Volume 05 | August 2010Consumer Service 2.0

03 _ State of service New Internet-based companies are proving that you can have it all

04 _ Work in progress Mikini’s founders are taking car sharing in Europe to the next level

10 _ Panorama New websites are catering to the active consumer

12 _ Done deal How Tipp24 became Europe’s dominant site for lotteries and games

16 _ Vision Polyvore CEO Sukhinder Singh Cassidy on the importance of engaging consumers

18 _ New kids on the block Yoom promises to revolutionize Germany’s large rental market

22 _ Up close and personal Earlybird Managing Partner Hendrik Brandis

The partners of Earlybird (from left to right): Wolfgang Seibold, Hendrik Brandis,Christian Nagel, Roland Manger, Rolf Mathies, Thom Rasche

“Welcome to EARLYBIRD Magazine. We want to share our insights on technology segments

relevant to our industry, as well as on how Internet-based companies are improving customer service.”

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welcome | content

during the early part of my career, I worked as an aerospace engineer, helping to design planes at Messerschmitt-Bölkow-Blohm in Augsburg. I was fascinated by the precision and intensity of the work; less so by the way delivery deadlines were consistently broken and project budgets overrun. To this day, airlines have to accept delays and cost ex-plosions if they want the latest “flying miracle” from Boeing or Airbus in their fleet. The message is simple: quality and service are neither fast nor cheap. You can’t have it all.

For a long time, this message was also the guiding principle in the consumer space. Take grocery shopping. Discounters such as Aldi or Lidl offer very cheap products, but little choice or service. At Fortnum and Ma-son or Harrod’s Food Halls in London, you can find an amazing assort-ment of gourmet foods, but you need deep pockets to buy them. Either way, there is a trade-off.

In the traditional consumer world, you can have quality, selection, speed, and reasonable prices – just not all at the same time. This edition of Earlybird Magazine, however, is dedicated to people and companies who have overcome this seemingly insurmountable issue. Our first case study, Mikini (pp. 4-9), proves in an impressive way that it is possible to deliver all the above mentioned parameters at once. Operating ride sharing web-sites all over Europe, Mikini’s German site alone offered 564,317 rides on May 31, 2010. Such a vast number on any given day would have been im-possible for a traditional car sharing service, even with hundreds of em-ployees working in a central dispatch. Yet Mikini is run by a handful of people. In order to create a valid business, traditional ride services always had to charge consumers directly; Mikini’s base service is free.

The technological tool for such a radical redesign of a business model was, of course, the Internet. But it would not have worked without the engagement of hundreds of thousands of registered users. What started with people writing book reviews on Amazon or selling products on eBay has become a mass phenomenon of consumer activism, which is the focus of our Panorama story on pp. 10-11.

More than 15 years after the launch of the World Wide Web, we fi-nally have an environment of transparency where almost every company and consumer in the Western world is online, fostering competition and, above all, giving consumers a mighty voice hitherto unheard. Sukhinder Singh Cassidy believes so much in the potential of this new age that she gave up her well-paid job as a high-ranking executive at Google and joined the fashion platform Polyvore. Read more about her visions on pp. 16-17.

At Earlybird, we also believe that there is huge potential in “Con-sumer Service 2.0”. That’s why we have invested in Yoom (pp. 18-21), a real estate marketplace which enables consumers to bypass the tradition-al broker. We’re also proud of having invested in one of the early harbin-gers of this new age: Tipp 24 (pp. 12-15). Launched in 2000, the company quickly became a huge success with its simple twist on the traditional lot-tery business. We invested €2.6m in Tipp 24, our return was €58m. Some-times, it can be quite rewarding to be an Earlybird.

HENdRIk BRaNdISManaging Partner

Munich

Consumer Service 2.0 is

about delivering quality, selec-tion, speed,

and reasonable prices all at the

same time

Finally, consumers can have it all

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STATE OF SErvicE | editorial

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Ticket to rideMore and more people are taking to the

idea of car sharing. Mikini, which operates Europe’s leading online ride share service,

is planning on driving the trend forward

B Y M A R Y L I S B E T H D ’ A M I C O

a greener way to ride: Mikini founders Matthias Siedler, Stefan Weber, and Michael Reinicke (from left to right) are professionalizing car sharing services, which cut back on the number of single-passenger cars on the road

carola riedel says she may never take the train again. An administrative assistant at a Munich-based asset manage-ment firm, she frequently travels home to her native Leipzig on the weekends. But for the past 18 months, she has been forgo-ing the train or bus in favor of Mitfahrgelegenheit.de (MFG), an Internet-based ride sharing service that connects drivers offering available seats with passengers willing to share the cost of the trip. “It’s a great thing all around,” says Riedel. “It’s cheaper and more flexible than the train – I can decide sponta-neously if I want to go. It’s good for the environment, because people don’t drive separately to the same destination. And al-though I had my reservations the first time I did it about what kind of people they would be, I have found you generally get to know nice people.”

More and more people are thinking like Riedel. Ris-ing transportation costs, financial insecurity, increased envi-ronmental awareness, and growing job mobility are all factors driving the interest in ride sharing. For those under 30, there is also a certain social element. And experts feel there is still much more business potential to be mined.

According to European Commission data, there are 231.9 million cars on the road in the European Union each car-rying an average 1.06 passengers. The average number of kil-ometers traveled per year is 9,512 km per person. “That’s a to-tal amount of over 2.2 trillion kilometers per year with just one

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BORN: Jan. 30, 1973 NATIONALITY: GermanFAMILY STATUS: Single EDUCATION: Business Studies (University of Wuerzburg)WATCH: NoneCAR: Volvo V50FAVORITE ENTREPRENEUR-ALIVE: Shai agassiFAVORITE ENTREPRENEUR-ALL TIME: Jeff Bezos

STEFAN WEBER

person in a car. This gives you an idea of the possible econom-ic and ecological impact of ride sharing,” says Matthias Sie-dler, one of the three founders of Munich-based Mikini, which operates the MFG platform. Germany’s top online ride sharing service, MFG is gearing up to benefit from this potential. It al-ready enables between 10,000 and 30,000 people to find rides daily, transactions valued by Earlybird at more than €200,000 daily, based on the average fares paid by each passenger.

Long acceleration period

If it were a movie, MFG would be an indie sleeper whose reputation grows slowly rather than a blockbuster sen-sation. Founded in 2001, the platform began life as an Internet project for Stefan Weber, Michael Reinicke and Matthias Sie-dler – three modest but hardworking business students at the University of Wuerzburg. Both Siedler and Reinicke had some

programming experience. The three had already been operat-ing wuewowas.de – a portal for the city of Wuerzburg – since 1999. Developing MFG took them about 18 months and was self-funded with 20,000 DM (€10,000). “We spent most of that on creating a logo, flyers, posters and business cards,” says We-ber. “The cost of programming the website and the servers was nearly zero, since we did it all ourselves and had some good contacts to the top web design company in Wuerzburg.”

