Over the next few months, The Kernel will publish extracts from Ivo Spigel’s upcoming book, Eurogeeks. In this first interview in the series, Ivo catches up with Saul Klein, of Index Ventures and Seedcamp.
It is five years since the entrepreneur, technologist, and venture capitalist Saul Klein joined Index Ventures, and five years since he co-founded Seedcamp. In that time, the environment for start-ups, and especially start-ups in technology, has changed beyond all recognition.
But Klein’s own journey started earlier. A graduate in English Literature from Cambridge, Klein went on to work at The Telegraph, WPP, Microsoft, and eBay, but also start-ups including Firefly (sold to Microsoft), Skype (sold to eBay) and LOVEFiLM (sold to Amazon). He left Europe for the US in 1995, returning in 2002, just as after the dot com bubble had burst.
“What has changed is that there is a much, much more confident and vibrant start-up ecosystem in London than in 2002. Back then, even in 2002, we had gone through one wave of excitement over the internet,” says Klein. “People were actually, generally pretty sceptical and negative about the internet as an investment opportunity. People really weren’t funding start-ups very actively. The big companies in London and in Europe felt that the internet wasn’t such a big deal. Today a lot of that has changed, although I still think Europe and London are still very underdeveloped when it comes to the web.”
One of those changes has been the growth of Seedcamp, and other funds, incubators and start-up competitions that bring together ideas, entrepreneurs, and talent.
“It was a highly fragmented ecosystem, so having something that could bring not just entrepreneurs together, but mentors and investors was be very, very helpful. I put a blog post out, I think in February 2007, and I was actually introduced to Reshma [Sohoni, Seedcamp founder] by Mike Arrington at a conference in London, Future of Web Apps (FOWA). She was very, very keen to do something to move the European community forward, and we started working on it together. Over that summer we raised two million euros for the first Seedcamp fund, found a venue and invited mentors and sought applications for teams. It was a real start up.
“One of my great learnings from Seedcamp is that it’s all very well having a good idea, but unless you’re working with someone who can turn that idea into reality, like Reshma did, it just remains an idea. The idea I had with Seedcamp was really inspired by a conversation I was having with my friend John Borthwick who was thinking about starting betaworks. He told me about what Paul Graham was starting to do with Y Combinator and I thought ‘that’s a great idea! In Europe we really, really need something like that to help first-time entrepreneurs get a start’.”
And Seedcamp gathered momentum quickly. “One of the things I wanted to try to bring to Europe was the experience that I had had as an entrepreneur, both in the US and in Europe,” he says. “That attitude of, ok, let’s just make this happen, and get it done and do it fast. I had a track record from the US and from Europe so that would have made the fundraising easier, but from an attitude perspective it is about believing that things are possible and going out and trying to make it happen.
“I think it’s an attitude that a lot of start-ups in Europe have. In particular you hear stories about start-ups in Berlin who really have that scrappy, just get going and make it happen attitude. You don’t need a lot of money to start a business. You can get a prototype up and running and live – if you can write code yourself – for nothing or for a few thousand dollars, and if you can’t write code, you can hire people per hour and have something up and running for ten thousand dollars.
“What’s been great with Seedcamp, and also something I learned with Skype, is that the innovation and the drive to build entrepreneurial businesses is happening all across Europe – and beyond. Even in that first year of Seedcamp, in 2007, I was amazed to see companies like Zemanta from Slovenia, or the following year, Branient from Romania and Erply from Estonia and Ubervu. There is clearly an amazing wave of entrepreneurial businesses that are waiting to happen all across Europe. It’s not just in the Balkans and in Hungary and Romania or Estonia. There are great companies being built too in Scandinavia, in France, in Spain, in Italy, in Germany, in Russia, in Israel, in Portugal. Europe has become a very, very vibrant place to start companies.
“Obviously there are still very significant issues and terms of starting businesses and the market being very fragmented, but that was really one of the things that we were aiming to address with Seedcamp: create a network that entrepreneurs from all over the Europe could plug into and then use that as a platform to grow their business.”
An entrepreneur’s culture
And Klein believes strongly that entrepreneurship is, and always has been part of European culture. The key is to awaken the talent.
“Europe has a very deep, rich entrepreneurial heritage going all the way back to Christopher Columbus and before,” he says. “The entrepreneurial DNA runs very, very deep in Europe. It was the Europeans who went to America; that was an entrepreneurial venture. There’s nothing inherently un-European about being entrepreneurial.
“It is very difficult in established societies and cultures that have a huge amount of stability and predictability to go against the grain, and to be a good entrepreneur you have to be willing to go against the grain. But there are more and more role models in Europe, great entrepreneurial role models, as I said, especially in the newer countries in Europe. The mentality of the entrepreneurs coming out of these countries is incredible and really, really exciting, because people feel like there are new rules to be made… I saw that in Estonia, I see that in Israel, in a country that’s not much more than sixty years old. In the young countries being an entrepreneur is the main profession. Honestly. So, I don’t think there are any reasons why Europe can’t be a home for great entrepreneurs. It has been in the past and actually, is so even in the present, albeit outside of the tech industry. If you look at fashion, if you look at [companies] like Zara, H&M, if you look at furniture, IKEA, if you look at airlines, Ryanair, EasyJet: some of the most entrepreneurial businesses in other sectors in the last ten, twenty years have come out of Europe.
