Felix Reinshagen is the cofounder and CEO of NavVis which is a global provider of indoor spatial intelligence solutions for enterprises. The company has raised over $60 million from top tier investors such as European Investment BAnk, Target Partners, BayBG, MIG, Digital+ Partners, Cumulus Ventures, and Kozo Keikaku Engineering to name a few.
In this episode you will learn:
- Applying knowledge from past experiences
- Expanding into China
- How to get in touch with Felix
- How they’ve grown the business
For a winning deck, take a look at the pitch deck template created by Silicon Valley legend, Peter Thiel (see it here) that I recently covered. Thiel was the first angel investor in Facebook with a $500K check that turned into more than $1 billion in cash.
Moreover, I also provided a commentary on a pitch deck from an Uber competitor that has raised over $400 million (see it here).
Remember to unlock for free the pitch deck template that is being used by founders around the world to raise millions below.
About Felix Reinshagen:
Felix is a co-founder and the CEO of NavVis, a Munich based high-tech start up in the field of indoor digitalization, indoor navigation and location based services. After gaining degrees in computer science and economics from KIT he added a PhD in economics in St. Gallen.
Always a nerd at heart Felix has developed software since high school. Before co-founding NavVis he spend 6 years at McKinsey advising large corporates in tech strategy while living in Hamburg, NY, Palo Alto and Munich.
Connect with Felix Reinshagen:
* * *
FULL TRANSCRIPTION OF THE INTERVIEW:
Alejandro: Alrighty. Hello everyone, and welcome to the DealMakers show. Today we have a founder joining us, and it’s a German founder doing great things in Europe. So without further ado, Felix Reinshagen, welcome to the show.
Felix Reinshagen: Thanks a lot, Alejandro. It’s my pleasure.
Alejandro: Born and raised close to Hamburg. How was life growing up?
Felix Reinshagen: Actually, very cozy and nice. I come from a family with a lot of entrepreneurs and people with a lot of technical backgrounds. Actually, I always had the idea of founding something in my life, even if it was very unspecific. My dad is a civil engineer, and it was clear for me that I don’t want to build houses. So when I started to look into software at age 13 or 14, I thought that could be an interesting thing for me, but it should actually take many, many years before I came back to that calling.
Alejandro: In this case, you were mentioning your family. Many of the founders that I speak with have this influence from seeing their parents or from seeing their grandparents, so what did you see that got you, “One day, it’s going to be me.”
Felix Reinshagen: First, my dad built his own business. Even though it was smaller scale, he was building his dream, so to say, and following his own vision at a time when what he did was actually not what people thought would be a good business. But it was his personal dream, and he thought there would be a lot of value in doing that. It turned out much later in his life that it was actually a great place to be. On a small local space, what he built had transformative impact. I, as well, admired a lot how much it meant to him and how happy he was in doing so, even though in the early years, he easily could have made a lot more money somewhere else. It was inspirational in terms of he followed his dream. Much, much later in his life, he, as well, profited a lot from that. I still see the legacy, and it’s amazing. If I just walk the streets of my hometown, seeing the houses he built and how whole neighborhoods have been influenced by his work over all the years.
Alejandro: In your case, you ended up going and studying computer science and economics. That’s quite an interesting combination. Why did you combine those?
Felix Reinshagen: First, I was a very quick learner in school. I really loved going to school, and I was very good in school as well – perhaps because I was curious. I felt at the end of high school that I was not pushed to my limits. It was clear to me that I wanted to do computer science, but I never wanted to work as a coder. It seemed to be a natural thing to not give up on computer science, but as well to pick a second thing. I was going through many things there. I was looking at physics, but then it would have been a really [4:33] career, and I wanted to keep my options open because, bluntly, at age 18, 19, I had no real plan of what I wanted to do and in which field would be good for me. So combining computer science and economics seemed to open a lot of options for me. Then I looked at universities where I could do a full – at that time, we still had a diploma in Germany, which is a combination of Bachelor’s and Master’s where you could approach a full diploma with two majors at the same time, and there were very few cities that would allow that and have a nice campus where you could easily study both of these things along at the same time. I ended up in the tiny town of Passau in Southern Germany, which came as a surprise to my parents, friends, and me. But it turned out to be a really good starting point because it was a really tiny place, and I made good friends there, and as well there was not that much distraction compared to had I been going to Munich or perhaps a big city like Berlin at the beginning.