Other such platforms already existed, including Mit-fahrzentrale.de, which had several advantages over the new-comers: a domain name that came up first in searches and a name linked to a well-known traditional ride sharing firm. But the three felt they could build a better software interface than Mitfahrzentrale. They also chose to make the service free, whereas Mitfahrzentrale required users to phone up a special hotline to get the driver’s number, for which they were charged

GoinG internationalBy the end of 2010, Mikini will have expanded its car sharing platforms to 10 countries, including its original German website. In addition to internationalizing the service, the company is in talks with bus, train, and air travel providers in order to es-tablish the portals as go-to sites for last-minute, low-cost transportation offerings. “That’s where the future lies,” says Earlybird Managing Partner Hendrik Brandis, who oversees the investment in Mikini

number of arranGed ridesBy the end of its first year of opera-tion, mitfahrgelegenheit.de had ar-ranged close to 100,000 rides. Four years later, it passed the million mark, and last year, it successfully matched some 3.6 million drivers with pas-sengers. That’s based on site traffic in 2009 of 28 million visits and 335 million impressions

GERMaNYmitfahrgelegenheit.deapril 2001

aUSTRIamitfahrgelegenheit.at

august 2001

SWITzERlaNd: mitfahrgelegenheit.chaugust 2008

ITalYpassaggio.itMarch 2010

GREECEpamemazi.grNovember 2009

POlaNdcarpooling.plFebruary 2010

SPaINconduzco.escoming in Q4/2010

UNITEd kINGdOMrideshare.co.ukaugust 2010

FRaNCEenvoiture.frMay 2010

CzECH REPUBlICspolujizda.orgcoming in Q4/2010

2002 2003 2004 2005 2006 2007 2008 2009

96,193276,263

500,667848,033

1,317,753

1,946,813

2,529,070

3,600,000

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BORN: Sept. 23, 1974 NATIONALITY: GermanFAMILY STATUS: Married, three children EDUCATION: Business Studies (University of Wuerzburg)WATCH: NoneCAR: audi a4 avantFAVORITE ENTREPRENEUR-ALIVE: Martin WinterkornFAVORITE ENTREPRENEUR-ALL TIME: akamai Technolgies co-founder danny lewin

MATTHIAS SIEDLER

a fee.The decision was a good one. With its free service, MFG saw its user numbers take off quickly, as its name was passed on purely by word of mouth. One year after it was launched, the site had garnered more than 41,000 registered users and had attracted some advertisers. But come graduation time – Siedler graduated in 1999, Weber in 2001, while Reinicke stayed on to pursue a doctorate – none of the founders saw a professional future in the site. It was the era of the post dot.com hangover, when even the best business ideas were not get-ting funded, and none of the three could imagine earning his daily bread with the online travel site. “We didn’t see a good business model in it,” concedes Weber.

Weber instead joined Yahoo Germany as a prod-uct manager, while Siedler co-founded and served as CTO of ComHouse, an ISP and payment company, and then later worked at both Audi and Akamai Technologies as project man-

ager. Meanwhile, Reinicke continued his studies in information management and business informatics, all the while keeping an eye on MFG, which continued to attract more users. The Mi-kini founders met several times a year to discuss issues relat-ed to the site, but Reinicke for one was frustrated. At universi-ty, he was focused on the new trend of cloud computing, which he wanted to use to improve the site’s real-time capabilities. “There were a lot of new features I wanted to implement, but I knew that if we continued to run it on the side, we would never be successful with it,” Reinicke says. At that time, the company had annual revenues of about €180,000 and an account balance of nearly €80,000 – the sum of all its profits since 2001.

Puzzle pieces come together

MFG continued to grow almost in spite of itself. In 2007, it had more than 600,000 registered users and saw the number grow by more than 35 percent annually. Its volume al-ready dwarfed that of Mitfahrzentrale and numerous others. According to Internet market research company Comscore, for example, MFG saw 374,000 unique visitors in October 2007, compared to Mitfahrzentrale’s 137,000 visitors.

When Reinicke was approached by television station ProSiebenSat1 Media in early 2007 with a banner sharing of-fer – a deal which would provide the site with more stable rev-enues – he felt it was time to get off the fence. Weber, Reinicke and Siedler were at a turning point: Should they put more effort into the site or let it lie? Reinicke and Weber decided to make a go of it, with Weber joining full-time in March 2007. Under the banner sharing deal, ProSiebenSat1’s online agency, Sev-enone, promised to exclusively sell advertising on the MFG site, for which it would get a revenue share on the ad sales and a guaranteed fee, based on the traffic generated. (Weber de-clines to reveal how much that was.) “The guaranteed numbers gave us the assurance for our self-employment,” says Weber. The two also set out to revamp the software as planned.

But it wasn’t until mid-2009 that two more things hap-pened which began to drive MFG forward and enable Siedler, who was married with three children, to join his co-founders on a full-time basis. First, the German automobile club ADAC asked the Mikini founders to develop a ride sharing platform for them to use on their own site, called mitfahrclub.adac.de – an agreement that not only gave Mikini a more steady month-ly income, but also the brand backing of the top German auto-mobile club.

Secondly came a simultaneous offer for venture cap-ital funding from Earlybird. MFG had come to the attention of Earlybird managing partners Christian Nagel and Hendrik Brandis in 2009 when, in the course of searching for an inter-esting Internet investment, they found a site that was unknown

Mitfahrgelegenheit.de began as an Internet project for the found-ers when they were still at business school. and since the service was free, the name of their platform quickly spread by word of mouth

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BORN: March 2, 1976NATIONALITY: GermanFAMILY STATUS: SingleEDUCATION: Information Systems (University of Wuerzburg)WATCH: iPhoneCAR: prefers his Cube lTd Pro bicycleFAVORITE ENTREPRENEUR-ALIVE: Niklas zennstromFAVORITE ENTREPRENEUR-ALL TIME: adi dassler

MICHAEL REINICkE

to them, but was ranked by Google as the eighth most visit-ed site in Germany. “They had this huge traffic and something like 15,000 to 20,000 transactions a day were taking place on the site, yet we had never heard of them,” recalls Earlybird managing partner Christian Nagel. “Usually you only have big well-known brands up in the top 20.” Even better, MFG had gained the traffic on its own, without paying money to other sites to advertise its offerings.

But the partners quickly saw that company revenues were far too low in relation to the huge traffic they were gener-ating: at that time, they had annual income of around €200,000 with around 15,000 transactions facilitated daily. “All these transactions were taking place, but not being monetized. Mon-ey was not really flowing over the platform,” says Nagel. They also noticed that the company was not having to pay to gener-ate the 100,000 hits a day on their site. Not requiring partner sites meant that if a transaction fee were charged, the resulting revenues would be pure profit. Nagel and Brandis were con-vinced that MFG was sitting on a gold mine – provided they professionalized their platform. They began courting the three founders, who had not really considered venture capital, with their vision for the company. “We helped them see the site’s potential as a top low-cost travel site,” says Nagel.

