Christian Strobl is the CEO and Co-Founder of Berlin based Hackerbay. He invited us to the Hackerbay offices at “Factory Berlin” to talk about agile software development, the potential of artificial intelligence and how to hack yourself an investment from a Silicon Valley investor.
innomaniacs: Christian, let’s start with the most important question: How do I hack myself a client?
Christian: Back in 2013 and 2014, we were really obsessed with everything related to „Silicon Valley“, there aren’t many people who watched as many videos on YouTube. Neither have they listened to as many podcasts or read as many blogs as we did before building the first version of Hackerbay. Back then there was just nobody in Germany who understood our business model and we knew from the blogs and all the other online media that there were only a few people who actually thought about the same things in Silicon Valley. But we didn’t have any access to them. So we decided to hack their websites, reset their passwords and send an email to make them aware of their security flaws in their websites, but also highlight Hackerbay as an exciting investment opportunity. And some of them replied! They got curious and we had three or four Skype calls and then we hit an investment. So a pretty unconventional way, maybe the „hacker way“ to get into Silicon Valley. But it worked for us.
And you started working in San Francisco?
We started Hackerbay in January of 2016 and already in April we got the chance to get that investment from the US and move to San Francisco where we worked in Palo Alto and then consciously decided in September that the German digital transformation market will be the market to create the market leader. We are really focused now on proving that digital transformation is working in Germany with the customers in this market. And we believe it’s the right place now.
What exactly made you decide to come back to Germany?
I guess now it’s very clear because it’s in the news but back in 2016 we felt two things: on the one hand we wanted to create value with software and we already had Twitter and Facebook and Google as clients. Back then and we created value for those tech companies. But when we wanted to expand the market we noticed that the US mindsets towards „agile“ software develepment is more casual and that „agile“ actually wasn’t such a big deal there anymore. On the other hand, „agile“ in Germany is a real cultural shift. It’s a question of trust. So we noticed that Germany would be the market for us. It’s a very big and sophisticated market with various big companies like SAP.
“companies like Facebook, Google or Apple were paying so much salary that you had nearly no chance to build a company on your own.”
We thought: if we can prove that in Germany, in our home country, both hackers and corporates can work together on “agile“ software, it’s going to be easy to expand all over the world. It’s gonna be the standard because here you will have all the questions, obstacles and all the challenges you can imagine. If it had not worked out it would have been ok too – at least we tried. We knew we could still land a job in the US because we have the right network there. It was a very conscious decision. Another point at the time was, that in San Francisco big companies like Facebook, Google or Apple were paying so much salary that you had nearly no chance to build a company on your own.
But in the end it did work out…
It’s not usual for a startup to survive the first three years. Nearly 90 percent of startups fail. Hackerbay is bigger than ever and we’re growing super fast. Even our investors in the US, who didn’t believe it was the right decision at the time. Last year in November I was there and they congratulated us for our foresight regarding the market and how it changed over time.
Back then you chose „Factory Berlin“ as a base for your company in Germany!
Yes, at the time we moved into „Factory“ it was only about 30 people. And now over the last two or three years „The Factory“ has growing to almost 3000 members. Being here helps us a lot to be in touch with the start up ecosystem. It also makes it way easier to attract international talent. On top of that, we are really good friends with „Factory“ on the corporate side as well now. Whenever they’re having new corporate partners who know us and whenever there’s a mutual benefit, they will introduce us to them.
SKYROCKETING PRODUCT VALUE
Could you tell us a bit more about what you do? And how you use „network effects“ in the process?
Hackerbay is a data analytics startup from Berlin with a focus on manufacturing. It was founded in 2015 by four Hackers from Munich with a background in the finance and private equtiy industry. With 200 hackers we build software for large enterprises like Volkswagen, Siemens or Microsoft. Using „network effect“ in our case means building software that scales in value with the amount of people that use it. The more users participate, the better the product experience gets for everyone. So when you have one user it’s one product, but when you have a thousand users, the product value skyrockets.
“By connecting people, machines and processes in a pretty complicated way we can generate more value”
What we are doing now as the only company – as far as I know – globally is to build this kind of network effects software inside of corporations to increase productivity. By connecting people, machines and processes in a pretty complicated way we can generate more value, which then allows us to solve problems that were just not solvable before. And that’s unique. So what’s the point of network effects? Basically you have two sides of it: On the one hand you have direct network effects, that’s network effects among people – mainly communication, coordination and control. How do you manage a network like that? On the other hand you have all those things that are called indirect network effects where the big word is platform economy. You have big platforms like the Apple App Store or Amazon where supply meets demand. The large corporations try to build those platforms now, and I guess it will take five years until they’re here. And with Hackerbay we are currently really specialized on those productivity gains, by using direct network effects.
What’s your experience helping big companies in Germany with implementing these effects, are they open to welcome some hackers into their processes?
Very good question. So first of all, all of our customers are really successful companies that have been successful for 50 or 100 years by now. Our average customer age is actually 73 years. They’re really thriving and most of them are market leaders. So why should a large corporation that’s super successful, that has an IT with 400, 600, 1000 or 2000 people, get any advice or help or any support from a small startup from Berlin? What we notice at the moment is a major shift in the market that lets them rethink. There’s people inside those corporations who see that this shift is coming and the shift is coming on two levels: On the one hand it’s moving from on-premise software to the cloud. Instead of owning the infrastructure you’re renting the infrastructure. That’s a major shift in IT because you were managing those servers before and now you’re renting them. Connected to this is the business opportunity of being in the cloud, being faster, being able to focus on speed and focus on really fast timelines as well as a fast iteration status instead of building the perfect product. That’s the big shift.
Do the companies feel the urgency in this?