Alejandro: Then, after university, why did you decide to go and do consulting?
Felix Reinshagen: I think it’s the same repeating thing. Consulting seemed to offer a lot of options, and I thought if I joined the big consulting company, I would see many different companies and industries, and I could form a more informed opinion on where I would actually like to play. I never thought about staying long, like many young people who join a consulting company, “I’m going to do this for a few years. I’m going to see the world and meet different industries, and then I’m going to find my profession in one of these places.” Then, on top of that, McKinsey had this awesome program back in the days when you could work for two years in Germany, and then they would actually fund your Ph.D. or an MBA. I think with the combination of these two things that I found attractive back in the day.
Alejandro: It’s interesting here what you said and what you ended up doing because it seemed that you really had that drive for business and for economics, so why a Ph.D. over an MBA?
Felix Reinshagen: First, I think it was a stupid idea, but I thought – I have a Master’s Degree in economics, so why doing another Master’s in economics, so to say.
Felix Reinshagen: I had really, really good experience in the last years of my Master’s Degree, so to say, with doing academic research. We published the first paper together with a post-doc, and I really liked that. I thought, “Perhaps even an academic career is interesting for me.” That’s why I went for the Ph.D. I very quickly learned doing my Ph.D. that career was not the right thing for me. [Laughter] That was a thing I really had to push through because I liked it a lot less than I thought. But, usually, if I start something, I really feel bad about giving up. It was actually one of the things where I thought more about giving up than almost any other thing in my life because it became clear after six months, and it took me a little bit more than two years to get my Ph.D. Making it through these one-and-a-half years when you already know you don’t want an academic career was a tough thing to do, and it was more, perhaps, a thing of pride than anything else to go through this.
Alejandro: So, when you finalized this, and you returned to having your full devoted attention to McKinsey, which was a big pillar in your professional career, where you spent close to a decade, you went to the U.S., and you went to Palo Alto. I’m sure that you now had the exposure to the hypergrowth companies and to startups going from nothing to something big. I’m pretty sure that pushed you over the edge to think, “I’m getting closer to actually thinking about doing my own thing here.”
Felix Reinshagen: Absolutely. Of course, I was looking at some things. During my time in New York, it was more financial industry. There were really interesting things going on, as well, at the interplay of tech and the financial system there – automatic trading systems and interesting hedge funds. That was something I was interested in, but I really wanted to see the West Coast. Perhaps, as well, none of these opportunities seemed perfectly right. Then, I spent close to a year in Palo Alto. Of course, there were all these super-cool companies out there. It was very tempting either to join one of the more mature tech companies to use it as well as a starting point to get to know the system better. Actually, I was really unhappy with myself. McKinsey had made me a really attractive offer to get back to Germany on a partnership track. I thought when I was actually accepting that offer that I had failed a little bit on my ambition to start my own company because you feel like you’re leaving Silicon Valley a year of, so to say, a little bit goodbye to that option of finding your place in the ecosystem and start your own company. One thing I was adamant about was I didn’t want to go and join or do the 125th eCommerce vertical and now sell – I don’t know – cutlery over the internet, or something because that was what I saw a lot, and where McKinsey, as well, had exposure to. I really wanted to do something that is unique and strong from the technology side. I had this whole background in computer science and had spent many years earning my pocket money in coding, and I wanted to do something as well, perhaps coming back to the influence of my family that I could pursue a dream, something that would be much more forward-looking compared to just executing on something that had been done many times before. Unfortunately, I didn’t come across something, but perhaps, as well, luckily, during my time in Silicon Valley. It really took me coming back to Germany and reconnecting with some friends here that were doing some outstanding academic work where I felt that could be something that I would be willing to dedicate many years of my life to, and then many long nights and weekends and everything that I learned as well from my family and my dad as part of starting something and then pursuing your dream on something that, at that time, no one else or very few people see as a promising topic.
Alejandro: And this ended up becoming NavVis. It ended up being a spinoff of the technical university there in Munich. I’m wondering here because I went through it, as well, the comfortable corporate job, 9 to 5. I was an attorney making a good, decent amount of money in New York City. At McKinsey, you also get paid very well, and here you were close to being for ten years there, so I’m sure that you had a really nice income. So was it scary to give your notice and go into something completely unknown?