The team was convinced. An investment, they realized, would help them not only revamp the website but internation-alize and expand their product portfolio. They actually want-ed less money than Earlybird was prepared to offer, partly to keep more control over their company. The firm was prepared to fund them with as much as €3 million, but the initial invest-ment has totaled only €750,000. “It’s pretty unusual for people to refuse money,” says Brandis. The Mikini founders also asked to delay the deal until they completed the ADAC negotiations, but the Earlybird partners wouldn’t go for that. “They said it was now or never,” recalls Siedler, who then joined the team full time shortly after the investment was made in mid-2009.

Ride share 2.0 Though ride sharing sites look deceptively simple –

passengers simply conduct a search of their destination and date and then contact the party in question – the software be-hind them is complex. They need to be able to portray what’s going on with thousands of transactions in real time. Miki-ni’s next-generation site, launched in June 2010, provides us-ers with far more than just a chalkboard where they can find one another. “The old site didn’t have much intelligence,” says Siedler, who works with Reinicke on many of the company’s technical aspects. “It used to be that what happened after the two parties met was unknown.” In its 2.0 version, MFG’s soft-ware will not only let users book a specific seat to their desired

destination online, but also review and rank different drivers and attributes such as driving behavior, cleanliness, and punc-tuality, which will be shown in the user’s profile. Similarly, drivers will also be able to report no-show passengers. “This demands more accountability from both sides but means ad-ditional security for both drivers and passengers,” says Sie-dler. The founders believe that users are willing to pay €1.99 a month for these services. The new booking system will be an optional feature that drivers can activate; otherwise use of the site will initially remain free of charge. “The new system needs to established very slowly and with the support of our users,” notes Weber. Further down the road, Mikini plans to develop dynamic ride sharing, in which people already on the road ar-range rides via mobile phones or other wireless devices.

Part of Earlybird’s vision is to establish Mikini as a site for all forms of low-cost travel. Thus the company is al-so in talks with Deutsche Bahn and other transportation com-panies to make revenue-sharing deals, in which they can offer

The next-generation MFG platform adds features that allow customers to review drivers and rank them on criteria such as punctuality and cleanli-ness, for example. The founders believe users are willing to pay a small fee for such services

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Bird’s-eye viewMikini wasn’t looking for venture cap-ital when Earlybird made an offer. What drew you to the company?hendrik Brandis: We were really impressed by the quality of the found-ers. They are self-starters who have quietly but surely built up the leading marketplace in Europe for low-cost travel. Though they weren’t the first and their platform was not unique, they ultimately outpaced the compe-tition. The rule of the online market-place is “winner takes all” and they look set to do that. Where exactly do you see the growth opportunities for Mikini?Brandis: We see opportunities both in moving towards a fee-based trans-action model and in internationaliz-ing across Europe. MFG is developing a more professional booking system that will provide users with more se-curity. That will enable them to de-mand a small fee per each transac-tion. Assuming that Germany makes up 30 percent of the European mar-ket, MFG has the potential to grow to well over 100,000 transactions a day. Assuming an average payment of €15 per ride and a 10 percent transaction based fee, the yearly income from ride shares alone could easily exceed €50 million. Internationalization could be tough. They are the market leader in Germa-ny, but what about elsewhere?Brandis: There will be challenges in places like France, where there are al-ready established competitors. And in other countries, low-cost bus routes compete more fiercely with ride shar-ing. But don’t forget, Mikini already has the highest volume of any such site in Europe.

The rule of the online

marketplace is “winner takes all.” They look

set to do that

HENdRIk BRaNdIS

Managing Partner Munich

reGistered usersBy the end of its first year, MFG had over 40,000 registered users; this number grew by tens of thousands each year, surpassing the mil-lion mark in 2009 2002 2003 2004 2005 2006 2007 2008 2009

1.148.531917.780

662.614493.687347.868114.02441.235 220.895

their low-cost bus, train or airfares via the MFG site. Besides that, the expansion into other European countries has already begun, with websites launched in Austria, Switzerland, Italy, France, Greece, and Poland (see map, p. 6). Spain and the UK are set to follow. All international versions are managed from the Munich office, with full-time country managers, all native speakers, for each market. Mikini’s founders are also in the process of sorting out which founder is responsible for what. There is still no appointed CEO, for example. None of this will be easy, but Reinicke, Weber and Siedler remain, as always, cautiously optimistic. They won’t be doing any rash overex-panding: with 18 people now working for Mikini, the compa-ny plans to hire more employees only when the new booking system is up and running, with no immediate plans to open of-fices outside Germany. Still, the founders firmly believe the time for their idea has come. Says Weber: “It’s exciting to see how user acceptance of the ride sharing concept has radically grown since we first founded the company.”

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B Y K A R S T E N L E M M

as long as the Internet has been around, it’s been used for flirting. The first dating portals kiss.com and match.com were founded in 1994/95 by web pio-neer Gary kremen

To increase trust in its online auction portal, ebay introduced an evaluation system in 1996 for buyers and sellers to rate transac-tions – a core element of social commerce today

a simple worldwide pay-ment method for online transactions: that was the goal of PayPal when it launched in 1998. Buyers also had protection from unauthorized or faulty transactions

Whether searching for a job, a partner,

or a great deal on any product ima-

ginable, consumers turn to the Web

as their first port of call. And that means there’s an

ever-present incen-tive for companies

to improve their online services

In the late 1990s, com-panies began introduc-ing online tickets, among them, deutsche Bahn, which first offered this service in October 1999 in conjunction with a special travel offer

Improving customer service via the Webill

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the little devil makes it hard to resist: “Come to the dark side,” it says with a tempting smile, “we have cook-ies.” On most days, someone somewhere around the world gives in to the temptation – and clicks the buy button. “It’s one of my top sellers,” says Pam Gobiel, owner of “T-Shirt Fun,” an online boutique offering a vast array of humorous designs. While her customers browse a selection of hundreds of differ-ent shirts, Gobiel keeps coming up with new ideas for future bestsellers. Unlike designers who run brick-and-mortar stores, the 44-year old Bostonian does not waste a minute dealing with things such as order fulfillment, warehousing, and logis-tics. “That’s the great part,” Gobiel says, “all I have to do is design, and Zazzle takes care of the rest.” San Fran-cisco-based Zazzle is one of a growing number of online retailers catering to a new breed of con-sumer-creators – people who do not only come to shop but also to dream up products of their own, with the prospect of selling them to others. At Etsy and Artful Home, for example, hobbyists present a wide range of self-made goods, from Japanese rice soap to artisan pottery. Budding authors try their luck at Cafepress, Blurb and Lulu, websites that allow everyone to publish and sell their own books. Internet photo agen-cies like iStockphoto and Imagepoint, mean-while, tap into the vast sea of pictures taken

Rise of the active consumerThe digital equivalent of the suggestion box, websites that gather

feedback or let consumers drive business decisions are the ultimate proof that the customer is indeed king

by talented amateur photogra-phers, selling them at a fraction of the cost that traditional pho-to agencies demand.

