What needs to happen to go from constant fundraising mode to landing an investment to the tune of 20 million euros? You have to prove that your business idea works. That is exactly what Alexander Henn and Philip Magoulas, the founders of the Munich-based startup Shore, managed to do. It also allowed them to recently win over investors such as Funke Mediengruppe, the Metro Group and Bayern Kapital.
What does Shore do? The Munich startup offers digitalization solutions for small, local service providers. Although solutions are available for specific sectors, the software-as-a-service concept from Shore along with the variety of products offered significantly distinguishes the startup from their competition as a specialist in B2B digitalization solutions.
No one has a better understanding of how difficult it was to reach this point than Shore’s founder, Alexander Henn. He started with Termine24 – now known as Shore – and discovered time and again that the path he was on sometimes needed to head in a different direction to be successful. We spoke with him to find out more about what he learned during the process.
1. Take your time and find the right team!
“In the beginning, everything should and needs to happen quickly. That is why we did not look for the right team at first, but instead relied heavily on freelancers who were not always necessarily committed to the project.”
The logical result of that experience: Instead of relying on a high number of freelancers, Shore now employs a permanent team. They also take all the time they need when looking for suitable people to bring on board. The team now comprises just under 250 employees with plans for continued growth – but only with very clear objectives in mind, emphasized Alexander. The major focus is on IT.
In addition to your team, choosing a business partner is also decisive. Since Alexander had never planned to work with a partner, it was certainly a new step to take:
“I had always been more of the kind of person to start a business on their own. I had never looked for a colleague or partner, because I felt I was more flexible and faster on my own. As soon as you have a partner, you have to organize and work together.”
His attitude was pretty much set. That is, until he happened to meet Philip Magoulas in Berlin, who had been with Zalando since day one. What Alexander values so much about Philip is his enlightened way of viewing things. He also appreciates his startup boldness. It also helps that Magoulas knows how to scale a business from 10 to 1,000 employees while keeping the processes running smoothly. “Without him, Shore’s rapid growth would have ended in total chaos,” admitted Alexander quite frankly.
What unites the two is their conviction that the digitalization of local services could become the next big thing. Their success certainly seems to confirm their belief.
“We did everything wrong in the beginning”
2. Concentrate on one idea instead of working on three at the same time!
“We did everything wrong in the beginning. For example, we developed way too much at first. That meant we needed a lot of people working for us, and the costs were too high.”
Resource-heavy developing cost the Munich startup an enormous amount of time and money. That mistake is now seen in a more positive light at Shore, since the company will ultimately benefit from it in the long run:
“Although we took somewhat longer in the beginning for product development, our test-based approach at different levels of development will pay off for us in the end. We have only scrapped a small amount of what has been developed.”
Nonetheless, there is always a danger of getting lost in too many ideas – much like Alexander has seen happen to others in the market. This often leaves companies stuck in a niche. One of the reasons that has not happened to Shore is partly due to their sound product development. It is also because the Munich startup was fortunate enough to successfully enter the market right from the start.
3. Do not get stuck on things just because you planned them in the beginning!
“If you are starting a company alone without much money, you need to be ready to quickly dump products that are not working. In other words, do not just develop away and hope that everything will turn out well.”
For Shore, that meant saying a relatively early farewell to their original B2C business model. They now concentrate solely on the B2B, or “customer management system for service providers,” segment. It was a classic pivot. Their new focus is on the products that are easiest to market to their target group:
“We started with online booking. Of course, it already existed at the time with sites like Booking Table. But nothing was offered that covered all of the sectors. Being able to make an appointment with your physician just like with your hairstylist – no one was offering that.”
In addition to online booking, they also offer a module for customer management, a web module for creating an internet presence, an iPad-based POS system and much more. The individual modules can be combined to suit the client’s needs.
Sending out newsletters is as easy as sending a text message
The objective of the Munich-based startup: When you have Shore, you will not need any other systems for digital management. Plus, sending out a newsletter should be just as simple as sending a text message.
A clear advantage provided by the new strategic focus on their target group: A huge number of small enterprises such as hair salons, restaurants and nail studios are often just beginning to digitize their businesses. The corresponding number of potential leads is just as enormous.
4. Think strategically, and not just about tomorrow!
“In retrospect, I should have been thinking more in strategic terms. That means not just thinking about how I can earn money next year, but instead about what topics might be big in the next five years.”
That being said, thinking strategically is a whole lot easier when your financing is solid. Looking for suitable investors was not always easy for Shore:
“A much higher proof of concept is necessary to receive significant investments in Germany when compared to the US, for example. Here, you are only judged based on your revenue and do not receive much trust in advance – especially with software products.”
The Munich startup has since been able to deliver its PoC, and landed a larger-scale deal just weeks ago. During the last financing round in the summer of 2016, Alexander and his team brought in investment capital amounting to a total of 20 million euros. In addition to the Funke Mediengruppe, they also have the Wachstumsfond Bayern from Bayern Kapital on board. Alexander only has good things to say about them:
“Bayern Kapital has been a very respectable and pragmatic partner – a real stroke of luck for us. We have always found receiving state capital daunting. Of course, it is also because the entire process involves a lot of administrative work. But we are happy to have them with us.”
5. Gather your own experience!
“Despite all the helpful tips you hear in the startup scene, I think you cannot automatically transpose other people’s experience onto your own. Instead, you should just get going and give it a try.”
Accordingly, Alexander does not make much of constant networking and interaction within the startup scene. “When you are in the stage of building your company, you do not actually have any time to network.”
“We were able to stay under the radar for a long time”
When it comes to having his company headquarters in Munich, however, he is completely satisfied. One reason is that Shore has “been able to stay under the radar for a long time in contrast to Berlin.” Employee fluctuation is also very low in Munich – people enjoy living and working in the Bavarian state capital.
On the other hand, the city can make some things extremely difficult for startups, added Alexander. Trying to find suitable office and living setups is one example:
“We looked for a suitable office for over a year. That alone can ruin a startup. Finding apartments for new employees is also extremely difficult and occupies quite a few people in our HR department. It is definitely a bit easier in other cities.”
What do they have planned next?
“Our funds never lasted for very long until now. We were in constant fundraising mode. For the first time, the latest investment will give us a longer period of time to be able to work with the money and break even on our own.”
So things are looking good. Shore has also set the goal of being more than a Europe-based phenomenon. Indeed, initial signs of success can be seen in the US market. The latest investments will be used to further those developments. Alexander feels certain that new partnership opportunities might arise, especially because innovative software solutions come from the US.
Shore plans not only to invest in internationalization, but also to expand the products they offer. Those developments do not always have to come from Shore itself. This idea is to become a marketplace for other providers.
“We have developed a large customer base, which other providers could use to offer their products. That would allow Shore to cover areas in the future that we do not develop on our own. We want to become a kind of marketplace for every area and product that might be of interest to our customers.”
We will be excited to learn more about how things develop for Shore. One thing is certain – they are definitely no longer flying under the radar in Munich.