Marc Penzel, Founder & President of Startup Genome: Hello everyone. Thank you for joining today's Candid Conversations. I'm extremely excited about today's show because we have Martin Olczyk based out of Turin, Italy, joining us. He's the managing director of Techstars Turin, and we're going to talk about the ecosystem, as well as the current environment of Italian startups in today's times. Martin, welcome.

Martin Olczyk, Managing Director of Techstars: Thank you, Mark. Good to see you. Thanks for inviting me.

Marc Penzel: How are you today? How's it going?

Martin Olczyk: I'm very well, thank you. It's summertime and I’m pretty happy.

Marc Penzel: Yeah, I mean, when I looked at your profile earlier, I thought, “This is very impressive.” I mean, you've seen a lot of ecosystems around the world. You worked in Amsterdam, you worked in Berlin, you're in Turin now. Maybe just, you know, give our audience a quick overview of your last milestones in your career in the last couple of years. That would be great.

Martin Olczyk: Yeah, absolutely, happy to do so. Martin Olczyk, as you said, Managing Director at Techstars since 2018. Before starting the program in Turin in 2019, I worked at Techstars in Amsterdam and Berlin.

Before joining Techstars, I was an entrepreneur myself, so I created four companies, had one exit, one failure, and bootstrapped two companies between Germany, Asia, and the US. I lived in South Asia for a couple of years, started a business in Munich, and became an angel investor. Then I got in touch with Techstars, love what we do helping companies to avoid mistakes. I have done shared learnings with them, and since then, I invested in more than 50 companies with Techstars, plus some angel investments. This is what I have done so far.

Marc Penzel: Really interesting profile. Thank you so much for joining us today. You know, for us, it's always interesting to hear from people who have been in different ecosystems and different environments, because you have probably one of the best overviews of what Turin is about, and I'd love to hear from you, looking at Berlin, Amsterdam, some of the more mature ecosystems in Europe, how do you see Turin at the moment and how do you see its development in the last couple of years?

Martin Olczyk: Good question. So I can honestly tell you that when I was asked to launch Techstars in Turin, I didn't expect much. So, as you said, like Amsterdam, Berlin, very mature ecosystems. I have seen Berlin rising… I was there 10 years ago from a very early ecosystem becoming probably one of the top two or number one ecosystems in Europe. So I didn't expect that much. It's a city I have never been to before. It’s, of course, known for a couple of companies like Stellantis.

I knew the industry and, of course, you hear the name, but then I visit the city, and I have to say that, looking back, the success of the program and our companies especially, so we made now 35 investments there, went beyond expectations. So it was a challenge for me to start it from scratch, again, not speaking the language. Of course, knowing the Italian culture a bit and loving the food, weather, and the Italian people, but not really being close to the ecosystem honestly.

It was exciting, it was challenging, and looking back, I think we've done an amazing job of really creating a fantastic and successful program. Of course, with the support of our partners, which I’d like to mention quickly. It’s a company in Sanpaolo, Intesa Sanpaolo Innovation Center that helped us with the local environment, who helped us really heavily with connecting us with startups, investors, other corporates, and really making the success story great from day one.

So just to sum it up, again, being in a very, early ecosystem. I came there with not many expectations, but now I don't want to move on. It's amazing. People are super open, super friendly. Again, comparing it to more mature ecosystems, where people are… I wouldn't say fed up with startups, but if you knock on doors of large companies, it’s easier to get in touch. Italy is welcoming us and all our companies with open hands. People are super interested in innovation. The country itself and Turin is changing. Everything is being digitized. The industry is moving from the earlier pillars of Italy of the hotel industry, hospitality, or manufacturing to digital products, and it's an exciting moment to be in Italy.

Marc Penzel: Thank you so much. That's really good to hear, and I mean, this is core to our mission, right? Not only with this conversation, but in general, we're always trying to shine a light on what is happening outside of the top hubs in the world and in Europe.

