In Berlin, we meet Peter Borchers who founded and heads the Deutsche Telekom Incubator hub:raum.
Peter describes the business model behind hub:raum, which divided into an incubator and accelerator programs. Peter also talk about how it can help young entrepreneurs grow their company to the next level and he shares his valuable advice.
The transcript of the interview is below.
Martin: Hi, today we are in Berlin at Hub:raum, the Telekom accelerator and incubator. Peter, who are you and what do you do?
Peter: Hi Martin. I’m founder and head of Hub:raum. Hub:raum is the incubator/accelerator of Deutsche Telekom so we’re supporting start ups in the early, seed stage, helping them by funding them and advising them, helping them to build their product and their company.
Martin: And what did you do before you started this Hub:raum?
Peter: Quite some varieties in my career. So, already during and because of my studies I started to build the company. It was before the internet age, so therefore it wasn’t directly related with the Internet. It was kind of an advertising agency. I then started out at the consulting firm and then went in ’97 into the sphere of internet. So I started as a product manager for very early, internet products back then and actually that was at Deutsche Telekom as well, but I left the company again after two and a half years or so to build my own startup, which was called Everseven, together with three friends. So, that was a marketplace for freelancers, basically, for the communications and media industry. Actually, we went bust like the bubble did back then, so through some consulting jobs and without having it planned I came back to Deutsche Telekom actually, and worked in our headquarters at corporate strategy. So one of my projects was what later became entertain our TV product, so I did the initial strategy product for that. I then built up a daughter company for Deutsche Telekom, also in the innovation sphere, which was called Telekom Innovations GmbH. So we’re building products outside headquarters, also it was located here in Berlin, dedicated GmbH so a little bit also outside the structures of a typical corporate. Products like fussball.de, for example, came out of that, or three-minutes short film Portal, very early short film Portal and also it was called Twister, a very early second screen product so that was between 2006 and 2008 or so. And then, when T-ano GmbH, as it was called, to shorten the name a little bit, when we migrated back into the corporation, so back at the Deutsche Telekom AG, I was kind of well… I mean I still got my money but I didn’t have a structured job anymore so I thought about what to do with my time, also thought about potentially leaving the company but then thought that basically what I’ve learnt during my professional life so far so being an entrepreneur on one hand side being in a large corporation on the other hand side so I thought there must be a way to kind of pragmatically connect those two worlds and create something that helps both worlds equally. And is what eventually came after another two and a half years at Hub:raum.
Martin: And can you tell us about the Hub:raum business model? I know there is an accelerator and you have an incubator, can you tell us a little bit more about that?
Peter: Our main activity is the incubator. The incubator means that teams that become part of it get basic four things: #1, funding, up to 300.000 Euros; #2: a place to work so behind us here you see, you’ve just seen our co-working space; then #3: we have a big network of advisors, of mentors from the startup scene, but also experts from Deutsche Telekom, domain experts like security space or so; and last not least, it’s a pragmatic way for startups to connect with a large corporation and also profit from the strengths of a large corporation like the reach, for example.
Martin: And how can I as an entrepreneur gain reach through Telekom?
Peter: Well, I mean, there are several ways because the product portfolio of Telekom is so huge so I mean there’s lots of ways to interact with the corporation like DT. But one is, for example, T-systems we have. T-systems is the unit of Deutsche Telekom that serves the 400 biggest customers like very big global corporations or governments, or so. So their sales force are always happy to take some of the products for startups with them when approaching their clients and basically, well yeah, make it potentially more interesting also for the clients to get introduced to new products, also trying to bundle their existing products with our product, so that’s one way. But there is also problems like the pop-ups program at T-mobile. So, every month there’s approximately 10 apps, mobile apps that get featured within the T-Mobile network, so that’s another example. But it can also be, I mean, like with one of our start up’s Q-learning that Telekom just becomes a customer and buys the product.
Martin: Ok, I understood from this B2C side that it’s top apps and B2B is T-systems. In terms of this B2B side – when I have built a product, some kind of subscription model that could target other Fortune 500 companies and who do I need to convince at Telekom so they will implement my product and sell it to their clients?
Peter: Well, first of all, you should convince the Hub:raum team and get accepted into the program and then actually what we’re doing is we are really trying to help the company, the start up, to find their way because it would be so incredibly difficult for a start up to actually find their way through the big jungle that every large corporation is. So, we have in place a handful of what we call cumulationship managers and they are really helping the startup to get access to the right person at the right time and also try to kind of facilitate the whole process.
Martin: And you talked about this incubator model. How do you help your companies or portfolio companies for raising additional money once they leave your program?
Peter: So, after typically 9-12 months they need additional money and there are several ways. I mean, that could be a follow on investment by T-Venture, for example, so Deutsche Telekom had, for more than decade, we have dedicated venture funds so this is way number one. Way number two would be to get money from another external investor, like I typical VC, and we have quite a broad network of VC so we try to introduce our startups early on to them, we also have a yearly portfolio day that helps introduce our startups, so we are really trying to help get the follow-up on financing as smoothly as possible.
Martin: And in terms of your accelerator, how does it work?
Peter: So, the accelerator basically is kind of the little sister or little brother of the incubator. It’s basically the same but it’s shorter and it’s without money but also without equity. So it’s basically a no-strings-attached program for the startups and they also get access to our co-working space, they get access to our network of mentors, of experts and also access to Deutsche Telekom.
Martin: So, they also get the same access to T-systems, for example? Great, okay.
Martin: We always try to teach first-time entrepreneurs not to make as much mistakes as they may be doing, and what have been the major learning for you? When starting your own company and when seeing other entrepreneurs failing and succeeding?
Peter: Well, I mean, there’s an infinite area of things an entrepreneur should think of, but maybe to name a few. I think first of all its super important with whom you’re working. So, with whom you’re working on one hand side as advisors and as an investors, but also your own team. So you should really focus on getting the best people and getting the best team to work because this is the basis for everything else. Then, I would say another important aspect is, and this also has kind of changed you to the lean startup movement, that, as a startup, I would always try to start building something, start getting something to work, get it in front of customers, get their feedback and then get moving like that. And also, I would only approach a VC or an incubator after having done at least a few steps. I mean, we also have accepted ideas on paper, but it’s far easier to get the idea over to, for example, the investor, if there is already something in place, like a prototype or so. What else? I mean, actually, one thing might not be typical learning, but in inside that I get, and that is interesting because, when startups approach us, they are so convinced about the product and they know their product so well that often times, and that’s really strange, they just forget to really explain what their product is. So they’re coming in, telling everything about their marketing strategy, about their internationalization plans, everything, everything. But they forget to tell in a few sentences, sometimes they are because I didn’t ask them, sometimes they are not even able to really condense it and just say in one or two sentences what their product is. And this is something I was really, I mean, I was in the beginning, I was kind of shocked but now I see it’s often, and it’s really strange. I think that’s the thing that is typical potentially to first-time founders, they won’t do it second time, I assume, also, when telling them they kind of…
Martin: You can change quite fast, yeah?
Peter: It’s no problem, I mean, they know their product, but they just, often times they just forget to really tell it and to have one or two sentence kind of elevator pitch thing in mind, every entrepreneur should have something like that in mind.
Martin: Ok. Peter, thank you very much for your time.