Creator economy“We’re seeing the shape of a new economy,” says Stan-

ford professor and renowned futurist Paul Saffo. While the industrial revolution gave us mass production and the post-World War II economy revolved around “how to inflame con-sumer desires,” Saffo now detects signs of an entirely new era: “We are entering an age in which the central economic ac-

tor is someone who both produces and consumes at the same time. It’s a creator economy.”

The Internet and social media are key, as they allow for instant feedback and new forms of customer interaction. When Amazon invited shoppers to leave comments about the products on its virtual shelves, the online superstore turned formerly passive cus-tomers into active participants in the sales proc-ess. The reviews provide shoppers with insights from others who previously purchased, and help Amazon give feedback to its suppliers. “To allow reviews was a big step a few years ago,” says Josh Bernoff, senior vice president of idea development at Forrester Research. “But by now it’s been definite-

pAnOrAMA

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In July 2004, Matt Rutledge, a pioneer of the one-deal-a-day e-commerce model, launched Woot, which offers customers a differ-ent product each day at a discounted price

On June 28, 2005, amazon patented its technology for generat-ing product recom-mendations based on customers’ purchase history and their prior use of the site

Since 2006, online service Weblin has allowed consumers to create their own avatars with which to explore the Web. Should different avatars happen to meet, they can communicate

In 2000, adidas gave customers a service that was previously restricted to top athletes. With Miadidas, they could custom design their own sports shoes for performance and style

Turning the job applica-tion process on its head, German website absol-venta allows young job hunters to enter their details, and then wait for interested companies to contact themill

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ly proven that sales increase because people develop confidence and trust.” Consequently, shopping with a little help from a million online friends has be-come ubiquitous: travelers book hotel rooms based on recommendations at Tripadvisor, film fans con-sult the Internet Movie Database before heading to the cinema, and services like Yelp and Qype present user reviews on anything from local restaurants to day-care centers.

Web services have begun to tap into this ac-tive consumer base for more than just opinions. French start-up MyFab sells designer furniture at a fraction of traditional cost with its direct-to-consumer business. Instead of stocking

up on tables and sofas that have already been made, MyFab first collects orders, then has the products manufactured and shipped to the customer’s door-step – no warehousing or retail stores required. The price is patience: it can take up to three months for the furniture to arrive. But the reward is savings of 50 to 80 percent on comparable products.

Consumer as designerFor companies, turning directly to con-

sumers has become both a marketing tool and an opportunity for innovation. Some, like Star-bucks, actively reach out to their fan base and ask for new product ideas; others invite shop-pers to make products to their own liking. Each of the big sports apparel makers – Adidas, Nike, and Puma – have launched websites that turn joggers into designers. With a few mouse clicks,

prospective buyers can choose from a variety of colors and patterns for their running shoes, which

are ultimately made to order. “Participation is the new brand loyalty,” says Yves

Béhar, founder of design studio Fuseproject. The Swiss-born designer, whose clients include Herman Miller, Birkenstock and Google, envisions a world of close cooperation between professional creators and armchair consultants. “This is not a

way to replace designers and engineers,” he says. In-stead, Béhar sees a chance to foster the dialogue with consumers who can finally tell companies “what they actually want rather than what the market-ing department believes they want.” To some, the changing dynamics, dramatic as they may seem, constitute little more than a shift in emphasis. “Com-panies have been asking for 100 years what features

should be in their products,” says Kent Grayson, mar-keting professor at the Kellogg School of Management

in Evanston, Illinois. “The difference is the speed of feedback. What we’re now talking about is real-time market research.” It sounds tempting, but it’s not without dangers, says Grayson. Professional market research companies, he points out, care-fully select focus groups and try to vet answers for sampling errors. “On the Internet, you’re not sure who’s responding.”

Such concerns matter little to customer-creators like Pam Gobiel. Four years after setting up shop on Zazzle, the former hobby designer is now a professional t-shirt vendor. Her revenue – a few percent commission on top of Zazzle’s own price for each item – has grown to the point where her husband has given up his construction business to help run “T-Shirt Fun” instead. Success on that scale is not the norm, how-ever. “We have thousands of people who make good money,” says Jason Kang, Zazzle’s vice president of marketing. But while some earn more than $100,000 per year, there are only a handful who manage to turn Zazzle into a living. “This is not a quick and easy way to make money,” cautions Kang. “Like any other business, it’s hard work.”

But it has its perks. While Gobiel takes care to monitor customer trends, optimize her store for search en-gine keywords, and promote her work via Twit-ter and Facebook, she can also allow herself the luxury of an extended vacation. “And it’s nice to know that the money still keeps coming in,” she says. Next up is a cross-country drive in an RV that she and her husband recently bought. Paid for by a little devil and a number of Go-biel’s other successful designs.

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OvErviEw | active consumers

Betting on a sure thingTipp24 began by bringing the German lottery into the Internet age. It has grown

into Europe’s dominant website for lotteries and games, despite fateful regulations that forced the company to radically change course

BORN: June 6, 1973NATIONALITY: GermanFAMILY STATUS: EngagedEDUCATION: law (University of Muenster)WATCH: IWC PortuguesaCAR: Porsche 911 CabrioFAVORITE ENTREPRENEUR – ALIVE: Steve JobsFAVORITE ENTREPRENEUR – ALL TIME: Fathers of the German “Wirtschaftswunder”

JENS SCHUMANN

the first thing you no-tice when Jens Schumann walks in-to the room is his tan, the kind of ruddy tan you get from being out at sea. He appears so relaxed that it is hard to imagine him 10 years earli-er, putting in exhausting days as he built his company. “I’ve been sail-ing,” he says, “getting my sailing li-cense; something I’ve always want-ed to do but never had the time for.”

Time is something Schu-mann now has in abundance. At 37, he has come full circle. In 1999, Schumann and his friend Marc Peters hit on an idea for an Internet start-up. It was the height of the dot.com boom, an era, Schumann recalls, when “two guys and a 60-page busi-ness plan” could get millions from venture capitalists eager to find the next big thing before anyone else beat them to it. The idea was to create an online lottery retailer, sparing lot-tery players the trouble of going to the corner store to buy their tickets. But it wasn’t only about convenience. Tipp24, as the company came to be called, modernized Germany’s state lot-tery system, making it more secure for the players, and making it easier for winners to retrieve their prizes.

Within a few years, Schumann and his colleagues turned the company into the dominant European site for online lotteries and games, and navigated the usual arc from start-up to stock market listing. In September last year, Schumann left the company in which he invested a decade of his life to take some time off, close a chapter, and plot his next moves.

Schumann and Peters met at university, where they studied law and business respectively. But Schumann was more captivated by the Internet hype than the thought of working as

B Y W I L L I A M B O S T O N

a lawyer. “We spent a lot of time to-gether as students and we were con-stantly trying things out, building websites and experimenting,” re-calls Schumann, leaning back in a chair in the company’s spacious, glass-walled conference room.

