10x Founders’ Pathway Points Towards D & I Chances In The EU Start-Up Ecosystem And Beyond
In May 2022, Sifted spread the news that the “German venture network 10x Founders launch[ed] with €160 million, backed by 200 entrepreneurs”. This article will both provide a background about the mission of 10x Founders and its founders. In addition, it will provide useful information for start-ups who find themselves struggling in their early stages on the German market due to discrimination and racism. Information is key, isn’t it? Even when it just contributes to not feeling alone – because together, we cannot give up just yet! Let’s get critical and rethink what can be done by and for seed stage start-ups in Germany now, especially to promote diversity and inclusion! To better understand this, this article will first draw upon findings from the Migrant Founder Monitor 2022, which demonstrate the need for changes!
The Migrant Founders Monitor 2022: Racism As A Core Issue In The German Start-Up Scene
If you are a migrant founder in Germany, you are probably facing a range of hurdles next to and in the context of the search for investors – and you are not alone! According to the Migrant Founders Monitor 2022, which was established by the Friedrich Naumann Foundation for Freedom (FNF) and the German Startups Association (‘Bundesverband Deutsche Startups/ Startup-Verband’), racism sadly remains a definite problem, which also affects the German start-up ecosystem. To find out how this problem plays out specifically, the FNF and the Startup-Verband interviewed 394 migrant founders of the first and second generation in 2021 with 59% of interviewees having been born abroad.
Whereas the choice of interviewees allowed to interview a similar number of founders who were born in Germany and abroad, the results of the 2021 survey show that founders of the first generation who have studied abroad encountered the most frequent experiences with racism during the founding stages of their business. More concretely, 51,4% of first generation founders who studied abroad mentioned that they had to deal with racism while starting up their business. In comparison, only 32,6% of first generation founders who studied in Germany and 16,7% of second generation founders agreed to the latter statement. While the Migrant Founders Monitor 2022 emphasizes that these numbers provide insights into the frequency and severeness of racist encounters, it does not specify what type (i.e. verbal, physical, passive aggression, micro-aggression etc.) of racism, discrimination or aggression migrant founders encountered. However, it determined the dimensions of racism dividing racist encounters by different actors.
Whereas first generation migrant founders were mostly affected by institutional discrimination, namely through competent authorities and administrative bodies (19,7%), banks (16,5%) and investors (13,3%) with landlords (11%) and cooperational partners (10,1%) still majorly contributing to hostility, second generation migrant founders were proportionately less affected by racism overall. However, their statements reemphasize that institutional discrimination (8%) constitutes the largest issue next to the lacking support of banks (6,7%), landlords (5,3%) and investors (6%). Different from first generation migrant founders, second generation migrant founders encountered the least experiences with racism in their relationship with cooperational partners with both groups noting that there were comparatively little issues in the contact with other founders. This is indeed not very surprising considering the fact that the average start-up is multi-national and interested in the internationalization of their business activities.
If one were to make a rough guess about what the latter findings mean in the broader context, one could argue that the transformation of the German start-up scene, or even its formation, is still an ongoing project on the way towards diversity and inclusion. The latter is to say, no community and network grows overnight and overthrowing old values takes its own time (sadly). As Anais Cisneros, the Chief of Staff and Head of Operations at TechTree, writes on LinkedIn, after Berlin became Germany’s capital city in 1991, its reconstruction began. Offering cheap rent and attracting different cultural movements, Berlin naturally became a city for entrepreneurship – but “[i]n the early 2000s […] there was no big industry, which made it a fertile ground for people to build from scratch” and loosen up the tendency of certain industries dominating certain geographical spots. While the latter is certainly no prerequisite for start-up ecosystems to thrive, it could be argued that loosening up Germany’s economy for a while led to a much-needed diversification – and the more diverse a start-up ecosystem is as well as the more diverse companies cooperate together towards a common goal such as the digitalization or decarbonization, the more chances might arise to break with old stereotypes!
Even today, specific cities and regions are still associated with one particular industry. Probably no one would disagree that Frankfurt is the ‘German capital of finance’. However, the difference is that start-ups, rather than SMEs and large companies, ensure that experts from different fields proactively work together. Germany’s Mittelstand has long been referred to as a “model of economic success” and 3,5 million businesses in Germany are small- or medium-sized, providing for 60% of employment and 80% of vocational education. Whereas the latter certainly are great achievements, the German Mittelstand might be stagnating a little – providing too little employment opportunities for university graduates with an entrepreneurial drive, especially in leadership where careers often start at the age of thirty-nine. As industries break open and start-ups and SMEs increase prospects for cooperation, it is of profound importance that diverse entrepreneurs are backed by investors and networks to support their work in front of public investors and the investment departments of German SMEs.
10x Founders: Multiplying VC Funding, Multiplying Seed Stage Success
So, who are they anyways?…
Are you curious to meet 3 of the 10 founders of 10x Founders? Then look at the profiles below!
