Startups' insights Try, Try Again

Failure was never an acceptable part of Germany's traditional business culture, but startups have altered the landscape, turning a previous faux pas into an industry standard.
Mike Muehlberger: Proudly showing off another notch on his failure belt.

According to established career standards, there was a time when Mike Mühlberger was doing very well. Like his father, he was working for BMW, drove a fast company car and had a lot of responsibility as head of Formula BMW.

He laid the groundwork for today's Formula One drivers, and he negotiated with giants of the racing world, like Gerhard Berger and Bernie Ecclestone. He also socialized with German race car driver Sebastian Vettel. But he never truly fit into BMW's narrow corporate structure. He had long hair, liked to surf and ride dirt bikes, and was an independent revolutionary type.

Still, no one understood why he left the company in 2010. Mr. Mühlberger said: "Security isn't an issue for me" – and went out on his own.

And today? He now has a small storefront office in Lehel, a Munich neighborhood. There is a dog sleeping in the window, and although it's dusk all the lights are off. Mr. Mühlberger greets us wearing a hoodie with neon green stripes. He can get by with little money, he says, "even though it ought to be embarrassing for me."

People often talk about the idea that failure should also be possible in Germany, so that a real startup culture can develop. Failure is considered a valuable experience in America, but in Germany failure is frowned upon. Siemens chief executive Joe Kaeser recently said in a speech to young entrepreneurs that while people should be allowed to make mistakes, they shouldn't repeat them too many times.

The market needs to be literally screaming for precisely that app. Only then do you stand a chance of reaching critical mass. Mike Mühlberger, owner, Bliphead GmbH

Mr. Mühlberger is a member of this new class of entrepreneur. He says that he misses the lifestyle he had in his BMW days, and that he still strives for success.

But he has never regretted his decision to strike out on his own. Today he owns Bliphead, a company that advises other startups and has contracts to develop apps for large corporations, such as pay TV service Sky and DAX-listed pharmaceutical giant Bayer. Of course, he is also constantly in search of the next big thing.

For the 44-year-old, the advantage of being involved in projects that failed is that he can learn from his experiences. After leaving BMW, he convinced a "business angel" to invest in his ideas, and he developed, a flirting app similar to Tinder.

"I had underestimated what it would be like to enter a completely new business," Mr. Mühlberger recalls. "I had no relevant skills at all and didn’t understand the digital world." He made the painful experience that hardly anything is completed on time in the IT sector, and that the composition of the team is tremendously important, even more so than the idea itself. "The setup has to be right," he explains.

But the most important thing is that the business has to work. Many people have developed a practical app and thought that they could make money with it. "But the market needs to be literally screaming for precisely that app," says Mr. Mühlberger. "Only then do you stand a chance of reaching critical mass."

His comments reflect a new realism that has taken hold in large parts of the startup community. "A new app, a new online shop or a new e-commerce solution alone do not represent a good business model," says Carsten Rudolph, head of the BayStart-up network. The goal is to ask: "How do I utilize the opportunities of the Internet and digital technologies to generate real value for customers?"

According to Mr. Rudolph, it is hardly possible today to come up with true breakthroughs in e-commerce. The important thing, he explains, is to find applications in which digitization truly creates real added value.

An example he cites is the eGym app, which digitally links fitness machines and individually analyzes the user's exercise data. Another example, says Mr. Rudolph, is a navigation system with technology for indoor cartography, which could be used in places like museums and large corporate buildings, which are practical in that they help solve everyday problems of getting around.

Many startups have already had this experience. People rarely talk about it in Germany, but the fact that a business model isn't working is the exception, not the rule. Many new projects, such as apps or online shops, are launched with great pomp and then quietly terminated.

A study by consulting firm Rousseau Associates concludes that only 78 percent of startups make it past the first year in Germany. And according to surveys by the German Federal Office of Statistics, fewer than 50 percent of all newly founded companies survive the first five years.

Founders have to learn from the experience. Mr. Mühlberger made it a step further with his second idea, even though it too failed in the end. The idea, which he called Spreya, was a sort of digital bulletin board that allowed users to see, for example, whether someone nearby was giving something away, looking for a roommate or needed help.

Mr. Mühlberger was convinced that "there will be a need for this app as long as the lamp posts in the city are covered with flyers." He reached four million users and 30,000 active users with Spreya, but the app still wasn't stable enough for the long term. Mr. Mühlberger has since stopped all marketing activities for the app, and he wants to redevelop it so that refugees can use it.

Mr. Rudolph, the networker, is convinced that this new realism is good for the startup community. What he calls "unbridled hype" has been replaced by sustainable development. According to him, founders have learned to question whether business models are in fact sound. If they are, he adds, there will always be enough investor capital.

This translates into further opportunities for Mr. Mühlberger. Even after two failed attempts, he says: "I'm living my dream." Although Munich isn't the ideal place for startup founders, he adds, those who make it there can make it anywhere. He has broken his bones at least 12 times in motocross, and yet he still rides dirt bikes. "If you're afraid of the landing, you shouldn't drive toward the takeoff ramp in the first place."


Axel Höpner heads Handelsblatt's Munich office. To contact the author: [email protected]