Janosch Kühn, Daniel Stammler and Oliver Löffler are the CEOs of BLN Capital, a Berlin-based investment firm that invests opportunistically across various asset classes with a focus on public and private equity. Moreover, the three entrepeneurs are the founders of Kolibri Games, a startup their sold successfully to Ubisoft in 2020. WIth us, they talk about Berlin as the ideal place for startups, their book and what drives their investment decisions.
Why did you initially move to Berlin with Kolibri Games and why did you stay with BLN Capital?
Our journey began as students at KIT University in Karlsruhe, which provided a great ecosystem with a massive focus on IT skills for our young gaming startup. However, finding professionals and valuable advice from other startup founders proved easier in Berlin due to its large startup scene, many talented professionals and the new, daily fascinating ideas that promised substantial growth and opportunities! During our time here disruptive ventures were founded and the scene grew tremendously.
There were a few different reasons why we stayed in Berlin with BLN, one of those being the strong venture capital environment with great deal flow, which from an economic perspective is perfect for us as investors so that we can focus on disruptor companies.
Personally we also felt very at home in this fascinating city, which holds many new opportunities behind every corner. In the end, we wanted to give back something to the wonderful city that gave us so much!
You wrote a book about your success story with the title "Mach keinen Quatsch". What does that mantra mean to you and how did you follow it through the ups and downs of your career? How does it apply today?
"Mach keinen Quatsch" or in our own English translation: "don't do weird stuff". We were always very focused on the substantial parts of work by following the mentality of being in the office on time, publishing a new update weekly and staying concentrated during those working hours. In return, every employee could return home on time and no one was overworked. Since the beginning, it was always crucial for us to launch a product quickly to the market and see how the consumers would react. We focused on the fundamental parts of the game. We did not want to do too much at once, instead doing it step-by-step. Not having too many complicated features but an easy-to-understand game was our mantra.
Through our career's ups and downs, we quickly learned that communication is the key to success. If something was not working, the only way to prevent further problems was going to the source directly and figuring out the issue.
Even now, with BLN Capital, we still follow our mantra. If we want to invest in a startup there needs to be a clear purpose and organized working structure maintained by a skillful team that knows what it wants to achieve.
You structured your book in levels. On what level did you learn the most and why and on what level are you right now?
The most challenging level was definitely chapter 9, the "Ick will nach Berlin Level". After moving to Berlin, we knew it was now or never. We wanted to push our company to the next level and succeed internationally. The new environment that Berlin provided had a lot of opportunities for us including a new talent pool of potential employees and an excellent ecosystem with other talented founders. Suddenly, we found ourselves in an office bigger than 1,000 square meters and we realized: here we could make our dreams come true.
The final level is the "Schluss-Level", which we would name "giving back and exploring" - level thanks to BLN and everything we are working on now as well as our book. With our investments, we can give something back to founders and can reinvest our money in the startup ecosystem and also give other startups the financial support we never received. We are always keen on learning new business models and could see ourselves founding a new business within the next few years. From where we are now, the world is open to us, and we know that if we pour our heart and soul into something, and with a bit of luck, we can make it work.
You say that the success of a game does not depend on realistic graphics or an epic soundtrack, but on a close connection with the users early-on. How did you accomplish and hold this connection?
Before we published the first version of Idle Miner Tycoon, we celebrated a "Release party" in our flat in Karlsruhe. We did not only invite gamers but also friends and family to test out the game on their phones. While they were trying our game, we paid close attention to their reactions to see if they understood the game and enjoyed it. Through their indirect and direct feedback, we could ensure the success of our game.
Later, we focused a lot on user feedback from our players. We hired a whole community management team to go through reviews and be in close contact with the users. Our weekly updates allowed us to quickly and efficiently track the reactions and stay in line with the wishes of our players. The direct and open communication with our audience helped us to adapt our game to their continuous imagination quickly.
Even though, an epic soundtrack is not too bad either. I mean, you probably cannot get the epic Idle Miner Tycoon music out of your head, right? ;)
What was the biggest challenge of your rapid expansion?
