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Interview: Silicon Valley is the first location that comes to mind when thinking of startups, but the scene is developing outstandingly in the Vienna Region as well. Pioneers CEO Oliver Csendes as well as startup founders Denise Mandt (of the TU Wien spin-off “UpNano”), Alexander Reissner (CEO of “Enpulsion”, a spin-out company of FOTEC GmbH, the research subsidiary of the University of Applied Sciences Wiener Neustadt) and Martin Poreda (of “Hektar Nektar”) discuss the Austrian startup ecosystem.
- UpNano is an industry startup which develops patented high-resolution 3D printers for micro components.
- Enpulsion is a tech company which successfully produces satellite propulsion technology for micro- and nanosatellites.
- Hektar Nektar, a bee conservation platform, is the new project by brothers Martin & Mark Poreda, founders of the employer rating platform Kununu.
- Mr. Csendes, the startup scene in Vienna has grown considerably – but can it compete with international developments?
Csendes: The competitive capacity of Vienna as a location for innovation and startups has increased. We contributed by bringing together the ecosystem and making it more visible internationally. We bring together, for example, companies from different sectors in open innovation programs, and we help entrepreneurs with our spaces, services and network to boost their success rate.
- Dear founders, how did your companies originate, how did you finance them and what are your next steps?
Mandt: UpNano began at the Institute for Material Science at the TU Wien. A research team has been dealing with high-resolution 3D printing systems there for almost a decade. While researching applications in the cell biology sector, it turned out that the 3D printer would be suitable for use in many industry branches as well. We were able to develop a prototype with university commercialization subsidies. At the same time we founded our startup, we received an aws PreSeed grant and private investments from strategic partners which helped us finance the technical equipment and machine parts. By now, development of the next machine generation has already begun. As our next step, we intend to set up a demonstration machine in the US.
Reissner: The Wiener Neustadt-based Enpulsion produces electric satellite propulsion systems which are based on ion current emissions. In our early stages, we profited from the funding possibilities in Austria and the EU. Since these subsidies are seen as a proof of quality, it was easy for us to attract additional investors, so within the first two and a half years, we were able to launch the production of a well-researched technology with an investment of three million Euros. This means we are not a classic startup, but rather consider ourselves a young company. We are currently in the second round financing phase since there is high demand and we need more capacity. We are currently producing about eight engines per month, have delivered over 70 models, and we are simultaneously developing another product to cover more of the market.
Poreda: The goal of Hektar Nektar is to grow the bee population. We combine the technical know-how of spawning bee colonies with the knowledge of building up communities and moving the masses. Hektar Nektar is currently in its startup “labor pains”. On the one hand, investors are more trusting thanks to the success of our Kununu project, but on the other hand, their imagination is not as strong when it comes to bee preservation as with, for example, blockchain. Even though the FFG and the aws have both agreed to give us funding, we haven’t seen any money yet due to bureaucratic reasons. Overall, we are not able to launch big campaigns and tap the full potential of the subject since our funds are limited.
- Which leads us to the question, what happens if you can’t achieve your breakthrough? Should a startup have a plan B?
Reissner: There was a transitional period with FOTEC. If our plan had not worked out, we could have pulled the plug in time. This gave us mental security. We did have a Plan B in terms of intelligent team line-up: experts who are able to follow new technologies if the current one does not hold up anymore someday.
Poreda: I’ll argue that there shouldn’t be a plan B for startups precisely because it creates a safety net which can be mentally hazardous. I believe in self-fulfilling prophecies. You need to believe in your ideas and visions. With Kununu, we were extremely close to pulling the plug two times. The media usually romanticize the startup world. You only hear success stories in retrospect, but almost never how the founders went through hell before their successes.
Mandt: We are currently in the seed phase. We sold our first machine for half a million Euros, which gave us a financial cushion. We are just one step away from our breakthrough. There is no plan B. Going back to the TU Wien is not an option for us. Should we fail, we would keep trying our luck in the private sector.
- Every region has its own startup strengths. Where do you see the strengths of the Vienna Region?
Csendes: There is a cluster of healthcare and life sciences in Vienna. Also, Brexit and the good reputation of Vienna are opening up new opportunities in the areas of digitalization and modernization of public administration. Therefore, Pioneers has been focusing on GovTech for the past three years. Technology is changing our social and democratic systems. Europe needs to actively help shape this development and assert its claim for leadership.
Mandt: The Vienna Region is a good launch pad for people with creative ideas or concepts, since there are many possibilities to take first steps without having to take great risks, for example via the Vienna Business Agency, WKW rocket science, the INiTS incubator program etc. Especially the academic world leads to many commercialization possibilities.