You know I'm often times blown away by when you look under the hood, all the amazing stuff that's going on in innovation and investment, etc., so it's really also happening in Turin, and that's so great to hear. When you look at the industry, the industrial fabric in Turin and how the startup ecosystem builds on top of it, you mentioned a few key areas, but are there any specific highlights that you see? Because it's so important now that industry and, you know the innovators, are working hand in hand to basically bring industry expertise into the ecosystem.

Martin Olczyk: Yeah, so when we started, we were pretty lucky, because one of our partners built Italy’s largest innovation hub in Turin, which is Officine Grandi Riparazioni. It’s an amazing space with 12,000 square meters connecting different players. So first of all, we have a physical location, which you see in my background as well, where you meet investors, startups, corporates for, of course, like, professional meetings, but there is also a space with four restaurants. There is an event space so people have a physical location to meet, so innovation is, let's say, built in this environment, which is just fantastic, happening 24/7.

What I would say, on top of this, of course, again, this openness to innovation, to new products, to startups is fantastic. So Turin is well known for those later-stage companies I mentioned, like Stellantis or Iren, who are willing to innovate. We are also very lucky to have a partnership with Torino City Lab, which is pretty unique in Europe. It's an initiative from the city itself, so not only the private sector is really innovating but also the government is pushing very hard to innovate. So we are collaborating with Torino City Lab, which has roughly 80 partners attached, large companies, those who I mentioned, Stellantis and Iren. Cisco, our partners who help companies pilot from very early stages on. So our companies who join us, have also the possibility to work with those players pretty early on and get access to, say, names and corporates that are not easy to access somewhere else.

Marc Penzel: Yeah, which is also interesting for entrepreneurs outside of Italy, outside of Turin, to look into if you're in specific areas of innovation, of course, right?

Martin Olczyk: We have verticals. We started with a smart mobility program based on the city's history as well, based on the support we got from our partners, from the corporates, and evolve the program to The Cities of the Future, which is even closer, more aligned with the city direction, so we can help companies with autonomous roads, 35 kilometers in the city for autonomous driving.

We have drawn a testing environment. We have robotic AI environments, and yeah, this is growing, right? So our companies who came to the program are from all over the world, not only from Italy but also from the US to Israel, Portugal, Norway, Ukraine, Poland, Hungary, Germany, all over the world. And, of course, we are investing in international companies, but also for those who are really interested in tapping into an ecosystem that is very open and super supportive, very, very eager to work with innovative companies, Turin is a great place to be.

Marc Penzel: A key question, of course, is what does the local talent pool look like? Especially in the verticals that you mentioned? A strong talent pool, of course, is essential in order for entrepreneurs to really leverage the ecosystem’s value. Can you talk a little bit about that? Because in our Global Startup Ecosystem Report, we actually found that the talent is quite amazing in Turin.

Martin Olczyk: Yeah, I can copy that. I mean, it’s not just amazing, I would say, but it’s available, which makes a difference today. Because it’s available, and for startups, it's also still affordable. When you look at London or Berlin with crazy prices nowadays for tech talent, especially. Turin is still affordable. We have great universities. Across the street, we have Polytechnic of Turin, which is graduating 5,000 students per year in different technology directions. Those people are eager and way more open than 3, 4, 5, 6 years ago to join a startup. Also, I think the culture is also changing the mindset of people. They're not only interested in joining large companies, but they're also really willing to either start something or join companies.

So it's available, and of course, people who work at large corporations can get in touch with startups. So we have great success stories where people started working with early-stage companies out of their corporate and figured out, “Hey, this is a life I can honestly imagine being part of,” so we can always transition.

Again, like all these initiatives from the government, from the city, but also the change of mindset creates a great talent pool from universities to later-stage companies that are creating talent, who are building talent, and people who have a couple of years of experience, so you get very junior people but also senior people.

Marc Penzel: I’m so glad you differentiate between the quality of talent and the availability of talent, because oftentimes, you know, when research organizations, for example, look at the quality of talent, they're making a great point for the ecosystem but may be missing out on the fact that, you know, it's not always available to the entrepreneur, that the entrepreneur is not supported in any kind of way, right? So I'm really glad to hear that not only is the quality high, but also there is available talent to the entrepreneurs. That's awesome.

