The resilient founder who pre-empted the e-commerce boom
LOCATION: Munich, Germany
LANGUAGES SPOKEN: German and English
CURRENT ROLE: General Partner, 42CAP
PREVIOUS LEADERSHIP ROLES:
CTO, SAP Customer Experience
SVP Global Presales, SAP Hybris
Co-founder, Hybris
BOARDWAVE ROLE: Mentor
Moritz Zimmermann, like many entrepreneurs before and since, is a disruptor who had a good idea as a university student. “Do you remember those big mail-order catalogues?” he says. “You know, the ones that would kill a person if you hit them over the head with it? Well, I thought, why not take this paper catalogue and put it on the web?”
It was 1997 and the internet was just getting started. “I think there were a few hundred thousand users. We were lucky because we were the first to get exposed to this new tech – and we were first in line when they were handing out university email addresses.”
Zimmermann was earning a bit of extra money building HTML websites, and he started thinking about how they could be applied to selling goods online. And so he co-founded Hybris, an e-commerce software start-up.
“It sounds obvious in an age where we purchase products with a tap of our phones, but the birth of internet shopping was slow and it had many casualties. Giants such as Amazon survived the dot-com crash but many firms folded,” he says. “People thought that it was just a fad. Nobody is going to buy stuff on the internet.” With hindsight, he admits that Hybris may have been ahead of its time. “We could have started the company five or six years later.”
But it was too late to go back and Zimmermann and his co- founders were desperate for funding. Because the dot-com bubble had burst, institutional VC funds were “a big row of disappointment”. Luckily, they found an individual business angel who was prepared to take the risk. “He was in training for the New York marathon at the time. Maybe the endorphins kicked in when he was running because he came back from a training run down the river and said he had made a decision that the company needs funding,” he says. “It was the day of our Christmas party, and the last one in our minds because we didn’t have much cash left.”
The leadership team cut their salaries by 50% and, within two hours, employees accepted a 30% drop as well. “We had one office where the managers in the team didn’t want to do it, so we just had to part ways with them because we had to treat everybody the same.”
That bootstrapping continued for seven more years, and Zimmermann says that the period saw employees putting their own money into the firm. He also asked people to cut their wages again and converted that money into shares. “That turned out to be a really bright spot because folks were clearly invested in the company,” he says.
Mob rules
Zimmermann has a rather surprising analogy for his company at this stage. “I want to compare it to the Mafia, but obviously take away the fact that they are in the business of making money from forbidden things,” he says. “It’s a very resilient organisation. They have got every police officer and district attorney wanting to see them behind bars and yet, hundreds of years later, they are still there. And there are a couple of reasons for that – they don’t hire people from job boards, they go through a network of relatives and family,” he says.
“We were in a similar situation because we had nothing to offer. Who wants to work in a company where you earn 30, 40, or 50% less than the market rate? And nobody believed in this e-commerce thing anyway. The only folks we even dared approach were through our circle of friends and network, who wanted to work with us or were crazy enough to trust us.”
Like a Mafia boss, Zimmermann was wedded to the company. “In movies about narcos, you will see the head of the organisation wants to retire and have a nice beach house but it’s just not possible,” he says. “We were in a similar situation. I woke up sweating in the middle of the night with bad dreams thinking, ‘I’m wasting my life here, it’s not going anywhere’. But, whenever I thought I should leave, I thought ‘How do I pay back hundreds of thousands of dollars worth of loans? And what will I tell my friends and colleagues?’ Basically, there was no way out. I had to make it a success.”
These “non-typical recipes” for success aren’t necessarily what he would recommend for a company starting out today. Now, as a partner at seed-stage investment firm 42CAP, he looks for the same level of commitment from entrepreneurs. They may not have to prove Mafia-like credentials, but they do have to be willing to put their own money into their ideas.
He says he has identified two types of founder. “The first is an entrepreneur who sees a problem and is passionate about solving it. They put their days and nights into building a company. And then there are the folks who think they want to do something in the start-up tech land. They brainstorm ideas but it’s not really genuine. They have just scanned a lot of problems.”
Hybris fit into the first category, and Zimmermann’s university idea went on to be a huge success story: European SaaS leader SAP bought the company for $1.5 billion in 2013.
Deal or no deal
Zimmermann says that it was a good fit because Hybris already had a three-year sales partnership with SAP. “When you want to exit a company, I would say start thinking about that three or four years beforehand. It can be very simple things like joint revenue, customers or a reseller partnership,” he says.
The deal with SAP was also done very democratically, involving those loyal employees, many of whom had stuck with the company through thick and thin. “We wanted to get the employees on board with that journey as well. It’s very easy when the news breaks that this company has been acquired by SAP for an employee to think: ‘Shit, I didn’t know that, I don’t support that. I signed up for this cool start-up and now I am ending up at a corporate. I’m out of here’.”
