Seedcamp Founder Saul Klein Talks European Entrepreneurship, Spotify and the Real-Time Web

It’s been a big week for European entrepreneurship, what with 20+ startups emerging at Seedcamp and Dopplr getting picked up by Nokia (or does it just feel that way since I’m here with GeeksOnAPlane for the first time in four years?).

In any case, Seedcamp’s six winners were announced earlier today. If you’re not familiar with Seedcamp, it’s a startup mentorship and funding program for European entrepreneurs that shares basic tenets with US-based Y Combinator and TechStars, among several others. I had the opportunity to sit down on Wednesday with Seedcamp founder Saul Klein and ask him about a variety of topics ranging from the idiosyncrasies of European entrepreneurship to Spotify, smart energy, and the real-time web. In addition to founding Seedcamp, Klein is a partner at Index Ventures and a founding partner at The Accelerator Group (TAG).

A transcript of the interview follows below.

Mark Hendrickson: What was the initial motivation behind starting Seedcamp?

Saul Klein: Having started companies in the US and then started companies in Europe, I recognized that Europe really didn’t have a cohesive ecosystem. And especially if you’re a first-time entrepreneur, it’s incredibly difficult to get the advice you need, to get a network built, and to get access to capital. So the idea behind Seedcamp was really to offer European entrepreneurs the ability to have more of a framework to plug into where they could get those three things.

MH: And there was no other program in Europe that did that before Seedcamp?

SK: No, there wasn’t. And I think at the time the only other program worldwide doing something similar was Y Combinator, but Y Combinator was solving for a different problem. Y Combinator was very focused on young hackers who would cluster and move to the Valley. And Y Combinator, by virtue of being in the valley, has a built-in network, a built-in infrastructure. In Europe, we got none of that. Every single market is highly fragmented; the UK is different from France, which is different from Germany, which is different from the Nordics. We have a real problem of fragmentation in Europe, so Seedcamp was really trying to solve for that issue as much as anything else, bringing people together in a cohesive network.

MH: So would you say that the hackers are the same in Europe and the US, but the markets are different here in Europe?

SK: There’s no shortage of talent in Europe in terms of the right hackers coming out of very strong technical schools. You can look at a lot of open source technologies, from Linux to MySQL, that started in Europe. Skype started in Europe. GSM and WiFi standards started in Europe. The World Wide Web started at CERN. We’ve got great technical talent here but it’s spread out everywhere, as are the investors and mentors. There’s no hub and that’s the beauty of the Valley, it has a network effect that feeds itself. You’ve got Stanford, Berkeley, Sand Hill Road, Google, Microsoft, Cisco — it’s all there. In Europe, it’s everywhere. It’s a totally different problem.

MH: How has the program changed over its 2+ years of existence?

SK: This is our third Seedcamp week; we’ve been running the program for about 2 to 2.5 years. I think several things have changed. Initially, we conceived of the program as being a once-a-year event: one week in London, invite 20 teams here, and invest in 5 of them – that would be it. Over three years since the original conception, we’ve made 15 investments over 3 main events. We’ve realized very quickly at the first event that Europe was a different problem set, so we actually had to get out into the different local markets and get closer to the teams to help them with their local networks. Now we run eight events over the course of the year in Tel Aviv, Warsaw, Berlin, Paris, Slovenia, the Nordics, and London. And we actually take the teams out to the US. So we’re running eight different events and seeing 140 different teams. We have a network of 1,000-plus mentors across all of these geographies. So it really has become pan-European (including Israel as well), which has been really exciting to see.

MH: How have you found that the economic downturn has affected European startup culture in general and the operation of Seedcamp in particular?

SK: From our perspective, I think it’s hard to sign a company in any economic climate. When you’re starting a company, you have no customers, you have no revenue, you have nothing basically. So in good times or in bad times, it’s always a bad time to start a company, quite frankly. You’ve got to have a real desire and passion to do something. I think good entrepreneurs want to start businesses regardless of the economic climate.

Certainly, some of the trends have been changing. We’ve now had over 1,500 applications to Seedcamp over the years and we’ve started to do some analysis on those applications by market, business model, and geography. And we’ve certainly seen in the last 18 months more software-as-a-service, fremium models, enterprise focus, and customer and revenue focus, in contrast to just putting something out there and seeing how it goes. So I think we’ve definitely seen a change to not only more of a focus on monetization, but also a much broader range of problems that people are trying to solve. It’s not just the newest social app or the latest widget; people are actually trying to build real businesses that solve real customers’ problems, with products that customers are willing to pay for. Whereas I think a year ago, 60-70% of the companies had advertising-based business models. That’s somewhat cyclical, but for me it’s a good sign because a lot of these programs only manage to attract consumer web apps, and I think there are a lot more innovative startups than those building the next best thing for Facebook or the iPhone.

