New start-up culture
German start-ups with good ideas can be successful in the USA.
In the beginning we were rather naïve and optimistic,” reminisces Dominik Stein. “We assumed that we would simply be able to apply our concept for the German kebab restaurants to the US market.” Stein and Michael Heyne are the founders of the kebab restaurant chain “Verts Mediterranean Grill”, which is based in Texas.
The two graduates of the Otto Beisheim School of Management (WHU) got the idea for the venture in 2008 whilst completing a semester abroad in Dallas. During their time there, they realized that there were hardly any kebab stands in the USA. They subsequently completed MBAs and several internships before finally opening their first two Verts restaurants in 2011. They now operate 33 of them throughout Texas.
Learning how the American restaurant market functions was a lengthy process for the company founders. “Customers expect more than in Germany, but are also generally willing to pay more for good food,” says Dominik Stein. Hence the Verts outlets bear very little resemblance to the kebab stands you usually see in Germany. They are reminiscent of fast-food set-ups: customers can put together individual kebab, falafel or rice dishes for themselves. In addition, Verts is able to boast that most dishes contain fewer than 600 calories and no artificial additives.
Other start-up founders from Germany have likewise been able to prove that their business ideas work in the US market too: the photo app EyeEm, for example, or the software firm Celonis, which received millions in funding from US investors. Unlike Verts, they have branches in both the USA and Germany. On its initial forays into the USA, Celonis benefitted from the promotional program German Accelerator. The private initiative, which is supported by the German Ministry for Economic Affairs, provided Celonis with offices, advice and contacts for several months.
“For many German start-ups, conquering the US market is an important goal,” comments Lucie Volquartz from IT association Bitkom. “That also has a lot to do with the funding systems there,” she says, because digital start-ups in particular, which have high development costs, find they quickly come up against their limits when seeking venture capital in Germany and Europe.
The Verts founders have also been able to raise sufficient capital in the USA, although two thirds of their initial funding of 35 million dollars came from Germany: from colleagues, friends and relatives, as well as several family-run companies. Stein and Heyne have retained a majority stake in the company, however; for them – unlike for many other German start-ups – a quick exit is out of the question.
They are currently planning the next round of financing; 50 million dollars is the amount they need for further expansion. By 2016 they want to open seven additional restaurants in New York, Philadelphia and Boston. Their ambitious goal? By 2020 they plan to have 250 Verts restaurants, including some on the West Coast. ▪
