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February 09, 2008
Interview: Lars Langusch of Holtzbrinck Ventures
Lars Langusch (34) is a partner at Holtzbrinck Ventures (formerly Holtzbrinck Networxs), which is German publishing group Georg von Holtzbrinck's 8-year old corporate venture company.
Langusch joined the venture team in 2000 and along with Konstantin Urban and Andreas Arntzen, set up online dating company Parship, which has become a market leader in its segment.
He led operations at Parship until 2003 and since then he's been active in establishing American-German joint venture audible.de and experteer (a job search engine for the better paid category of job-seeker). He was also involved in his firm's studivz investments.
Today Langusch is responsible for 11 companies and says that what he enjoys most about his work are the discussions – and sometimes heated arguments – with portfolio firm founders.
Read on for our QandA with him, including a bonus Fixture, Fad, or Feature quiz about some Web trends that he did with us via email.
Media companies, particularly in Germany, are investing in early stage Internet ventures. How does this compare with activity during bubble era?
During the bubble era a lot of investors tended to be overly optimistic about the potential outcome of yet unproven business models. I think we all learned our lesson from that era.
We also shouldn’t forget that for the media companies, the internet downturn came along with an economic climate and a decrease in ad-spending that heavily affected not only their online ventures but most especially their traditional businesses. This might explain why some of the traditional media companies needed a little longer to invest into online companies again; they simply were preoccupied with restructuring their off-line businesses.
However, the good news is that during the downturn a lot of internet companies have grown more or less under the radar and are now generating millions of profits per month. These successful online companies have shown the potential of the internet for investors and have helped renew big media’s interest in online investments.
Since the dotcom-bubble, there is now a new generation of teenagers who are the first generation to have grown up with the internet. This generation is not wondering whether social networks, blogs or mobile apps are just a fad or not. Instead, they have never known a life without these apps. Just talk to your own interns and I am sure you will hear the same things I hear from our interns here at Holtzbrinck Ventures: For example, they don’t watch linear TV anymore, many of them don’t even own a TV set. They don’t understand the very idea that viewers should organize their days around the rigid programming schedules of TV-stations.
Some media companies, particularly ours, are very much aware that they have to invest into internet companies with business models that will substitute and/or reinvent part of their traditional businesses.
Holtzbrinck was one of the few vcs that invested in the downturn. Tell us about the investments you made when everyone else would not touch an online venture?
Compared to today where there is a real rush for the good investments, the competition amongst investors was very low back then. All our business models had one thing in common: a clear focus on revenue.
Only a few people believed so strongly in their ideas that they quit their jobs and started a company - one could call them "crazy" but that`s exactly what you have to be as an entrepreneur.
The first “crazy” team we invested in during the downturn was gameduell. That was in 2003. In the same year we acquired a third of bol.nl which today is the largest online retailer in The Netherlands with revenues of about €170M last year.
In 2004, we initiated Audible.de, a joint-venture with the nasdaq listed mother company audible.com (recently acquired by amazon)
What is your group's track record like, exits vs investments. What did you learn from failures?
Some of our most interesting exits were Parship, studivz, bol.nl, Jobline, Buecher.de, booxtra, mobileview, immowelt, and recently cember.net which was acquired by Xing.
We have made 55 investments so far and the number of write-offs is fortunately limited to a handful.
We don`t accept the 80:20 rule that says 80% of your companies will fail. Since we are involved at a very early stage, we also have the chance to change the direction of the company if we see that the first idea doesn`t take off.
In 1999/2000 we tended to invest in businesses that might substitute the traditional business of a media company, such as Jobline, a company that went IPO in 2000 and was then acquired by Monster.
Companies that failed in that time were a) just too early or b) they lacked a sustainable and seasonable business model.
Compared with the year 2000 our investment strategy has changed a lot. In 2000 it was very cash intensive to set up internet start ups, whereas today you can launch a complete website for less than 20.000 Euro with monthly server costs of 100 Euro.
So, testing ideas and founding your own company has become much easier. As a consequence, we decided to invest into more companies with lower investment amounts, see if they get traction and only then invest a larger amount.
It feels like there is a bit of a frenzy on in Germany - I cannot keep track of all the early stage deals anymore. Fortunately, Deutsche Startups is there to cover the news. What is the rush?
Part of today`s rush is that there are a lot of marketable opportunities out there. As I said, the entry costs to launch a start-up have decreased dramatically. In addition, Google-Adsense enables them to earn some money without having a product to sell.
Another factor is that there are a lot of business angels investing their own money into internet companies – and this money is very ‘smart’ because it mainly comes from serial internet entrepreneurs who support the teams, know how to set up a company, how to connect them with partners and clients, and how to shape a product.
Certainly, to some extent, there are spaces were a few companies doing nearly the same can coexist, as is the case in the online dating industry. But there are also market segments where there is only room for one or two companies.
We noticed that in Germany, the distance between a market leader and the number two tends to be much larger than in the U.S. This phenomenon might explain why there is such a rush in Germany to stake your claim for any new business model that might prove successful.
Fixture, fad, or feature?
Bookmarking - Feature, instapaper is quite nice and very simple
Tagging - Feature, not very much used in Germany yet
Social Networking - Fixture!
Crowdsourcing - Fixture, and quite nice to reduce content complexity as long as the “crowd” has something in common with your own interests
Corporate Blogs - Feature
Posted on February 9, 2008 07:42 AM | Posted to | Permalink
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