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June 15, 2007
New Twist On Open Source: The Bootstrapping Startup Behind Spreed.com
Today we profile struktur, the Stuttgart-based open source applications developer behind Spreed.com, an online service that caught our eye last year because of a fine user interface (Flash-based) to do online meeting and conferencing, including video and powerpoint, screensharing and even mind-mapping.
struktur has impressed since last summer because it is steadily developing new features for Spreed, it launched a financial planning application, which banks install on their customer-facing portals, and it sells icoya content managment software, which is the basis for a set of appliances it developed for e-billing that it claims makes invoice printing a lot cheaper for business and government orgs. (image of one the boxes right).
And it did all that with 20 employees.
struktur is an Open Source company, but not in the sense of a MySQL or a RedHat. struktur uses open software to create its business applications, which is apparently a very cost-efficient way to go.
If we compare Spreed with Sequoia-backed Unisfair, both are web-based conferencing and events applications: Unisfair has raised several millions in VC. Spreed.com has raised zero dollars in venture capital. 
Little buzz, but big customers.
Read on to hear co-founder Niels Mache talk about why he's not raising venture capital, on what's overhyped in Europe, and how his company makes open source profitable in the business with just 20 employees.
You host some of your software applications, like spreed.com, but you also sell software licenses?
Our core business is not software, nor technology. It is selling business applications to industries, i.e. banks, insurances, government and the manufacturing industry. We license business applications. Our licenses guarantee that the application, spreed for instance, is reliably available with
- a defined set of features,
- for a given number of users and
- during the contracted period of time.
Developing solutions for upcoming businesses in the future, understanding the customer need is what we essentially do. Except for spreed, services are not struktur's core business.
Basically your team develops code for certain OS communities in exchange for using it in your products, right?
We directly support and are part of a few OS projects. For example, Zope, Plone, Red5, icoya, WordXML, OSNelly -- the Nelly Moser ASAO open source project. We directly finance OS developers for development projects and we develop and release code for OS projects. Indeed, our product development takes advantage from shared OS development.
This helps us to improve quality and to lower development time and costs. Open Source is our most important instrument that helps us to have products ready for the market before others do and to work with cutting edge technology being able to deliver unique products.
In many installations the customers receive the complete source and therefore would be able to deploy the application on their own. But most customers don't deploy our software on their own. But they don't because it is simply too expensive [for them].
How many employees do you have now and how much do you spend on R&D?
struktur is a small company. 20 people are working for struktur. In 2001 the R&D budget was 250,000 EUR. In 2006 we invested in R&D 480,000 EUR. For 2007 the goal is to spend 850,000 EUR on R&D.
You have never raised outside capital from venture capital firms or biz angels?
Right. We have not raised venture capital. We started in 2001 with private capital of €1M [that is not a typo -it's one million].
What are your goals with Struktur? Do you plan to go public someday?
We had a few enquiries this year to get capital for raising our business to eventually go on the stock market. However this is not our goal, at least not in Germany.
Why?
German capital in the IT-sector is pretty stupid money. For most IT companies, capital from German venture capitalists does not really help to grow an IT business. Our strategy is to spin-off operations. spreed.com is one example. One of our product lines will also take a role in an IPO next year.
Can you elaborate on that statement about venture capital and IT sector in Germany?
I personally cannot think of a larger and successful venture-backed German IT company in the past 10 years.
There are many successful start-ups in other sectors: physics, Laser technology, medical, pharma, automotive and construction. Germany is a good market for start-ups in the consumer market. Examples include Car advertiser mobile.de, photo sales platform fotolia, Jamba mobile ring-tones, OpenBC/XING and social platforms (students, dating, etc.) are successful in Germany.
My impression is that the German venture capital investors focus on rather simple business models where no real technology is involved.
VC’s in Germany have mainly invested in businesses where the revenue scales directly with the investment in marketing, sales and eventually, production.
Venture capital over here is rarely invested for the development or deployment of a technology. Most investments solely focus on the growth of a revenue-proved product and market. Thus a typical German VC investment in not a venture finance, it is growth finance.
The revenue/customer - investment loop is also typically driven by a short term view: an investment today must result in an increase of revenue or number of customers within a narrow time frame of 3 to 12 months.
What is the most overhyped tech trend in Europe right now?
Europe generally and Germany in particular overhypes older technologies and underhypes the really new ones because Europe tend to adopt new technologies slower than the US and Asia.
Nanotechnology [for exampl] is decades old. It is not well suited to create much employment because most of the outcome of Nanotechnology will be pretty simple and straight-forward applications such as fluids, colors, windscreens for the automotive industry. Mass production of nano-products will be in Asia or the US.
The solar cell sector is also overhyped in Germany because of an artificial pricing for solar and wind energy. Solar energy is overhyped in Germany because of a legislation “Regenerative Energy Law” that force energy producers to pay high prices for electricity generated by solar panels.
The effect of the law is that the solar energy sector receives hundreds of millions of Euros subventions from consumers who pay for increased electricity prices. The unwanted side effect is that many solar companies can only survive on a subsidised market.
Finally, Second Life is massively overhyped (but this is a lot of fun for the media).
- End of interview extract.
Mache also told us about how he recruits for his startup, which we wrote about in How to Hire For Your Bootstrapped Venture.
Posted on June 15, 2007 04:38 AM | Posted to Business software | Permalink
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