The search beginsOne evening, the duo at-

tended a gathering of the local In-ternet scene, where they met some-

one from Icon Medialab. As chance would have it, both were offered jobs to join the company in Hamburg. During the day, they worked at Icon, but after work, Schumann and Peters would often hang out at a local Greek restaurant, huddled be-tween salads and beer and the blue shimmer of their laptop screen, batting around ideas for a company of their own. They created a master list of must-haves to make a business idea to work on the Internet. It must generate commission income and not depend solely on advertising. There must already be a large market for the service. The service must add value. Al-so important: there must be no inventory and it must obey the truism that you can’t force customers to change their behav-ior. “Every time we had an idea, we’d run it through our list,” says Schumann. “Every idea failed to clear one of the hurdles.”

This went on for several months until Peters had an interesting conversation with an acquaintance about how the lottery was getting ready to go online, and how Germany was home to a €10 billion market for lottery tickets. Bingo! Schumann and Peters ran the lottery idea through their list. It cleared every hurdle. They could earn money on the commis-sion from Germany’s state lottery companies. They wouldn’t

Tipp24 still has its headquarters in Hamburg, despite the fact that a recent German law forced it to transfer

its core operations to the Uk, Spain, and Italy

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12

a lawyer by training, Jens Schumann found himself intrigued by the hype sur-rounding Internet start-ups at the end of the 1990s. But he and his business partner were determined to wait until the right idea came along

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reVenueTipp24 went live in 2000 and had its first profitable year in 2002. Profits grew steadily each successive year, but they really took off in 2009 with the new business model operated by Mylotto24, in which Tipp24 has a minority holding

emPloyee GroWthTipp24’s ranks stead-ily swelled until 2008, when online sales of lottery tickets became illegal in Germany, mean-ing the company had to downsize in 2009

oPeratinG resultIn 2009, Tipp 24 reported earnings before interest and tax (EBIT) of €23 million on sales of €89.5 million, a margin of nearly 26 percent. That was a year after a German legal ruling forced the company to abandon its core business

2000 € 0.69m / € -5.36m

2001 € 3.81m / € -3.17m

2002 € 8.28m / € 1.02m

2003 € 14.08m / € 1m

2004 € 19.51m / € 3.21m

2005 € 26.12m / € 6.05m

2006 € 34.58m / € 7.25m

2007 € 44.97m / € 8.95m

2008 € 45.84m / € 8.89m

2009 € 89.55m / € 23.05m

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

154 185 13214411495722617 47

require the players to change anything except the channel – instead of walking down to the local newsstand, they would buy tickets online. And there would be no inventory to suck up profits through warehousing and distribution costs. “The add-ed value was the real killer,” says Schumann. “As much as 40 percent of lottery winnings never get claimed because people lose their tickets or don’t know they won. An online lottery system means every winner is known and gets his prize.”

Things began to move quickly. In the summer of 1999, Schumann and Peters often spent their lunch breaks on the banks of Hamburg’s Alster River, working on their busi-ness plan. After three or four weeks, it was still far from fin-ished, but time was pressing and they decided to start look-ing for money. When they began meeting investors, they often had to leave work during business hours. In order not to raise suspicion, they would never leave at exactly the same time and would always drive away in separate cars. They’d meet at Schumann’s apartment, where they would quickly slip into business suits, and then drive off together to meet potential in-vestors. Afterward, the whole routine was done in reverse, and they would show up again at work in jeans and t-shirts, their secret still safe.

Bold move rewardedBy the end of July, they were only speaking to a few

venture capitalists, who would always send them away with requests for changes to their still-evolving business plan. One

of the VCs they were talking to was Earlybird. They met reg-ularly with Earlybird representatives Hans Cornehl, now Tipp24 CEO, and Christian Nagel. At the beginning of Sep-tember, Cornehl and Nagel offered to back the idea and told them to go home and think about it. “They probably thought they’d never see us again,” quips Schumann. Nagel and Cor-nehl were, in fact, quite impressed with the young men and felt they had developed a solid business model. “Not even the best business plan helps if the people aren’t able or willing to trans-form it into a real business,” says Cornehl. “Their enthusiasm and readiness to do that was exciting. My later decision to join the company was based in part on the strong personal bond we built.” The next day, Schumann and Peters quit their jobs. “Nearly three months to the day after finishing our business plan, we received €2.6 million,” says Schumann, still proud of the achievement. “At the end of the day, it was just for two guys and 60 pages of paper. Pretty courageous.”

Game-changing decisionIt took a while for Tipp24 to gain traction. The site

went live in February 2000, but it took a full year for the Ham-burg state lottery to enable an electronic link with Tipp24. Un-til then, Schumann and his team would print out lottery tick-ets bought by their customers online and carry them to a local lottery booth to feed them into the system. After Hamburg, the remaining lottery companies also hooked up with Tipp24. In December 2001, the company reported its first profitable

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Bird’s-eye viewWhat was your first impression of the business plan presented to you by Jens Schumann and Marc Peters?christian nagel: The plan was not 100 percent fundable at the time. There were a number of holes to fill. The idea was brilliant, but it was very early. It was obvious that we needed a bigger team and would have to add fi-nancial experience at some point.Were you surprised when they actually took your offer?nagel: Well, we were tough negotia-tors. We made it clear that they could get money from us, but it wouldn’t be cheap. After all, we brought a lot of experience to the table, and it was our goal to actively support them so that they could then carry on with-out us. But we were interested and optimistic. What role did confidence in the people play as you made your decision?nagel: In the early stage, people are always the most important point. We thought there was a good combi-nation of creativity in Marc’s knowl-edge of online marketing and Jens’ solid legal background, which turned out to be so critical.How has the start-up environment changed since the dot.com era?nagel: It has changed dramatical-ly. Jens and Marc were typical of the founder teams of the time. They weren’t repeat entrepreneurs and didn’t have experience in founding businesses. Today we see a lot of re-peat entrepreneurs and very experi-enced teams. What was your return on Tipp24?nagel: We invested €2.6 million and our return was 22 times our invest-ment, €58 million.

There were a number of holes to fill in the busi-ness plan,

but the idea was brilliant

CHRISTIaN NaGEl

Managing Partner Hamburg

375m

300m

225m

150m

75m

0m

2000 2001 2002 2003 2004 2005 2006 2007 2008

brokered bettinG VolumeTipp24 boosted its brokered betting volume considerably with its 2002 expansion to Spain, and again in 2003 with a subsidiary in Italy. Bill-ings peaked in 2007 with a total bet-ting volume of almost €350 million

€ 5,2m € 42,9m € 70,9m€ 104,8m

€ 154,1m€ 204,7m

€ 264,2m

€ 346,8m€ 335,9m

month, and 2002 was its first profitable year. Tipp24 became so successful that the state lottery companies not only willing-ly cooperated, but in 2004, when Earlybird was ready to cash out, a group of state lotteries agreed to buy the company out-right. The plan was blocked on competition grounds by Ger-many’s anti-trust watchdog, the Federal Cartel Office. And so in 2005, Tipp24 went public. Schumann and Peters each earned €4.4 million on the listing and continue to hold over 10 and 8 percent, respectively, of the company which is worth around €200 million today.