Felix Reinshagen: Yes, absolutely, and you learn a lot about yourself and how much you really like to take a risk if you have to make that call because as a junior partner at that point in time – of course, as a junior partner, you already have a really nice income and a lot of additional perks. I knew if you would be doing the thing, and we would be starting this just the four of us founders, and we wouldn’t pay ourselves a salary, at least not in the first year. So that was a huge financial risk. On the other hand, the thing tipping me over was I would always be very unhappy with myself for not taking the opportunity. If you look back and you didn’t have an interesting career, and you didn’t build your dreams, then you have to look back to these moments where you had the choice, and if you did always go for the conservative riskless option, you must not at all be surprised if you end up having a boring career. I saw, as well, many senior partners at McKinsey that were unhappy with their careers even though they were making a lot of money. Then, finally, they came to a point that I said, “Look. The worst thing that can happen is that we’re really unsuccessful, and I’m still going to go back to consulting, and I would have had an interesting learning opportunity, and just make that leap of faith. It was harder than I had expected it to be, I have to say.
Alejandro: Here you are. You connect with your friends, and they were working on this interesting stuff, and then all of a sudden, you guys make the decision that this may have legs as a business. How did that spinoff end up happening, and how did you bring this to life?
Felix Reinshagen: We spent almost one-and-a-half years, on weekends and evenings tossing around ideas on how this technology could be put to work in a business context. It was fundamental research. It was mainly about imagery cognition, scenery cognition, and it was absolutely unclear where this could actually have a market. It was still clear that it would be some years away from bringing something to the market where it would be a well-rounded product. Actually, it came along even better than we thought. And we knew that. I think one of the most important things was that we were honest about this likely being a tough rollercoaster ride with a lot of tough moments ahead of us. When we started thinking, “Oh, this is going to be a super-easy ride with this amazing research. We just do a little bit of development around it, and this is going to fly.” We knew it would be a long and hard way to come up with the product, and we knew that the first product, very likely, would not be anything the customer would like because we had such an academic background, so to say. It was so unclear where the technology could fit in. Any business and any advice I got was telling us, “Whatever you’re going to try first, very likely, it’s not going to immediately be a big hit – very likely when you iterate a lot and learn and zone in on a certain market.” I think that was one of the most helpful things because, in all these often-awkward moments, they were none of that. We could come back to that moment and tell ourselves, “That was exactly what we were expecting. Things are going along according to plan here.” I think that helped me, at least, through some of the darker hours that you definitely have on the way of building something with such a strong tech focus and such an unknown place in the market and with the customer.
Alejandro: What ended up being the business model for the people that are listening to get it?
Felix Reinshagen: To give you the quick idea on where we started, we thought after the GPS and Maps, everyone uses Google Maps every day – earlier, there was this TomTom thing in the Current, and we thought, “Wow! This you should have endorsed” because we spent 85% of our time building, that’s where most of our GPS is created, but if you enter a building, there is no map, and there’s no GPS. The technology that the team has built was the capability to use images to pinpoint your location like you do as a human being. You know, you look around; you have memorized your environment. Then, by matching your knowledge of the environment with what you see, you know where you are. It’s pretty simple. That is what we wanted to rebuild. Our first idea was to have something like a Google Maps app for the indoors, where you would enter a university on the campus, and you would enter, perhaps, [17:39], and then it would show you which room the lecture is and guide you turn-by-turn through the building to your lecture room. It turned out that this was a great vision, and we are still somehow working on that vision. What the main problem was, was that there was actually no map. So the positioning was not the first problem to solve. The first problem was indoor mapping. Then, unfortunately, it turned out to be a hardware problem because we looked at all of the hardware, and it turned out either it was far too slow, cumbersome, or expensive. What we realized was that we would need to be a hardware company, or at least have a hardware arm. That was, perhaps, one of the things that we absolutely underestimated – I absolutely underestimated because we were all software guys, and we had no idea how hard and difficult it would be to develop and bring to market the hardware with all the long development cycles and more difficult iteration at the customer, that, of course, comes with building some hardware.
Alejandro: There was a really interesting foundation there that you guys did, but one of the things that also was interesting was that you were one of the first companies to be involved in this deep tech. So tell us essentially what deep tech is about and why was it so hard for you guys to be one of the first ones?