MH: What are some of the more unique traits of European entrepreneurs, especially when compared to entrepreneurs in the US or elsewhere? Do you find they are driven by different motivations or that they have different personality tendencies?

SK: I think that the best entrepreneurs, regardless of geography, have similar traits; they are very determined, single-minded, and not afraid of taking risks. And I think that’s true wherever they are. One of the things that European entrepreneurs might have different than US entrepreneurs is that they are typically more international in outlook, by virtual of the fact that most of their home markets are not big enough to sustain really big businesses. So you actually have to think internationally and globally from the get-go. Whereas in the US, you can build a huge business by just being successful in the US. I think with the web the way it is now, that’s potentially an advantage.

Most of them have also grown up sucking off fat broadband, and consequently I think you’ve seen a lot of innovation around apps that are broadband rich, such as Skype and Spotify. The fact of the matter is it’s still really hard in the US to get decent, high-throughput broadband, no matter how much you want to pay. In European countries, it just the standard. So I think that’s an interesting structural thing that the Europeans have.

MH: Speaking of Spotify, what do you think of them?

SK: I think it’s an amazing product.

MH: It seems to be the poster child right now for European entrepreneurship.

SK: I think it’s one of those companies that has broken through the noise, and I wouldn’t just say in the UK or Europe, but in the US too — and they haven’t even launched there yet. And it’s because they’ve made a great product that solves a problem. The business model is still unproven, but clearly they’ve built something that people love. And the entrepreneur behind it, Daniel, he’s 25. This is his third startup. He’s an absolutely fabulous entrepreneur and product person. I think he’s a good role model for European entrepreneurs, but I think there are more and more good role models in Europe.

MH: Are you personally interested in any particular sectors of the tech industry?

SK: I’ve done quite a lot of investing in the last 6-9 months in the real-time web space. We’ve been doing a lot of investing in the last 9-12 months with Betaworks. Ironically, some of the most interesting companies in the real-time space – effectively 3 of the most interesting companies in this space – are based in and around London. You’ve got Tweetdeck, which we invested in with Betaworks. You’ve got Twitterfeed that’s here that TAG has also invested in with Betaworks. You’ve got Tweetmeme that’s here as well. And then we’re investors in London’s actually produced some really cool companies in the space.

Another area in which I’m very interested (and have invested in through Index Ventures) is the smart energy space. There are two ways of looking at the space. One is behind the meter, if you like, so: everything that connects the meter in the home to the utility company. And then you’ve got companies that are in front of the meter and who help consumers actually figure out how much energy they’re using and how to make savings on their energy, etc. Alertme is a company that we invested in 2 or 3 months ago at Index.

I see energy today as sort of where the web was in ’93 or ’94 — like a trillion dollar industry that’s going to be totally reinvented in the next 25 years. There will be really big companies built there. And what’s exciting about companies like AlertMe is that these guys actually have a real product in the market. There’s a lot of hype around smart grids at the moment, a lot of stimulus money in the US and Europe, a lot of people raising a lot of VC and capital, but not a lot of product. So we’ve tried to find the pockets where there are real products that solve real problems.

MH: It’s interesting to me that you’re excited about the real-time web as well, since the real-time web is still pretty speculative at this point.

SK: Look, I think you gotta also invest ahead of the curve, and I don’t think I’m saying anything new when I say that the real-time web is a fairly seismic shift. The first version of the web was about static publishing, the next version of the web was about personalization and socialization, and the next stage of the web is about real-time data. It’s not just about the consumers on Twitter or Facebook; there’s real-time enterprise data that will change people’s supply-chain management and retail pricing. You can think of what AlertMe is trying to do in the energy space. They’re taking real-time data and interpreting it into something that can save money. So I think it’s a pretty broad space; there’s not just the stuff that’s built on Twitter, at least that’s the way we see it outside of the bubble.

MH: My startup is in the real-time space, too, so it’s definitely not a criticism to press the point.

SK: Well, one of the advantages that the European entrepreneur sometimes has for not being in the Valley’s echo chamber is the ability to get more stuff done. I would never advise any of our companies to not spend time in the valley, drinking from the well, understanding what’s going on there, and knowing who are the right people to talk to. But it’s also really good to get out for 3 of the 4 weeks out of the month and just build stuff. The exec team at Skype would never have been able to build its beta from the Valley without getting on everyone’s radar screen, whereas it took them 30-40 million registered users before the US paid any attention.