I wanted to talk a little bit about the challenges as well, especially in the current environment. You know, many of our listeners are wondering how entrepreneurs currently navigate through the difficult macroeconomic environment? I'd love to hear from you. You mentioned that you just finished one of your cohorts. What are some of the challenges you're seeing at the moment? That's going to be very interesting.

Martin Olczyk: Yeah, absolutely. To start with an optimistic view, I'd say I'm pretty positive about the future. So it's my fourth crisis now, it was the .com in 2000, 2008, and Covid two years ago, where we actually launched and ran our first batch in Torino.

So being in person for five weeks and then Covid hit us pretty hard, so we moved the first program at Techstars all over the world to a virtual one. Those companies did so well. I think the crisis is a bit different now, so yeah, you're right, we finished our recent class in April with a fantastic in-person demo day, so there was already a great step after two virtual programs.

You probably see the news. Every week, there is a new fund announced. Germany announced Project A, 350 million, UK, just another 500 million fund, France has announced Web3 funds, I think over 350 million. Italy is creating new funds, so there is still money available. I think what we see now, and I'm currently in the process of raising funds for a couple of companies, so investors are still deploying capital. That's the good news.

They are even more open and eager to deploy capital at our early stage than Series B or D. Look at Klarna. I think they've just announced that they are raising a 1.5 billion valuation and I think they were valued at eight, just like a piece of the valuation they had before the crisis. So we still see investors deploying capital. We are in discussions.

The due diligence and how investors look at companies have changed a bit. It came back to a level we have seen before Covid. People are really way more eager to understand the business or understand the dynamics, the economics, the financials behind the company, the mission, divisions… they really do their due diligence. We have seen the past years were not really sustainable, so people were throwing capital at almost every idea without going into detail. So now investors are really more eager to understand the risk, build a model for profitability, and understand if companies are really in the position to sell. Will there be a building? Do they have customers? Are they able to generate revenues? So the due diligence process is a bit longer.

For the moment being, we are not seeing the big crash in the super early stage. The summer is approaching now. It will probably be different in September, very curious to see what happens in September when all those new funds will have to deploy capital. I don't think those who now raised and announced their funds publicly will stop investing, but I think they will be more selective and go deeper when they consider investing in companies.

Marc Penzel: Yeah, yes, well done. I mean, I read an article yesterday that said we're not in full crisis mode in the startup ecosystem. Things are just a little less crazy, right? And what you're saying is great companies are going to make it through the crisis, especially being part of a global network like Techstars is of essential importance. Supporting these companies will be extremely valuable on your part, I imagine.

Martin Olczyk: Yeah, I can echo that. I mean this is the thing, the beauty of the network, the support companies get from our partners, from mentors, and from us. As we have seen it, in 2020 during Covid, you have to be flexible, right? I think, as an entrepreneur, adapting. There is never this lineup. It's always up and down, and again, it's the fourth crisis now in the last 20 years, probably not the last one. You need to adapt. Keep your eyes open. Try not to do too many crazy things now unless the market calms down a bit. Be cautious on your burn and potentially not going only for hyper-growth now but reconsider your business model and ask for help. Go out to people. Learn from different markets in every country now. Every continent actually has different dynamics, right? They’re, of course, connected, but this is the beauty of why and how all companies are successful and sustainable.

Marc Penzel: Yeah, totally. I mean, just to look at the ecosystem of Turin one more time. I'd be curious to hear your thoughts on this environment. How does the ecosystem have to come together, in your opinion, in working with the different entities and supporting the entrepreneurs? What do you see as one or two or three top priorities that we can share with the audience today?

Martin Olczyk: Yeah, good question. The thing is the ecosystem always consists of different players, right? So it's the founders, entrepreneurs with a big vision, it’s talent, which again, as you said, it's available, but it’s also the support of corporates and the city. We have all the ingredients in Turin, I think.