The rapid growth of our expansion demanded the structures of our company to grow at the same pace. In the beginning, everything was agile and we could make decisions quickly as we were a small team working with the same mindset in our small flat.
However, in the second and third year, it became more challenging to manage a growing team and pay attention to the needs of every employee. We did not want to lose the enjoyable atmosphere in our office and within our team. Therefore, quick feedback loops helped us to manage and lead our employees in the right direction and build a large and satisfied team.
Startups need to have an exit strategy. As yours seemed to be very successful, how did yours look like? How do the want to grow and the need to sell go together?
Ubisoft was our dream partner who could help grow the company even more and open the world to more possibilities. Our exit felt like letting a (grown up) child go into the world, but thankfully we knew it would have a good place with Ubisoft.
Moreover, all our employees obtained ESOPs (Employee Stock Option Plans) with the implicit promise to make them liquid at some point.
With BLN Capital you give what you yourself never needed: early-stage investment into leading, innovative, and disruptive companies. What is your impression of the Berlin startup scene? Does it fulfill your expectations?
Since we moved from Karlsruhe to Berlin in 2018, a lot has changed in the startup scene in Germany. Back then, a 10 million € Series A was something exciting and rare. In 2021 we saw 10 million € Seed rounds.
Germany, especially Berlin, has come a long way in the entrepreneur and startup culture. Startups receive better financing, in turn top university graduates consider starting their careers in startups as a strong alternative to consulting, banking, or large corporations.
We love working in Berlin and it definitely exceeded our expectations. Learning more about groundbreaking ideas being built in this city everyday is making our work so exciting. However, there is some room for improvement: the bureaucratic system in Germany is overloaded - it is normal to wait six weeks for a tax ID. In general, 50% of Kolibri employees came from abroad and most of them needed some sort of visa.
And if that was not enough, flats and offices are becoming more expensive every day. Nevertheless, the startup culture is flourishing and growing constantly. Bureaucratic and economic challenges have to be faced in every city and we would choose Berlin as our location every time.
What factors go into your investment decisions?
We focus on the team, the market, first successes and traction, and entry valuation vs. expectation.
Team: probably the most critical part. How do we assess the founders' ability to realize their visions? How does the collaboration with the first team members work? It is essential that the team has the expertise and knows where to go - we can help them to go in the right direction, but we should not be the ones they ask to give the direction in the first place.
Market: we look closely at the market the startup is operating in. What is the market size? Who are the competitors? How does the startup differ from its competitors? Is it a "winner takes all market" or can several players make it? The right balance of niche vs. large market - large market means a lot of competition and a lot of funding (see Gorillas & Co.); small markets may grow a bit slower but can often be much more capital efficient, but must not be too small either.
First successes and traction: What do the company figures look like? Have first successes already been achieved? How does the company plan to successfully implement the business model?
Entry valuation vs. expectation: "VC Power Law" - every investment should be able to return our investments of the same year - the company must either be able to become very large (and also justifies higher entry valuation) vs. smaller market and quick dominance in a niche at a lower valuation.
As an investment firm that supports aspiring gaming startups, you take active part in the gaming ecosystem. Where do you see that ecosystem in a few years? What trends do you follow, what do you dismiss?
When we entered the mobile gaming market back in 2016, everyone said the market was already exhausted and there were already too many players. Nevertheless, we still believed that we could succeed with a new genre, a disruptive and innovative idea. Until today, the market has grown a lot and the ecosystem is becoming more competitive, but we still believe that it is worthwhile to implement new gaming ideas. A leading idea might have the potential to disrupt the whole market.
That the market is not saturated can also be seen in the trend of new VC investors. Investors like Play Ventures, Bitkraft, or even big international funds like Andreessen Horowitz with designated gaming funds continue to invest in the gaming industry and see huge potential.
Moreover, free 2 play (F2P) and the Freemium model offer a whole new opportunity for the gaming market. Unfortunately, German teams often do not dare to engage in the F2P mobile market. However, US teams or teams in other European markets like Teams in France or Turkey show much more dynamism and engagement in the F2P mobile market.
New technologies like virtual or augmented reality also pose new market segments in the gaming industry.