- Felix Haas
Felix Haas is the Executive Chairman & Founder of IDnow, a “platform for identify proofing”, which tries to make it easier for businesses to rely on only one source thanks to offering a comprehensive series of products such as an AutoIdent, a VideoIdent, an electronic ID verification with near-field communication (NFC) and an identify wallet. Next to making electronic signatures trustable, Haas has also been involved in Bits & Pretzels, a reputable high-level start-up exhibition in Munich, as a Chairman and Host. No wonder that 10x Founders has collected funding from 200 entrepreneurs and angel investors to kick-start its further journey…Bits & Pretzels namely attracts around “5,000 founders, investors, and startup enthusiasts” yearly! The perfect network to start from or, at the least, one of the best-skilled networkers to get inspired by!
- Andreas Etten
Have you ever heard about FLEX Capital? If your answer is no, then you probably also wonder who Andreas Etten is and why he chose to become a Founding Partner at 10x Founders! Lucky you, we have answers…FLEX Capital is an investment firm, which is particularly interested in start-ups, who ‘deal’ with internet and software solutions. If your company has its headquarters in the DACH region, generates between €5-30 million in sales and has an EBITDA, which does not exceed €1 million, then you might probably want to find out more! Of course, targeting German-speaking countries with your growth-oriented solution might be an extra challenge, but why not try? Whereas he might only be able to provide an answer himself, one may assume that Etten’s interest in “investing in founders of digital start-ups in Europe and USA” is somewhat linked with the mission of FLEX Capital.
- Andrej Henkler
If you have not yet heard of Andrej Henkler, then let us describe him in one or five words: the jack of all trades. As it states on his team profile at 7 Global Capital, “Andrej is a serial entrepreneur and active business angel”. Whereas he founded companies in the domain of media from the late 1990s to early 2000s, his interest shifted to deeptech companies in the US and Europe after that, and his latest project is probably Leblon Capital. Whether it may be the latter experiences or his involvements in the Bertelsmann Group and VOX media, Henkler’s pathway is certainly a fascinating one. Having been managing the portfolio of companies such as Evernote, Zipline, Klara, SimScale, Seed Legals and more, and having been involved in some of Silicon Valley’s well-known VC funds, Andrej Henkler has without doubt developed a good sense of what works and what does not.
And what is their mission?…
As Miriam Partington argues in the Sifted article about 10x Founders, their initiative has a lot in common with the Galion Project in Paris and ByFounders, whose partnerships aim to empower ‘impact-aware’ founders and start-ups with software-driven business models in their early stages in Nordic and Baltic countries. Different from ByFounders, the Galion Project aims “to make the [start-up] ecosystems of France [in particular] and Europe the most attractive in the world”. Bringing together around 400 entrepreneurs, the Galion Project could also be described as a pool of great expertise about French tech, which shows that 10x Founders is not only such a great initiative, because entrepreneurs have heavily invested into a €160 million worth pre-seed to Series A fund. 10x Founders indeed marks an attempt to provide “access to knowledge, contacts and capital” among entrepreneurs with lacking connections.
In a nutshell, 10x Founders’ approach was described as “building bridges” and this is also, where the project could consciously choose to add a further component – that of building bridges to prevent and combat discrimination and racism in the German start-up scene. Indirectly, 10x Founders already does that, namely by making a commitment to bring together “the right coinvestors into the rounds with the best founders”. While this merit-based approach will unavoidably stay somewhat biased due to being based on the judgement of ‘connectors’, it could prevent certain groups from being strategically excluded from investments due to prejudices and racism, that is as long as connectors are committed to this goal and will not diverge from choosing the best innovations. The general question for 10x Founders and also smaller investment funds amid a changing world might however be, are they willing to make a legal commitment to promoting diversity next to merit?
Arguably, such an effort would also include carefully choosing and training its investors and any other members of a particular network with regard to these values. As mentioned in the article on Sifted, it is the mission of 10x Founders to systemize early stage investing and also engage in research and development. “48 business angel ‘fellows’ (seven of which are female)” will be involved to “contribute industry expertise to portfolio companies”. While the latter is a very proactive step towards supporting founders with any knowledge they might need and lack, additional efforts towards diversity and inclusion would certainly not be misplaced. And the latter might also be relevant in the wider context of investor-entrepreneur networks and communities such as 10x Founders. Considering that huge networks might have an easier time establishing contacts with public investors and similar networks and the start-up ecosystems in other EU countries and beyond, such networks should also have additional responsibility towards promoting diversity and inclusion.
Whereas this would need to be further specified, two developments might have to take place for this purpose: 1) the accreditation of investors in line with their commitment to promoting human rights, environmental and D&I standards and, 2) the accreditation of such networks at a more comprehensive level, which might allow for the chance to discourage highly unethical investments rather immediately. Whereas there already is a lot of research on (sustainable) value chains, it arguably is of great importance to start finding out more about the role of the investor amid a changing political landscape, wherein MNCs as well as SMEs have an impact on local, regional, national and international politics.
Centurion Plus
If you are an entrepreneur, a start-up or a SME with a mission in Germany, our team will happily assist you on the legal side. We are both specialized in supporting multicultural businesses in Germany, in supporting African businesses in Germany and in supporting businesses across various African jurisdictions. While our support starts with providing help on immigration and relocation matters, it does not stop there – taxes, tech, intellectual property…You heard us! We are truly enthusiastic about business, international trade and knowledge exchanges and want to support businesses with innovative missions from their initial founding phase to their regional expansion. Contact us today to find out more and find out about any potential synergies.
