risk behind HackFWD more than commendable: it looks like it would have taken a larger vision (possibly even larger & more costly than YC) to carry a tech-focused EU incubator forward. I understand that the decision to cut losses is probably the right one, but if he's unwilling to stick it out for 5-7+ years - YC was started in March 2005! -, maybe he shouldn't have started HackFWD in the first place. The way it stands now, the one who benefited most seems to have been Lars through publicity and reputation (cf. European Commission etc.)
When I first heard about HackFWD I thought it was the ideal program to join. They were well positioned as accelerator program specifically looking, optimized & engineered for techies.
I was not part of their program but in the last few years I learned to know a bunch of the HackFWD mentors and met a few teams that went through the program and only heard the best about it. So I was curiously following what they did and also encouraged a bunch of teams I met to apply at HackFWD if they fit their profile.
I still believe that their hypothesis to focus on technical founders is very smart for an accelerator program (it is way easier to teach marketing & business skills to engineers than the other way round). Also the better you can specify your target audience/hypothesis the better you can focus and build an environment around it and it felt like they did a great job there (even when they ultimately hit some (european) barriers that were hard to overcome).
On top of that (besides their focused hypothesis) Europe has an amazing pool of brilliant engineers that at the same time lack a bit of the business savviness if you compare them to founders in the US. So it's not only a great global strategy, I believe it especially works well for the local (european) environment, same with having Germany as the base rather than the UK.
HackFWD also reminded me a lot of philosophically aligned efforts like Fred Wilson's MBA mondays, what Google Ventures do with their lab and 500Startups with their amazing mentoring program/bootcamp on UX and distribution.
We ourselves (Blossom.io) ultimately were lucky to get into Seedcamp (one of the leading european accelerator programs) and we're very grateful for all their support but it is sad to see another bright star of the european scene gone.
Hat tip to Lars for sharing his thoughts and lessons learned. The great thing about building an environment/a community is that even if you 'fail' you leave something that lives on, and it definitely touched/helped/accelerated a lot of people in the european startup scene that certainly will continue to leave a trail and go on to do great things.
Would love to hear from others who were more tightly involved with HackFWD.
Proof that hype alone doesn't cut it. HackFwd was one of the coolest kids in the block with enough press and attention.
I'd suggest 2 more why's:
1) Consumer Web is very difficult in Europe. It requires scale and scale isn't as easily achievable than in the US
2) Because of 1) Dev-centric teams only don't make the cut. In Europe more than in the US. Devs can make good CEO's but teams need more on the biz dev level
HackFwd was the best thing that happened to us on our entrepreneurial road so far. The ability to meet and network with Europe's top entrepreneurs, investors and jounalists, the ongoing support from the staff and the general coolness of the programme and the people is what shaped me as a doer.
The programme was not without its flaws. Yes, the amount of stock HackFwd took was significant, and the communication between everyone involved could have been better between the Build events, but overall I cannot imagine a better place to start my first business than here and I'm very sad other young entrepreneurs won't be able to experience this anymore.
Europe is losing one of their best startup schools and I can't see on the horizon anything that will replace it anytime soon. Let's just hope TechStars grows outside of London and Seedcamp gets even bigger, or maybe someone some time will try to create a new geek-friendly accellerator machine without making the same mistakes. Fingers crossed!
Great article. I'm very surprised and disappointed by this news. I was hoping it would set an example for the European ecosystem.
We actually got accepted into their program but decided to join another incubator instead. The amount of equity they would take upfront was quite big if I remember well.
Who has insights on any of these HackFwd companies (YieldKit , Cobook, Infogr.am, Watchlater, To Be Honest, Outlander Studios, Filmaster, BeamApp , Sharypic, Starforce Delta, Dropify, Telety.pe , FlockOfBirds , Visualnest ) and is genuinely excited?
Infogr.am, Watchlater and Cobook have amazing consumer traction and will definitely be great exits for HackFwd in a couple of years.
Some other companies like Yieldkit or my own Filmaster.TV have pivoted towards a b2b model and generate proper revenue in their niche (we help cinema exhibitors and television providers learn about their customers tastes, personalize marketing communication and grow their audience).
Others like Visualnest and BeamApp are fascinating pieces of technology still looking for the right application.
I believe only FlockOfBirds has officially closed down.
If you have specific questions about any of the startups, let me know, I'll be happy to help.
As for FlockOfBirds, we had to pull our app from the App Store due to the rate limit changes in the Twitter API v1.1. However the company still exists, and we are planning a come back for next year.
HackFwd was one of the rare accelerators that was actually pushing the envelope instead of being copycats. Besides they had another rare trait in this space - integrity and deep commitment to companies they fund (disclaimer - I'm the founder of one of those companies).
My project FlockOfBirds has been funded by HackFwd. I would not have missed it for the world – if I could turn back time and make the decision again, I would do it again. Lars, thanks for everything!
Wow. It required starting an entire incubator to realize that? Given the number of European born innovators in the US it should have been obvious that being European itself is not a hindrance. If they'd looked to Y Combinator that would have noticed Paul Graham's heritage; they might also have noticed Paul Graham residence.
"3. We Underestimated The Bureaucracy. We all knew that bureaucracy in some European states, and across Europe was high."
See above.