To avoid a mass exodus, Zimmermann came up with a risky strategy. “I wouldn’t necessarily recommend this to other entrepreneurs but we got the 50 top employees on a call and swore them to secrecy. We said ‘Don’t talk about this to anyone, not your wife, not your dad’.”
If details had leaked that two publicly listed companies were in the bidding, then the offers would have to be abandoned, Zimmermann says. “We told them that we have three options. We’re two weeks away from going public on the Nasdaq but we have SAP and Adobe who want to acquire us. We tried to explain the pros and cons of the three options. It was a Friday night and we said ‘You have until Sunday to give us your vote and we’ll try to make that happen’.”
He smiles when he explains that SAP was not the highest bidder, and it was not his preferred choice (he voted to float). But because the majority favoured that deal, it was the one accepted. “I think it was one of the most successful acquisitions and post-merger integrations, and the company is still thriving under SAP stewardship,” he says.
The selling of the company also coincided with a big life change. “We sold the company in June 2013 and in September my first son was born.” Given that he describes the time investment for a start-up as “insane, literally nine to midnight five days a week and some weekends too”, it was rather good, albeit lucky, timing on his part to become a parent after his start-up was sold.
Despite the acquisition giving him a bit more family time, he is not a fan of the term “work-life balance”. That’s partly down to his dad’s advice to “find both a job and a wife that you love”. “If my material needs were taken care of, then I would have done the Hybris thing for free because it was so much fun,” Zimmermann says. “I get that not everybody has that privilege, but search long and hard because, if you find a job like that, there is no such thing as work-life balance.”
His own non-work passions include skiing and mountain biking, and he has one key piece of advice for budding entrepreneurs. “Look after your health and make sure that you get some relief from work with something like sport. You have got to make sure that at least a few hours a week you do something physical,” he says.
Corporate life
Zimmermann stayed at SAP for seven years, even though he had originally intended to guide it through the change for six months. “We still had a lot of discretion about building our own separate business unit and growing that. And it was exciting to talk to Fortune 1000 C-level executives on a weekly basis about what they were doing with their digital strategy.”
But corporate life brought challenges and disagreements, and Zimmermann reached a point where he realised the firm wasn’t his anymore. “You can argue your case but decisions are made and you think that it was the wrong decision. You can swallow that a few times but if it’s happening more and we’re disagreeing too often on certain fundamental things, then that’s the time to change.” He compares life at SAP to “defending this fortress against the smaller attackers that are trying to climb over the walls”, while he yearned to be “more on the attacker side”. “Now I am and I enjoy that a lot,” he says.
He likes that his role as an investor means he gets to see a new generation bring cutting-edge tech out of academia and intothe world. “I love interacting day-in, day-out with people and business models, and companies that are disrupting the status quo, and literally hanging your head into the future,” he says.
If he hadn’t founded Hybris straight out of university, Zimmermann says he may have enjoyed being a “ski bum”, but he also sees that there were many advantages to starting a firm so early in life. “Someone once said that the three most addictive things in life are heroin, nicotine and a regular salary. As a student, your standard of living is pretty low. That means you have less to lose if it doesn’t work out. I didn’t have a mortgage and I didn’t have a family to feed,” says Zimmermann. “We were young and dumb. We were very optimistic. Life experience teaches you that things can go wrong and things can fail. But we didn’t even think about that because we were young and wild.”
He was approached to join Boardwave by a few mutual connections. “I think it’s a fantastic idea,” he says. “When you look at the success that tech has had in the US, it’s obvious that there are key things that are still missing in Europe that we need to create more of. The network of people who can help open doors, help with hiring and mentoring. There are so many things that are obvious in Silicon Valley because they have done them for 50 years now. We’re just getting started in Europe.”
Tips From The Top
What are your tips for a successful business?
1. Follow what you’re passionate about rather than money – then you’ll be really good at it.
2. When joining an organisation, it’s really important to observe how the people at the top interact with employees and others. This will give you clues about the company and whether it’s good to join.
3. Practice persistence – it takes 10 years to build a successful software company.
What is the best advice you’ve been given?
Two ways to be unhappy are to pick the wrong job and pick the wrong spouse.
Can you tell us something surprising about yourself?
I try to travel everywhere by bike.
How do you relax?
I enjoy family time and I’m an avid reader. I also like mountain biking, skiing and weight training.
If you hadn’t become an entrepreneur, what career would you have pursued? Consulting or academia.
Is there a piece of tech, other than your phone, that you could not live without?A Macbook Air.
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