Felix Reinshagen: I think now, everyone in the venture capital scene knows the term deep tech, which means nothing less than that you’re bringing or developing a technology or a product out of the fundamentally new and complicated technology. It’s a bit opposite to developing a new eCommerce vertical, where you take a product that is not distributed over the internet, and then you build a webshop around it. Or perhaps taking an existing piece of software and just developing it into a Software as a Service model. Deep tech usually means that it’s perhaps a robotics topic, something around artificial intelligence, quantum computing. Or in our case, we started with 3D laser scanning and computer-based scenery cognition. At that point in time, the German venture capital scene knew eCommerce models very well, and they had proliferated in Germany in the 2010 years. Then, when we hit the market, of course, there were already successful deep tech examples from the U.S. But in Germany, venture capitalists would work around eCommerce metrics or social media metrics, and they didn’t even understand how to measure us – which KPIs to put up against an idea like NavVis. So it was really tough for us to do the fundraising. We were, as well, surprised because we all had lived and worked in Silicon Valley in the U.S., and they were, of course, some of the coolest and most well-known iconic deep tech companies. Even though there was a time in Silicon Valley where everyone wanted to do eCommerce and social media stuff, but there were always constant fundraising around more fundamental technologies going on. But that was definitely not the case in Germany. So we had to knock on many doors. We were thinking it would be required for us to move the company over to the U.S. to get funding. But finally, we convinced some venture capitalists in German. I think this started while we had been part of starting a much broader wave there, and I think some of the bloody noses that we got, in the beginning, have helped now in a new wave of more technology-infused companies in Germany. I think over the last year, there were many, many of them. Munich has become the center, but there are a couple of other cities where this has established and served as the new wave of startup companies in Germany, so there’s a real ecosystem around robotics, artificial intelligence, system automation that are thriving now in Germany. It’s good to now be a mentor and see how some of the groundwork that we did in that space is now helpful for the next generation of companies that are being founded these days or have been founded over the last few years.
Alejandro: In your case, obviously, an operation like this requires some financing, so how much capital have you guys raised to date?
Felix Reinshagen: Around 40 million in equity, and another 20 million from the European Investment Bank in a very special form of enter-debt, which is almost somewhere in the middle between equity and debt.
Alejandro: For the folks that are listening to understand this, how do you differentiate that equity from debt? How does that typically work? What’s the difference?
Felix Reinshagen: Equity, at the end, is very simple. Someone gives you money and gets a stake in the company. Then, you have a lot of freedom to do with the money because you never have to pay it back, so to say, either until you do an IPO and you allow your shareholders to sell their shares, or until a big corporate perhaps acquires you, and then you can pay off your shareholders. Debt, of course, is a very different animal. Someone gives you the money but expects you to pay it back. Of course, then, on debt, there is always the question of when do you need to pay it back and how much interest do you need to pay. Of course, there are very different models. In the European Bank, there’s an interesting model where you don’t need to pay the money back for five years. They have a very low-interest rate, but instead, they take a small amount of equity. Again, the timelines we’re working against, there’s money very much [23:56] like equity, but it leads to less dilution of the existing shareholders and the founders, which is the beauty of the thing.
Alejandro: Understood. So, in your case, was it tough when you were thinking about the overseas and other markets, for example, China, how tough was the entry into China?
