Why the German Ecosystem Continues to Fall Behind Silicon Valley

About this episode

Philipp Möhring of Tiny.vc is one of Germany's most active early-stage investors. His fund invests up to €200,000 annually in 50 to 100 startups and recently launched its third fund generation. Through his time at Seedcamp and AngelList, Möhring is strongly connected across Europe and the US – the perfect position to assess the differences between ecosystems.

Tiny.vc's Investment Strategy

Tiny.vc pursues a diversified, high-volume investment strategy. "We basically just raised our Series A," Möhring jokingly describes building his own company. The fund has continuously expanded its team and professionalized processes to efficiently handle the high volume of investments.

The strategy is based on the conviction that diversified portfolios offer better risk-return profiles for early-stage investments than concentrated approaches. While concentrated portfolios can theoretically achieve higher returns, the risk of total loss is significantly higher.

German vs. American Startup Ecosystems

The differences between Germany and Silicon Valley remain significant according to Möhring's assessment. The American ecosystem benefits from several structural advantages:

Capital Availability: The US has significantly more venture capital available, and investors are more risk-tolerant. German investors are often more conservative and prefer established business models.

Mentality and Risk Tolerance: Americans handle failure differently. A failed startup is often seen as valuable experience there, while in Germany the stigma of failure remains strong.

Network Effects: Silicon Valley benefits from networks between investors, founders, and talent that have grown over decades. This density of expertise and connections hasn't been achieved in Germany yet.

Investment Process at High Volume

To invest in 50 to 100 startups annually, Tiny.vc has heavily systematized its processes. The key lies in efficient evaluation procedures and clear decision criteria. At the same time, personal contact with founders must be maintained.

High-quality intros play a special role here. Möhring emphasizes that a good introduction should highlight not just the startup's credentials, but also the context and specific strengths of the team.

Changes with the Third Fund Generation

With the third fund, Tiny.vc continues to professionalize. This means larger ticket sizes, more structured processes, and expanded services for portfolio companies. The focus is on evolving from a pure capital provider to a strategic partner.

Trend Analysis Using AI as an Example

For hyped topics like Artificial Intelligence, Tiny.vc takes a pragmatic approach. Instead of blindly following trends, the team analyzes what concrete problems are being solved and whether the business model is sustainable. The AI boom offers opportunities but also carries the risk of overvaluations.

Getting Started with Angel Investing

For aspiring angel investors, Möhring recommends a gradual entry. It's important to first leverage your own network and start with smaller amounts. Diversification is crucial especially in the early phase, as the learning curve is steep and early investments are often suboptimal.

Exchanging with experienced investors and studying successful cases helps develop a feel for promising investments. Angel investing is a marathon, not a sprint – accordingly, the approach should be long-term oriented.