Over the years, Tipp24’s business has changed, and not always voluntarily. The company expanded abroad, branch-ing off into Spain in 2002 and Italy the following year. But in 2008, the game completely changed. Germany created a law to fight gambling addiction, which among other things, out-lawed any form of online lottery. Schumann’s legal training stood him in good stead during three years of lobbying, trying to stop Germany from destroying his business. In the end, he fought the law, and the law won. Tipp24 sold most of its activi-ties to do with brokering lottery products to a minority holding in the UK called MyLotto24 and its subsidiaries, where play-ers bet on the outcome of European lotteries.

Bouncing backIronically, the loss of its core business in Germany

was a boon for the company. Instead of selling German lottery tickets at a small commission of about 13 percent per ticket, it was earning 50 percent on every €10 lottery ticket sold, had lower overheads, and higher profits. The company’s shares soared, rising 425 percent in 2009. “They managed the tran-sition very well,” says Marcus Sander, an analyst with Mac-quarie Securities Group in Frankfurt. “But there is more risk and greater volatility now because they have to pay out when someone hits the jackpot.”

The result of last year’s transition is that all but a few of the employees that once filled Tipp24’s Hamburg headquar-ters had to be laid off as core operations were transferred to the UK, Spain and Italy. Schumann saved the company, but as he talks, you get the feeling that he doesn’t feel like it’s the same company he and Peters founded a decade ago. Schumann wants whatever he does next to be a hands-on challenge, such as restructuring a company. But for now, he appears happy to just have time. Time to himself to learn how to sail, to play golf with his fiancée, to refocus. “This year, I’m just going to do the things that I never had time for in the past 10 years and not think about what happens next.”

Cut-throat: the contemporary paintings in Tipp24’s confer-ence room prove business is about survival of the fittest

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Consumer power - no passing fashion

Former Google executive Sukhinder Singh Cassidy became CEO of Polyvore, a social network for fashionistas, after being intrigued at how the site engages

consumers, melding commerce with fun tools for self-expression

B Y K A R S T E N L E M M

When you pick what to wear, do you first go to Polyvore?sukhinder singh: Not on this outfit today, but I do use Poly-vore increasingly as a way for me to think about what goes to-gether. Basically, you can discover styles that you like from other people, and you can express your own. Beyond fun and games, what is Polyvore’s purpose as a busi-ness?singh: Essentially Polyvore stands for user-discovery at mas-sive scale, and fun is an important part of that. We’re the larg-

est fashion community on the Web where users help other us-ers express, discover and share style ideas. As a company, we sit at the intersection of both media and commerce, and there are changes in both arenas that make something like Polyvore possible today.What changes are you thinking of?singh: Internet 1.0 was about crawling the Web for hard goods and helping people compare them objectively. Then you look at 2.0 and the rise of Amazon, eBay, Zappos – they all thrived

Sukhinder Singh Cassidy joined Polyvore as CEO in March 2010. Pri-or to that, she was a CEO-in-residence at accel Partners. From 2003 to 2009, she held various executive positions at Google, including overseeing its asia Pacific and latin american operations. Polyvore is a leading fashion and social shopping platform, where users can in-dulge their styling fantasies, mixing and matching clothes and accesso-ries from any online store to create and publish their own looks. Cassidy participates on Polyvore under the name “Sukkie2008”

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on value propositions suitable to commerce, for example great customer service and extensive selection. Commerce 3.0 is first of all about bringing an experience back to shopping. You may buy along the way, but first of all it’s an experience.How do you earn money with an experience?singh: It’s a combination of advertising and commerce. For example, we run contests, four or five per week, and the major-ity are sponsored. Tacori, for example, wanted to create excite-ment around a new line of jewelry and ran a contest in which some 2,000 people participated – creating hundreds of thou-sands of page views on Polyvore but also on blogs, Twitter, Fa-cebook and other sites. It’s viral marketing through engage-ment, an example of how new-generation media sites with a social component bring brands into connection with users.In addition, you make money with transactions?singh: We have an affiliate agreement with a number of retail-ers, and we get paid if we refer users to them. Of our 7 million visitors, about 200,000 are active creators, generating some 30,000 new sets per day. So the vast majority come to browse and shop, and we drive a lot of transaction-al revenue. But we never send traffic only to places when we get paid. If you look at a Polyvore set, you see all of these links – some of the retailers have affiliate programs, others don’t. We don’t distinguish. That sounds a bit like, “We all benefit by be-ing open and collaborative.”singh: That’s probably a bit too generous. It’s more about what Google, Apple and oth-ers have shown: your best results come from keeping the consumer experience front and center. There are many companies that have adopted that the-sis, of which we are one. What makes Polyvore addictive is that we focus on creator and shopper delight. To move away from that for direct monetization seems a risky proposition. Why are users willing to do all of this work for free and help a company like Polyvore create a business with their effort?singh: One of our founders said: if you want to build any kind of consumer service you have to figure out how to appeal to a basic human need. For us, it’s self-expression, empowerment, and fun. You can create a beautiful set and people leave hun-dreds of “like” comments. Everybody has some sense of who they are, who they want to be, and clothing, art, and home ac-cessories are ways to express that. So you’re tapping into some-thing that people naturally want to do and already spend a lot of time doing. We’re just giving them a very simple new tool.If social shopping is Commerce 3.0, what’s next?singh: One of many possibilities is social shopping, both for soft and hard goods, combined with location-based services.

Online local services are still mostly service oriented, focused on how to get you to your local coffee shop. But there must be a way to map location and the social graph on top of soft goods. It’s nice that you can see something online and buy on the Web. But I really want to be able to take a picture of some-thing I like with my smartphone, upload it to Polyvore and fig-ure out what goes with it. And get real-time feedback from your friends?singh: Yes, why not? Maybe there’s a friend around the cor-ner who comes by, or maybe they just text me back that they like the set. And that causes me to buy the item in the store that I previously wouldn’t have bought because I didn’t know what it would go with. Perfect example. How can companies benefit from making users their partners?singh: There are multiple ways. Take user advocacy – you can spend millions to try and figure out what your brand message should be, or you can just ask your best users. User feedback is similar: Modcloth, for example, has a service called “Be the buyer” where they put out samples from designers, and users

get to vote. Whatever wins gets produced. In the process, Modcloth uses this information to give designers real-time feedback on how much of an item they should produce. It cre-ates shorter product life-cycles and more ef-ficiency. You can guess what people want to buy and blindly produce massive quantities, or you can take this feedback and base your manufacturing cycles on it.How do social platforms fit in?singh: For us, user-to-user interaction is the entire system, but I could certainly see a way

for any company in America to incorporate that concept. Take “like” buttons as an example – it’s one user indicating an opin-ion that other users will benefit from seeing. I think the notion that the most trusted, authentic voice may well come from oth-er users, the notion of recommendations from your own social graph, is becoming very important.Where do you see pitfalls?singh: You have to be prepared to listen to what your custom-ers have to say. One of the biggest concerns, I imagine, for a company used to having tight control over its brand is they hear a message they’re not necessarily interested in hearing. But even if you think that your brand is entirely in your con-trol, I’d say we now live in a world of such information trans-parency that that’s no longer the case. Customers have found their voice on the Internet, and they’re going to use it. You can choose not to participate, but it’s being said anyway, and it’s being said pretty publicly. So you might as well engage in the conversation and use it as an opportunity.