Felix Reinshagen: Surprisingly, the entry was ridiculously easy, and that led us to vastly underestimate the challenge. When we had the first prototype versions of our hardware ready, we called it the M3 because we had two other models of the Model 1 and the Model 2 that were so scrappy that we didn’t ever give it to a customer. So the Model 3, the M3, was the first one that we thought we somehow could give a customer to experiment with. We did show it at some trade shows. Germany is the country of trade shows. We have some of the biggest in the world there. There was always [24:57], for example, where information technology across all different areas was displaying. There, we showed our technology. There were a couple of Chinese people scouting for interesting new technology that spot-on found us and were immediately willing to buy a device. We were flabbergasted because in Germany or Europe, in general, it took months usually of negotiation and explaining until we could sell a device because it was not really ready at that point in time. These guys were just coming in and immediately writing us a check. So, we thought, “Oh, wow! China! That’s a cool market for us.” We had no idea how to sell it in China, so the simplest thing for us seemed to be hiring someone who could speak Chinese. So we were looking at the University of Munich, and we hired a colleague who was of Chinese origin and fluently spoke the language. We were asking him and tasking him, “Can’t you just call a couple of similarly-looking Chinese companies and see if they would be interested in buying some of our machines?” That was, as well, ridiculously successful. He earned his first year’s salary back in two or three months. We thought, “Wow! We are really up for something big here.” We hired more Chinese-speaking people, and then, unfortunately, we had to find out the there was a really strong tech [26:36] and early adopter base in China, as well as fueled by some state subsidies, and there was not some lasting demand. That, of course, was a conflict because we already had big dreams about how fast the Chinese market would be growing, and this could be our first anchor market, perhaps even before we were scaling in Europe. We had to go all the way back and understand the Chinese market and the customer, and we built a small subsidiary in Shanghai and hired local people. We had to go through a couple of flat years, and only then could we start to slowly scale the Chinese market. But we were really, really mistaken by the strong initial willingness to try out new things and to even by expensive machinery to check it out and understand it, and we were really mistaking that for a much broader systematic use of the technology, which is only now is starting to kick in when things are a lot more mature.
Alejandro: That’s amazing. Now, just for everyone that is listening to get a sense on how big NavVis is today, any numbers in terms of the number of employees or offices, or anything that you can share?
Felix Reinshagen: We’re around 200 heads. We’re mainly located in Munich. We’re still all R&D suites. It’s a rough indication. Half of the guys are engineers, and in product development, and by now, the other half is customer-facing. I don’t like to call a bunch in overhead, but, of course, we need strong recruiting; we need a finance team; we have a lot of international shipping and logistics to do. We have two smaller offices. One in New York City, and one in Shanghai, but these are mainly focusing on sales and service in the local markets, doing some marketing. Very likely, we’ll have an office on the U.S. West Coast. Yes, we had a very different experience in China, who is really, really difficult to sell the first one or two devices. In general, the market was much more skeptic toward this strange German technology that we were offering. But once we got rolling, we really saw some much more sustainable and constant growth. So, China and the U.S. couldn’t have been more different in the way they developed for us. Today, the U.S. market is clearly ahead in terms of size and maturity compared to the Chinese market. If you had asked me three years ago, I would have said exactly the opposite.
Alejandro: That’s incredible. One of the typical questions that I ask the guests that come on the show is – you’ve been at it now for quite a bit. There have been a lot of lessons, a lot of good, bad, ugly, and you name it. So, if you had the opportunity to go back in time and perhaps you’re going back right before when you were in McKinsey thinking about what’s going to be next and what am I going to be building – if you had the opportunity to perhaps have a chat with your younger self and go back to 2013, right before NavVis was going to be launching, what would be that one piece of business advice that you would give to yourself before launching a business and why knowing what you know now?
Felix Reinshagen: If I have to pick just one, I would strongly advise hiring more experienced people earlier. At McKinsey, we always had the saying, “Talent and experience for breakfast.” That might be absolutely true in consulting, but it’s absolutely not true in a startup. Specifically, not in a startup where you have to do things you have absolutely no clue about. Of course, you can try figuring it all out yourself, but you’re so much faster if you just hire a few people who know how to do that stuff.
Alejandro: Makes total sense. Very profound, Felix. For the folks that are listening, what is the best way for them to reach out and say hi?
Felix Reinshagen: Connect with me on LinkedIn. Please write something meaningful there. I get so much stupid context there with absolutely no idea what these people want and why I should connect to them. But if you approach me, and you want my help on a specific business question, or you’re considering starting your own business, or you’re generally active in the field where we are active with NavVis, I would be very happy to connect with you. That’s the easiest way to reach out.
Alejandro: Amazing. Well, Felix, thank you so much for being on the DealMakers show today.
Felix Reinshagen: Thank you very much for having me. It was a pleasure.
* * *
If you like the show, make sure that you hit that subscribe button. If you can leave a review as well, that would be fantastic. And if you got any value either from this episode or from the show itself, share it with a friend. Perhaps they will also appreciate it. Also, remember, if you need any help, whether it is with your fundraising efforts or with selling your business, you can reach me at firstname.lastname@example.org.