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Entrepreneurship Has Many Facets & Why Not Every Start-up Must Be a Unicorn

Alexander Schmitt, founder of Mergerspot

When you read Alexander Schmitt’s curriculum vitae, you can sense his drive and passion. Schmitt, who hails from Germany’s Franconia region, studied at the TUM School of Management, CDTM and at MIT. Since graduating, he already founded and sold his own start-up, Mergerspot, before switching to the other side of the table: he now works in venture capital. In our interview, he told us how he was able to achieve so much at such a young age and what role the university and the TUM Management Alumni e.V. played in his career. 

 

When you still were a student at the TUM School of Management, you started a company. How did that come about? 

The TUM, and in particular the TUM School of Management, played a significant role in our founding history. Julian Wolz – my friend and co-founder – and I discovered the inefficiencies in private equity during our project studies. Repeatedly, we noticed that many processes are far from data-driven. Given our technical background, we realized that automation cannot only improve these processes but PE funds can gain insights one could not generate manually. Teaming up with Ingo Mayer, this ultimately led to founding Mergerspot. With our fintech start-up, we automated market and company research using language processing technology. Mergerspot is, so to speak, the Bloomberg of private equity. 

 

What does a start-up need in order to be successful? 

Of course, there are basic elements for a successful company such as a pressing customer need, a new, 10x-better solution and the customers willingness to pay for it. But often undervalued is close contact with a peer group of founders. Starting your own company is a rollercoaster – with lows below sea level and highs outside of the atmosphere. At the TUM School of Management, you talk to founders almost every day and can share mistakes and small pieces of the puzzle one solved, that ultimately lead to success. Meeting other founders in the TUM Management Alumni e.V puts you in an atmosphere full of energy, which is highly contagious.

Later on, we used the TUM Management Alumni e.V. as a recruiting platform for our company. It might seem obvious, but the interdisciplinary setting is really what distinguishes the TUM from other universities well-known for startups. I personally believe this will even become more important in an increasingly more technological startup ecosystem.

 

What is the biggest challenge when you start a company? 

Every day you are confronted with multi-faceted challenges – but that is what is so exciting about starting your own business. I believe what is missing is a differentiated discussion around topics like whether every “start-up” must be a unicorn. We should take a much more individual view. All founders should also ask themselves: “What are my motives for starting a company? Am I solving a real customer problem? What is the right vehicle to solve this problem?” 

Not every sustainable business model is also scalable to a unicorn. This means many founders are building different types of companies, some probably even more financially successful than a highly diluted startup. As a founder, you should be clear about your path. When you want to collect venture capital, you need to solve a subset of questions: “Is the market big enough? Can I scale and protect my product? How can the company ever be worth a billion euros?“

 

You sold your company. How did that happen? 

With our bootstrapped company Mergerspot, we were technology leaders in Germany. We built a great product, which solves a pressing need for a focused user group. Merging with Gain.Pro, one of the market leaders for private company research, builds the perfect setting for serving customers. Our technology stack is able to enrich their datasets and the joint offering will transform the industry. After having integrated our product, I wanted to build on my experiences on how to successfully build a product and team.

Working as a venture capital investor at Cherry Ventures allows me to work with the most ambitious founders each and every day across a number of industries. We often say that the most important factor for us in early-stage investing is “team, team, team.” Through it all, be it dealflow or team meetings, I am surrounded by people who want to make a difference and who are highly motivated  — and that inspires me.

 

Which experiences from your own company help you to be a better investor? 

Well, the entire Cherry DNA is very much rooted in entrepreneurial and operator experiences of our entire team. So, almost all of my experiences as a founder, from starting to exiting, have bolstered my thinking as an investor but, mostly, in how I can support prospective founders and those already in the portfolio.

My background allows me to understand founders and the pressure they feel day-to-day. I like conversations on eye level and hope to be a fruitful sparrings partner. I am personally an enthusiastic person and – if I am convinced – develop high passion, which can sometimes be challenging given the analytical side of our role. 

As investors, we always put all founders first and try to understand how we can best support. In recent years, TUM has excelled at bringing strong technical teams together that solve many of society’s pressing needs. As an early stage investor, I am excited to talk to these teams and support them. 

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