“Customers have found their voice

on the Internet and they’re going to use it,

so you might as well engage in the

conversation”

On Polyvore, the looks cre-ated by users are known as “sets.” Community members create more than 30,000 sets each day, spending an average of 10 minutes on the site per visit, and helping to drive sales of trendy items

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Getting rid of the middle manFor would-be tenants in Germany, Internet start-up Yoom aims to make

high real estate agent commissions a thing of the past. It could dramatically alter the country’s rental market landscape.

B Y K Y L E J A M E S

Fueled by his own outrage over high bro-ker fees, Malte Niebuhr (right) conceived Yoom. Next to him is his business partner, Jan Hendrik von ahlen

BIRTHDAY: Nov. 24, 1976NATIONALITY: GermanFAMILY STATUS: Married, one childEDUCATION: Business administration (University of Cologne, University of Hamburg) WATCH: SwatchCAR: BMW FAVORITE ENTREPRENEUR – ALIVE: Mark zuckerbergFAVORITE ENTREPRENEUR – ALL TIME: Henry Ford

MALTE NIEBUHR

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malte nieBuhr felt like he had been ripped off. Two years ago, the then 31-year-old Hamburg native wanted to move into a new apartment. Through a management com-pany, he found one he liked. But before he could sign on the dotted line, the company referred him to a real estate agent, who demanded a high commission before she would give him the keys. It didn’t seem right, he thought, since she had actual-ly done very little. He handed over the money, but it left a bad taste in his mouth. “You have to question whether unlocking an apartment door or taking a couple of documents from you and giving them to a landlord is really worth a commission of €1,500 - 2,000,” Niebuhr says. “It’s just absurd and it shows how people looking for apartments here are exploited.” Every year in Germany, around 9 million people move to another apartment or house; real estate agents bro-ker an average 1.4 million property units annually. Agents typ-ically take a commission of two months’ rent plus VAT. And they’re not exactly beloved by the population at large. German Internet forums on real estate are full of bitter invective about agents and the fees they charge. Terms like “highway robbery” or “rip-off” pop up often.

After forking out for his own broker’s fee, Niebuhr didn’t just sit and stew; he channeled his anger straight into a new company whose goal is to help renters keep a little more of their hard-earned cash. His startup is the Internet platform Yoom, which was founded in June 2008 and went live last De-cember. It combines a conventional real estate listings site with an online auction site akin to eBay. Renters wanting to move

can post a listing for free, and apartment hunters can browse the listings, see photos, and set up appointments to view prop-erties. The difference with Yoom is that, once apartment hunt-ers find a flat they like, they bypass the broker. Instead, they enter a bidding process, the proceeds of which are shared by the current tenant and Yoom. “We’re offering a marketplace for current and future renters, who both come out ahead,” says Niebuhr (see “How Yoom works,” p. 20).

Bye bye brokerThe one group that stands to gain nothing from Yoom’s

service are estate agents. But most people who rent aren’t like-ly to be too cut up about this exclusion. Aric Austin is one such person. An entrepreneur who runs his own web-based business, Austin moved to Berlin from Munich with his girl-friend in February. It took them almost four months to find an apartment, because they were determined not to pay to a bro-ker’s fee, which made the search much more difficult. “I just couldn’t live with going through an agent, since the service they provide is so crappy and the costs so high,” he said. “I al-ways say, if you want to make a lot of money easily in Germa-ny, just become a real estate agent.”

According to Niebuhr, German brokers are paid €2.3 billion annually. His goal is nothing less than to redirect a good portion of that money to tenants – and to Yoom. “In the end, the agent will become superfluous,” he says. Yoom rep-resents Niebuhr’s debut as an entrepreneur, but he says he’s already hooked. As a business student in college, running his

Yoom is hoping to appeal to Germany’s large market of renters with posters such as this one, which uses a play on the word “ausziehen,” which can mean “move out” or, alternatively, “undress”

BIRTHDAY: Jan. 17, 1974 NATIONALITY: GermanFAMILY STATUS: Single EDUCATION: Business administration (Syracuse University) WATCH: Swatch CAR: Porsche FAVORITE ENTREPRENEUR – ALIVE: Oliver SamwerFAVORITE ENTREPRENEUR – ALL TIME: Oliver Samwer

JAN HENDRIk VON AHLEN

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hoW yoom Worksa tenant named astrid is moving out of her flat that rents for €1,500 a month. She has a refrig-erator and microwave oven which she doesn’t want to take with her. She posts her flat for free on Yoom, and an upper bid limit of €1,000 is estimated for her appliances and moving costs. She gets bids from interested parties, who upload documents such as application forms and proof of income to Yoom. at the end of the bidding period, there are two bids for €500, one for €600 and two for €750. She passes on information about the two highest bidders to her landlord, Bernd, who makes the final decision about who gets the flat. He chooses Carsten, who has to pay the €750 he offered in his bid. Ten percent of that goes to Yoom, and the rest goes to astrid. Carsten saves €2,820. Had he used a broker, the commission alone would have been €3,570 (two months’ rent plus VaT)

own show had always been in the back of his mind, but af-ter getting his degree and doing an apprenticeship at a bank, he went to work for his parents, who were in real estate. He learned the ins and outs of the business, even working as a bro-ker himself for about six months just to get a taste of the sys-tem. After his first-hand experience of having to pay a broker’s fee, the idea for Yoom germinated. In the meantime, Niebuhr decided to seek out expertise, a search that lead him back to the sandbox and a good childhood friend.

In kindergarten, Niebuhr had dug sand with and oc-casionally stolen wooden blocks from the von Ahlen broth-ers, children of friends of his parents. Years later, Jan Hendrik von Ahlen helped found JobLeads, an Hamburg-based online headhunter specializing in executive and professional place-ments. Von Ahlen knew about forming a new business and had the needed know-how when it came to creating an Inter-net platform. Then, of course, there was the personal connec-tion. “It’s great to be able to do something like this with close friends,” Niebuhr says. After the men finished their business plan in June 2008, the company got €100,000 in seed financing from angel investors in spring 2009 and then secured addition-al funding of over a million euros from Earlybird a year lat-er. The new funding is aimed at helping the company achieve more traction after their market entry last December. “The po-tential of this model is so great, the benefits so obvious, and the idea’s reception by everyone we talk to so positive that we think it’s a very good bet,” says Christian Nagel, the managing partner at Earlybird who oversees the investment in Yoom.

Making it growDuring the first six months of the business, the focus at

Yoom was mainly on the legal aspects of the new endeavor as well as designing the website. Now that the platform has been running for six months, the priority for the 10 permanent em-ployees and four freelancers is getting the word out to a wider public. Of course, there are also constant refinements to the site and the occasional tweak to the business model. For example, Niebuhr had originally planned that Yoom would take a 25 per-cent commission from the successful rental bid. “But then we thought that might seem too high to people, so now we’re test-ing the 10 percent level,” Niebuhr says.

