Interview by Beata Socha

WBJ: It is interesting to see so much US capital looking to invest in Europe. What is it about Europe that makes it attractive? In the past, it was undervalued but now? 

Nico Schoenerberger: It still is. You can get a stake in a European company for a fraction of what Silicon Valley offers.

Do you think there are a lot of opportunities  happening here or is innovation in Eastern Europe trailing Western Europe? 

No, I would say things have changed. People have realized that the sheer number of developers in the CEE region is so substantial that you can easily build businesses around that. But what I realized is that the CEE lacks the ability to commercialize. I think product, tech, innovation is extremely strong across Europe. But what is needed is someone with the ability to scale up a company from one million to five and then from five to a hundred. Businesses in the US are really strong at doing it; Europeans have yet to learn this skill. You have to have the right people and the right tech, and you need someone who can sell it.

Scaling up has been Poland's Achilles heel because it has a large enough domestic market, and most startups in Poland don't think about the international market until they have strengthened their position enough. In doing so, they miss their opportunity, their first mover advantage in other markets. Is this still the case?

This mindset is still there amongst many of the entrepreneurs of the older generation. I think the new generation of Polish startup founders realize the need for a global mindset from day one of building your company. That may be because of education: many young entrepreneurs have worked for US companies or CEE companies that became global champions. They see the opportunities in looking outside the domestic market. That is the case for Polish, and also Czech and German startups. They are becoming more international. You can see that in their very first pitch. You should always have your pitch ready in English rather than your local language. It also matters where you locate your headquarters, if you have a Delaware Inc., for instance. 

Is it really that big an advantage to have a US office, the so-called "Delaware Inc."? Should a startup have an international HQ from the outset even when they also operate on their domestic market?

Definitely. I suggest that companies do both. Because if you sell domestically, it definitely helps to have a local legal entity. But if you want to raise funds from US investors, you need to think global from the beginning.

A few years ago, we saw mainly software companies in events like Infoshare. Now, you can see more startups developing environmental and energy tech.

Investors have realized that environmental tech and tackling climate challenges with tech solutions is where money can be made. It's very opportunity-driven.

Are these more hardware-heavy tech solutions than we've seen in the past?

Yes, they are. Sure, you can get the low-hanging fruit by helping the company optimize power use with software. But if you look at carbon capture – you need significant investments into hardware solutions to suck out the carbon from the atmosphere, to invest in renewable energy. It's still a tough game because of the amount of hardware involved and how capital-intensive these investments are. That's why we need public-private cooperation to see these investments properly funded.

Have the mass layoffs in the tech industry had a major effect on the startup scene? Are startups finding it challenging to raise capital?

I think the layoffs have been a consequence of the missing funding. The layoffs freed up a lot of talent. Over the past few years, with all of the startups hiring, everybody was looking for the same people. Two years ago, I heard people saying: "I can't find the right talent. I need to scale, I want to grow, but I'm lacking developers." And now we are at a place where companies are saying: "We don't need to grow anymore or search for funding." 

Does that mean investors are becoming more selective?

Absolutely. Investors have become more picky. They are taking way more time in terms of due diligence now.

So the VC model is now more professional?

It was already professional, but we now see a clearing out to a certain extent. What has disappeared is what I like to call "tourist VCs." These are the people choosing to invest for lifestyle reasons without really understanding how to invest in startups. They are now pulling back. And startups are also finally learning that it's not enough to simply have a cool proof of concept or a working piece of tech. That you can only get money if you have a sustainable business model that makes sense in the long term.

What is the future of AI? Do you see it more as an open-source tool available to all, or is it proprietary and entrenched?

It will be a mixture of both. Just like with public cloud solutions that have become the standard, and no one is building their own servers anymore. Underlying AI tools will become like cloud infrastructure. You will need to build on top of that AI scaffolding to train the generic models as use-case specific as possible, for example, train specifically for cancer detection. There is a lot of room for value creation in what you build on top of that underlying AI technology. The groundwork has been done, and the AI "infrastructure" exists. How you plug into that infrastructure and what you create out of it will determine your company's success. 

Infoshare Conference 2023 - a festival of tech-driven community 

Over 6000 participants, 500 startups and corporations, and nearly 200 experts from all over the world shared their expertise on 9 stages at Infoshare. The largest tech conference in CEE took place in Gdańsk. Check out the overview of the event at www.infoshare.pl/conference