“There’s no question that there’s a whole generation of really strong entrepreneurs and entrepreneurial role models in Europe and at Seedcamp every year we try to showcase some of those stars. But we also can’t kid ourselves: the ecosystem in the US has been going since the mid 1950s.
“In the US, they are probably in the sixth or seventh or eighth generation of entrepreneurs and investors. There are start-ups that have become huge companies and we are probably just coming into the second or third generation [of that]. So yes, we should showcase the role models and inspire people to think big. But I also think the whole US-versus-Europe thing is not helpful. There’s an enormous amount that we should learn from the US and can learn from the US. It’s one of the reasons why going to the US is a big part of the Seedcamp programme, because we think it’s really important for entrepreneurs to spend time out there and to meet people out there, and to build a network out, there if they are to be really big and successful.
“The US will remain, for the foreseeable future, at least in my professional lifetime, a major, major force in the economy at large and in the tech economy. I would always encourage European entrepreneurs to learn whatever lessons they can from the US, but then also to forge their own way. I think it’s also increasingly important to start learning lessons from Asia as well. A lot of the really interesting companies of the next twenty five years will come from there as well.
So how will European venture capitalists, and Seedcamp in particular, fit into this?
“When we started Seedcamp I always said to the investors and to Reshma that I think this was a fifteen to twenty year project,” recalls Klein. “You don’t build an ecosystem overnight. I see Seedcamp today rather like a series A company. It’s still very young, it still has a lot to prove, although it has done a lot already.”
And much of what Klein has learned, he freely admits, comes from the time he spent working for large enterprises – especially Microsoft.
“I always think that Microsoft was like going to business school for me,” he says. “All the big companies I had a chance to work at, The Telegraph, WPP, Microsoft, and eBay: I learned an enormous amount at those companies. You learn a lot about scale, you learn a lot about process. Any small company really, hopefully, aspires to be a very, very big company and having worked inside some of those big companies, I’ve a sense for what a small company looks like when it grows up.
“Microsoft is a very big company, and even when I was there, ten years ago, twelve years ago, it was a very big company. When I was there I think it was twelve thousand people, that is half the size Google is today. But Microsoft in 1975 was a start-up. That seems like a long time ago but it’s really not… and it’s an amazing experience to work at a company where the founders are still running the company. They had very, very entrepreneurial leadership, running a business in hundreds of countries producing billions of dollars of revenues and billions of dollars of profit. So for me it was an amazing experience to be there at the time when Microsoft was as dominant as folks like Google are today, and Facebook may be in the future. It was a very, very great experience to see how to, or how not, to deal with that kind of market dominance.
“As long as people have the mentality of being open to starting businesses and having the risk profile that says ‘I could be part of a start-up’ I don’t think it matters what you study – you don’t even necessarily need to study anything. People who come into our industry come from all sorts of different places and backgrounds and actually that is one of the most exciting things about it.”
An Ivy League for tech
But not every entrepreneur can work for Microsoft, or Google. Can Seedcamp and other accelerators fill the gap?
“The way I see Seedcamp, Y Combinator, or Techstars is that they should be the best start in life, or the best education that a prospective entrepreneur can get. If you compare this to universities or MBAs it would be like going to Harvard or Yale, or Stanford, or Oxford, or Cambridge. What I would like is if, in ten years’ time, someone who wants to start a business and wants the best possible start for that business should think of these as an Ivy League of accelerators, and that Seedcamp is one of them,” he says.
“Europe is where the need is greatest and where we have invested the most time building our network. I think we’ve probably under invested, even though I think we’ve invested a lot more than most, in the ribbon of countries between Estonia and Slovenia. I expect that in the next five to ten years many, many more start ups will come out of Croatia, Slovenia, Romania, Hungary, Poland, Czech Republic, Estonia, Latvia, Lithuania, and Turkey. Those are the areas Seedcamp has really pioneered in terms of connecting entrepreneurs to the wider tech community and to the US, and we see those as great opportunities.
“Obviously our focus is on Europe, on the time zone between London and Tel Aviv. We help entrepreneurs to access customers and investors in the US. And the reason we have started to dip our toe into Asia is because we believe over the long term that is important as well. We have had successful Seedcamps in Mumbai and in Singapore.
“But to me this is a very long-term project and in the short term, in the next couple of years, what we need to do is to hold great events that entrepreneurs and mentors want to come to, keep investing in good companies and help them to be successful. It’s a simple as that. If we can keep doing that then we’ll still be around in ten or twenty years’ time.”
Edited versions of Ivo Spigel’s interviews have also appeared in the Croatian edition of Forbes magazine.