Poreda: We never thought about our competitors and never did any market research, but I consider the manageability of our community an asset. There is less competition, the location is uniquely central, and the quality of life is matchless.
- What are the characteristics of the Viennese startup ecosystem?
Csendes: According to the “Global Competitiveness Index”, Vienna ranks fourth and therefore better than San Francisco and Berlin. Also, Vienna is becoming increasingly attractive for investors. After all, Austria has seen 138 million Euros in startup investments, a large part of that in Viennese startups. Furthermore, with a foreign student share of almost 30 percent, Vienna is very internationally oriented. Not to forget the many “hidden champions” which have become world market leaders in their respective niches. With its success stories and collaborations, the Vienna Region is a good spawning ground for the startup world. Also, Vienna boasts well-connected co-working hubs such as the Talent Garden, where the most important players of the Austrian ecosystem can meet and exchange experiences.
Mandt: If you are part of the academic world, the Vienna Region offers an excellent ecosystem. As a spin-off of the TU Wien, we are still in intensive contact with them, for example regarding patent law matters. Both partners profit from such cooperation. INiTS, the university founding platform, also gave us many contacts and helped us to get started.
Poreda: Comparing today’s world to the one where we launched Kununu, there have been many positive developments. Back then, there was no public awareness of the startup scene. It was difficult to get financing or funding for digital projects, not to mention co-working spaces. Today, startup300 and Speedinvest are among those who deserve a special mention.
Reissner: Yes, there are many attractive and sophisticated funding possibilities. I should also highlight the idea of cooperation – between academic institutions and companies, but also between research companies and startups. It bears fruits and generates an ecosystem which results in very good ideas. To us, well-trained specialists are important. We like to employ HTL graduates. Also, we attract highly qualified employees from the rest of the world, and we are able to keep them because Vienna offers them an exciting living environment.
- Is there insufficient outside-the-box thinking in Austrian startups?
Csendes: No, Austrian startups know the models which have been successfully employed by many international startups, and they know very well how the system works. They validate quickly and think internationally, otherwise they would not receive growth capital.
Mandt: There is a thin line between being too careful and missing out on potential opportunities, and being too carefree. When selling our first 3D printer, it was important to us that our customer was from Austria so the vicinity would allow us to offer the best possible customer service. But now we are thinking bigger and have requests from Argentina, Brazil, the US and the UK. More startups should have the courage to think internationally.
Poreda: The Austrian market is too small for startups and not a good testing ground for new ideas. For good reason, there is a saying: If you can make it in Austria, you can make it everywhere. At Kununu as well as at Hektar Nektar, the German-speaking countries were our first target market. The common language makes things easier. I think before heading off into the big, wide world, a company should prove that it can be regionally successful.
Reissner: It was our goal from the beginning to cover Europe and the US since the space industry is very much global. We started investing in distribution in the US early on; we have a subsidiary company in Silicon Valley which handles distribution, and we are working on a similar setting for the Asian market which we did not even consider at first. I believe many companies are missing a visionary component in their objectives. Exits are taken way too early, as if to say: rather enjoy quick success than let everything slip through your fingers. I think they do not have enough confidence in their own product.
- Many good ideas that originate in Austria only find investors in other countries. How can we foster a better risk capital culture in Austria?
Csendes: An active and successful risk capital culture needs several factors, many of which are given in Austria. There are talented founders, but as a small country in the middle of Europe with seven neighboring countries, Austria must not seal itself off. We also need a new form of organization to better fulfil the needs of startups. I’m thinking of an easier transferability of shares. What is even more important is to incentivize investments in startups, for example via tax incentives.
Mandt: The willingness to carry a risk is not part of the Austrian mentality, but there are more and more opportunities for risk capital. It wasn’t difficult for us to find investors because we have been present from the very beginning and won at many startup and pitching events. Therefore, investors kept approaching us. Financing becomes difficult once the capital requirements reach a higher six-figure value. This increases the risk of losing talents which require high investments to foreign countries.
Reissner: There is little risk capital – also because few companies can receive it. I think it’s a problem that many companies are kept alive for too long – so-called zombies which don’t draw profit and swallow up a lot of money. In the US, the mentality is “fail fast, fail often” – until you’re successful. But this motto is a tough sell in Austria. Still, the Austrian market is perfect for those whose goal is to generate stable sales. Therefore, the Vienna Region is perfect for owner-managed family businesses and hidden champions.
Interview by medienkomplizen / Christian Scherl
Fotos: Oliver Csendes© Sebastian Kreuzberger | Denise Mandt© upnano | Alexander Reissner © Enpulsion.Ben Leitner | Martin Poreda © Schedl