We also have a location where we can bring them all together. I think one thing, because it's so fast and so innovative and every year we bring 12 companies to Turin from all over the world, with different ideas. And they have to adapt. People have to connect, understand what they do, and why they do it, as I think connecting and having this open mindset to really go and risk and go potentially beyond what you know to create great companies. I think the connection between the local players is already happening. Of course, it could be better.

Early-stage financing was just a bit different from what we see in Series A or B, where you have KPIs set. You're not only investing in the team or mission or vision and making big bets. I think this is something which could improve in Italy, and I have to honestly say it’s already changed in the past three years, so we have great new funds coming up. We're really addressing our early-stage funds, people who are okay to lose money as well. It’s always thought of as a very high risk. We know that nine out of 10 companies fail.

So this is changing. I have to tell you, as well, when I came to Turin we spoke to two people from funds. The mindset of investors was different. So they prefer to invest in later-stage companies with KPIs, business models, balance sheets, with cash flow projections for the next five years. This usually does not exist at such an early stage, right? So it was very difficult to find follow-on funding for those companies. I would say not only Turin but all across Italy. It’s changing now, so people are more willing to deploy capital at a stage where things are not figured out yet.

Marc Penzel: Yeah, great point. I'll echo that 100%. This is what we're seeing, but I mean again, just to champion the development of the Turin ecosystem in the last couple of years, and what I'm seeing in Italy, I mean, things are really, really starting to shape up and really developing towards a more mature ecosystem than we've seen the last couple of years ago, right?

Martin Olczyk: Yeah, I mean, like I wouldn't call us pioneers, but we’ve been the first program in OGR that supported companies at the largest scale. We now have 11 accelerators. Just to give you an example, I don't want to drop names here because they're all competitors of ours. But that's great for the ecosystem, right? So also, international players realize that Italy is a market with great opportunities, so they are entering from different countries, supporting in a similar way as we do, but we also have seen that out of these early-stage companies. Later stage funds were all built by CDP, the government, again. Raised, announced, and deploying now a 2 billion Euro fund to support entrepreneurs. We have seen corporations creating early-stage funds.

I think the connection between the cities as well as the competitive situation between Turin and Milan and Rome is getting better so people are already running in one direction and want to create an ecosystem that is evolving and thriving. It doesn't matter if you're based in Napoli or Torino.

So yeah, there’s a great future ahead. I think again, the collection of different local players, the mindset with international players, and combining that with local players while also learning from them, of course, to adapt to the local ecosystem is great. I think we have a bright future in the country.

Marc Penzel: Perfect. Well said. And Martin, before we close out, I'd love to hear what's coming up for you in the next couple of months. What's on at Techstars Turin?

Martin Olczyk: Yeah, so a lot of things are happening. Many, many exciting topics. We are now preparing the fourth program actually, which would focus on cities of the future, which is a pretty sector-agnostic and very broad term, so we are looking at early-stage companies who are interested in joining us for the next program starting in February for 13 weeks. We are working heavily with all portfolios to really help them steer through this storm.

Very excited about the next program which will be our second in-person program in Turin, so very welcome to speak to founders who are interested in Techstars, who are interested in receiving funding plus mentorship from 300 mentors globally, access to Torino City Lab, large corporate partners like those who I mentioned in the beginning, these are Sanpaolo Innovation Center, Fondazione Compagnia di San Paolo that provide us with a lot of mentors, access to local players, huge networks to other funds.

And, of course, we continue investing. I think that's a very important point. We are launching new programs with Techstars and new CDs, so we continue betting on early-stage companies. We continue investing with the same deal, so every company being accepted receives 120,000 USD, and we are looking for 12 companies who are eager to join our program in Torino.

Marc Penzel: So that's a great call to action to all the entrepreneurs listening today. Lots of exciting opportunities to engage with the Turin ecosystem, to engage with Techstars, and to engage personally with you, Martin, as an entrepreneur who has been there, done that, before.

Thank you so much for joining us today, and thank you so much to all the listeners for tuning in. I hope this was a great introduction to the Turin ecosystem. Yeah, I hope to see you again soon. Thank you, Martin. Thank you so much.

Martin Olczyk: Thank you, Marc. Thanks for having me.