So far, the company has done limited marketing tri-als – local cinema ads, flyers distributed by promotion teams at group apartment viewings. The first transaction (€600, of which €60 went to Yoom) was completed on Jan. 9, 2010; by mid-year, around 35 transactions had been facilitated. Now the company is at work on a new marketing plan, one that com-bines online ads and a presence on social media sites with more traditional methods, such as billboards and TV spots.

Von Ahlen, who is now CTO, says the site is picking up more and more traffic. About 1,000 new users register on the site every month and he records around 40,000 page impressions per week. “We’re working hard on explaining our business model very clearly and simply to people,” he says.

So far, the company has listed around 275 proper-ties, spread out over 10 cities but concentrated in major cit-ies such as Hamburg, Munich and Cologne. The short-term goal is to have at least 100 properties in each city to estab-

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reGistered usersYoom’s managers have been buoyed by the steadily increasing traffic on the site in the first six months. Each month brings about 1,000 new registered users January 2010 February 2010 March 2010 april 2010 May 2010 June 2010

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Yoom has the potential

to be a disruptive

innovation. It’s a very good bet

Bird’s-eye viewWhat did Earlybird find interesting about the Yoom idea? christian nagel: We like to look at companies that break apart existing economic chains, so-called disinter-mediation, or taking out the middle-man. We’ve made several investments of this kinds in the past and they’ve been successful. Here, the agent is taken out of the rental process. Why do you have confidence in Yoom’s business model? nagel: I have a great deal of faith in the customer service aspect of their idea and in its potential as a disruptive innovation that can take out a party from the rental process who is simply not needed. There are risks, certain-ly, especially when it comes to getting a foot in the market at the beginning and building up share. But the poten-tial of this model is so great that we think it’s a very good bet. Do landlords benefit as well? nagel: Yes. The documents the land-lord gets from clients can be standard-ized and thus clearer. And if current renters know that they can make mon-ey from new renters through Yoom, they have an extra incentive to keep their flats in good condition. That’s good for the landlord, of course.Yoom’s Malte Niebuhr is a young first-time entrepreneur. What impressed you about him? nagel: He’s a very good salesman. He knows what he wants and how to make it happen. I was impressed by his attempts to get to know the mar-ket he wanted to work in. He actually worked for a while as a broker himself and saw how the process functioned. I think he’s got the entrepreneurial spir-it in his blood.

CHRISTIaN NaGEl

Managing Partner Hamburg

lish a firm presence there. Long-term, the sky’s the limit. The partners are already working on concepts for new monetiza-tion avenues: partnerships with moving companies, insurers, and utilities, for example. An array of simple online solutions to people’s moving needs could soon be in the pipeline. “Our business model is easy to expand upon,” says von Ahlen. “Just because we are focusing on the rental sector now doesn’t mean we might not move into property sales at some point. There are few limits, but we’re taking it one step at a time.”

Yoom is working on a new marketing plan which clearly explains its business model to potential customers. Online ads, billboards, and TV spots are all part of the mix

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aPartment listinGsduring its first six months of operation, listings climbed gradu-ally. Yoom’s success will depend on gaining a critical mass of list-ings; the company’s short-term goal is 100 property listings in each of Germany’s major cities

January 2010 33

February 2010 50

March 2010 82

april 2010 147

May 2010 218

June 2010 350

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Hendrik Brandis after winning “les Voiles de Saint Tropez” regatta for the first time. The “Ear-lybird” beat out 45 yachts in its class

The family guyEarlybird Managing Partner Hendrik Brandis has had a colorful career. And as father and

step-father to eight children, his family life is no doubt equally exciting

BORN: Oct. 18, 1963NATIONALITY: GermanFAMILY STATUS: Married, four children and four step-childrenEDUCATION: aerospace Engineering (Technical University Munich)WATCH: longines from 1948CAR: VW Bus, Porsche 911FAVORITE ENTREPRENEUR – ALIVE: Steve JobsFAVORITE ENTREPRENEUR – ALL TIME: Jakob Fugger

HENDRIk BRANDIS

Tell us your life’s motto in one sentence.hendrik Brandis: Not trying is the biggest reason for failure. Which talent would you most like to have?Brandis: I would love to be musical. I never learned to play an instrument. To be honest, I fear that my attempts would have only limited success, as I regard my melodic talent as rather poor. But who knows, maybe one day I will give it a shot and start practicing the piano.What’s the most memorable thing you ever did or received that didn’t cost any money?Brandis: The birth of my four children. My oldest, Frederik, was born in 1992. The girls, Sophia and Carlota, followed in 1994 and 1997 respectively. Our youngest, Caspar, joined the family in 2009. If you could be reborn as an animal, what would you be and why?Brandis: Definitely as an elephant, because elephants have almost no natural enemies and they have time – the scarcest resource. They live longer than most human beings, at least in the natural circle of life.If you could take one year off to help solve one of the globe’s major problems, which cause would you devote your time to?Brandis: I would dedicate my time to a project to fight illiter-acy, as I regard the lack of education as one of the key drivers for most of the major problems in our world. Given my set of talents, I would focus on fundraising and organizing teachers, and not necessarily do the teaching myself. I visited such a school project in Namibia which has been set up by a German after a successful business career in Germany, and I really ad-mire what he has achieved. He created elementary and sec-ondary schools, as well as training schools where people can get qualifications to work as a baker, butcher or hotel manag-er, for example. If you could have one day without any private or professional obligations, what would you do?Brandis: I would go sailing with my entire family, maybe in Majorca or somewhere in Italy. I wouldn’t mind too much about the location, as long as it was sunny and windy. Given that we live in Bavaria and we only have one day, I guess we’d have to beam ourselves to the right place in order to make the most of the given free time (laughs).

Up clOSE AnD pErSOnAl | hendrik Brandis

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Earlybird Magazine

Editor-in-Chief: Hendrik Brandis; Earlybird Project Team: daniela von Wedel, dr. Marion Jung Editorial & Design: ambo Media ltd.; Managing Editor: deanne Corbett; Contributing Authors: Mary lisbeth d’amico, William Boston, kyle James, karsten lemm; Researcher: Peggy Hoyer; Art Directors: andreas Volleritsch, Michaela Pernegger, Neubau Editorial design Project Supervision: dr. Thomas Clark; Litho & Print: druckerei kriechbaumer, MunichEarlybird Venture Capital GmbH & Co. kG; Van-der-Smissen-Str. 3; 22767 Hamburg, Germany Tel: +49-40-43 29 41-0; Fax: +49-40-43 29 41-29, E-Mail: info@earlybird.com (responsible for the editorial content: Hendrik Brandis)

Did you know that: Compared to the United States, venture-backed companies in Europe have

delivered twice as many “home run exits,” bringing returns of at least 10 times the amount invested

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