The industry that we’ve been focusing on is the manufacturing industry. You have strong competition with companies that are now moving processes to agile and lean. They have achieved things in the last twelve months that were unseen before and nobody could know how you can ramp up production so fast. They’re using this agility as a strength and suddenly the competition is increasing. And for those companies it now gets more and more necessary to really rethink both their organization and IT. When they work together with Hackerbay it’s an exchange of information while for us it’s helping them reduce complexity.
So instead of changing your entire culture as a corporation and changing everything from day one to day ten we can help them by saying „look, we are in Berlin, our culture is agile and we are super fast. We are hackers, we can get you to results with our experience.
A MASSIVE SHIFT TOWARDS THE CLOUD
Are German companies too late for this shift?
If you would have asked me two years ago I would have said yes.
However, the speed that we have been able to see in the last two years, I have never seen before. For example: when we started „Hackathons“ in 2013, it was an underground thing. Despite that, we quickly got into discussions with large corporations back in 2013 and 2014 on how to implement events like this into their process. It never worked out. How can you open up office on a sunday? How could it work when in Bavaria the law of the church says that you should not work on sundays? It was impossible. „We can’t open our Wi-Fi for hackers!“, was a sentence we also often heard. Two years later everyone was doing „Hackathons“. I myself witnessed how our market is shifting from „this is impossible“ to „this is totally mainstream“. And two to three years ago, when we started coming back from the US, we decided Hackerbay is only doing cloud projects from now on. Why? Because we are doing modern technology and it makes no sense to build our own servers when we want to create value for our customers with artificial intelligence. With modern technology and mobile computing it no longer make sense to buy and maintain your own server farm as a corporation. It’s inefficient. I lost at least 60 percent of my customers over this discussion.
What I have seen in the last twelve months, is that the market is massively shifting – shifting towards the cloud. We have seen it in the news a week or two ago, that VW is now moving their entire IT to the Microsoft cloud. So this huge shift is already happening.
Did people like you have a part in this?
No, we are just a small startup. What we can do is we can deal with hackers. We can deal with software and we can bring some entrepreneurship spirit into companies. We can’t change the market, so we need to hit just the right wave. I see how this cloud wave, how this move to agile is accelerating and if we can be part of this and help them create value, then we are already doing fine.
Is there already a next wave in sight for you?
Everything relating „The Cloud & Industry 4.0“. It doesn’t make sense to start the fourth industrial revolution, if you have it on premise. It doesn’t make sense for you to be fully connected. You need the newest mass computation, you need cloud, you need network effects. I assume the fourth industrial revolution just got started and lasts another 30 or 40 years.
GERMANY NEEDS A REAL STARTUP ECOSYSTEM
Is there something that you would wish to come to effect in the next year or two? Maybe on the company side or regarding politics, something that would make your job easier?
What Germany is missing is a real startup ecosystem. Especially B2B-startups or startups with a thousand employees and financial power. That would be really beneficial to the economy. Let’s take a car company for example from Stuttgart or Munich. They’re great companies and they should stay great companies. They don’t need to become startups – it just wouldn’t make sense. Stuttgart doesn’t need to become Berlin in terms of culture because the people were super successful and they should stay successful. But for having a balanced ecosystem, I guess it helps for those companies to have partners in Berlin, successful B2B startups that can play on the same level. Therefore you need those successes and therefore you need the investment. You need the financing and you need the acceptance in the society that building a startup is not a failure, that you are just doing a startup because you don’t find a job at Daimler. That’s the general perception: „they are in Berlin, so they probably didn’t find a job at Daimler“. Wrong. I want to be an entrepreneur, I want to be a hacker, I want to do software. That’s why I go to a startup and then I cooperate with large corporations. I suppose it would be good from a political and cultural side if this wind came to the market, because it would make us stronger.
Maybe a pessimist’s question to finish this interview: If AI can double a company’s productivity, does it mean half of the employees are going to lose their jobs?
Artificial intelligence is a huge buzzword, but we’ve been using AI since 2016. A lot of people have fear that robots are going to take their jobs and that we have an unemployment rate of 80 percent because „AI“ is too smart and takes away their jobs. I personally believe in a productivity gain, and that an economic superpower driven by technology is creating more jobs. It’s creating more opportunity and it’s creating entirely new benefits to our society and therefore also to the employees. I give you an example; if you take „AI“ and you reduce delivery time, let’s say improving the process by 30 percent. That probably leads to productivity gains. And of course you could argue that I now need less people to produce the same outcome, but you can also ask yourself what if I reduced the delivery time by one third and suddenly I can give an offer to the market that gains me market share? Now suddenly I can deliver faster, people can therefore produce better in time and therefore my market share increases. Why? Because the customers are like „Okay, If I get the same thing for the same price faster that’s good“. I buy more or I add a premium option to the price and suddenly I can do business. And in order to make it work we need to talk to the people on the factory floor. We need to talk to the people who are working.
We never say we’re replacing your job or we’re automating your job. We always ask them how can we reduce the complexity. And I didn’t see a single person, yet, who was like „My job is super easy, I don’t have any complexity and that’s why it’s useless to build software, please automate me.“ I’ve never seen it. I’ve always seen people who are like „if I would have a tool that sends me push notifications or if I have a new risk management then I could do this and this.“ And so what you actually do with „AI“ is you free up the time for people to do the things that they currently in the daily job cannot focus on. And you reduce stress for people and that’s how you create more value for the company. Therefore a shift leader can actually see digital transformation as a an opportunity to make a career. From shift leader to delivery time manager. In autonomous cars from truck driver to fleet manager. I think we have a great chance with industry 4.0 to have a better economy and therefore a better society.
PHOTOS/INTERVIEW by Marvin Kleinemeier