Julius Dreyer

Writing a blog is a new experience for me and i guess it will take some getting used to until I will be comfortable sharing information about my private or business life here. I figured it might be a good start as well as some relevant information about me to simply translate some of the German stuff into English here. There are actually not that many publications worth spreading so this is going to be a rather short series. The first one is an interview I gave some weeks ago on Seedfinance.de, next to the Interview there is also a picture gallery with some photos of our life here in Shanghai. But read yourself:

Julius Dreyer has been living in Shanghai for four years now. Despite his young age he can look back on a rather unusual career that gave reason for the following interview.

Julius (Xing Profile), in Summer 2004 you and your brothers started a trip around the world, just after your youngest brother Robert finished school. Your aim was to cover your costs by making money on the Internet. What were the reasons for this decision? Did you have savings in case making money wouldn’t work out? What did you even know about the Internet back then?

The idea to travel the world came much earlier. I don’t really remember where we got our itchy feet but globetrotters, their adventures and travelogues had fascinated us since we were teenagers. We were dreaming about exploring the world in a Volkswagen campervan and being financially as independent as possible. When I was 15 I discovered the stock exchange as a flexible source of income while travelling.

After a rather mediocre first year as online daytraders we decided to pull the plug and focus on the Internet itself. Before we left we had already started various projects such as konzert.de, hotelsuche.de and also poppen.de which were already generating a modest income.

We were leading a pretty easygoing life being fairly independent just after finishing school but still living at home. But we were running the risk of relying on that success and not make any more effort. Unlike many of our classmates we were not aspiring to further education so on the spur of the moment, we bought a one-way ticket to what then seemed to be the most thriving city in the world. We primarily wanted to learn about language and culture – we didn’t really think about the Chinese Internet back then.

Unfortunately, we barely had any savings. What’s worse, we actually had to pay back sales taxes in Germany. This meant that we had to spend our first months in China in a youth hostel and lived off around 2€ per person and day.

How did your friends and family react to your decision?

At that time hardly anyone believed much in our Internet activities. We were used to tilting at windmills and to get our way without much support. Of course, our parents would have liked for us to go to university. But ultimately, finishing school was an accepted first milestone and eventually our family and friends supported us in our decision. There even was a newspaper article about the three expat brothers trying their luck in China. Originally we were only planning to spend one year in China and to move on after that. Most people didn’t really think we would even last that long.

But you didn’t get very far. Today, more than four and a half years later, you’re still in Shanghai although that was only meant to be the first stop on your trip. What were you up to there in the last years?

That’s right, and we really didn’t imagine staying here for so long. Looking back, there were just always so many things going on - in the first years we were more trying to adjust to the changing life conditions than actively shaping our future. Especially poppen.de was growing so fast that we had to find qualified employees. Starting a company in China is quite expensive and complex so we actually grew to about 30 unofficial staff while processing the company formation. Our lack of management experience also caused some troubles in the venture’s early stages, which then naturally cost even more time and energy.

In addition, we then started to build our own offices and the work finally became more than we could handle. Fortunately we had Claude Ritter (Xing Profile) in our team, a very intelligent and capable project manager who proved to be ideal to take over the role of the CEO. Within just a few months he managed to transform a bunch of talented employees into a properly functioning and most importantly a scalable team. In hindsight this was probably one of the best decisions we made.

In 2006, you paid half a million Dollar for gays.com. Was this purchase completely self-funded? Are you happy with the portal’s progress so far?

Yes, like all of our projects also gays.com is completely self-funded. We had previously tried to raise capital, but banks and business angels were cautious after the burst of the Internet bubble and we were probably too inexperienced. Now we are very happy that we succeeded without any outside financing. It’s possible that the lack of external pressure and input meant things weren’t moving as fast as they could have but also that work was generally more relaxed. For example, after half a year of development we turned the whole project of gays.com around in 2007 to start from scratch.

We had initially planned to grow from private invitations only. A romantic concept in the web 2.0 era that showed to be a lot more difficult in reality. We therefore decided to open the site up to the public this year. These strategic changes could have been problematic with an investor on board.

Currently we are growing steadily by around 500 new members a day. We expect to reach a member base of 400,000 this year – and to grow even quicker from then on. The idea of a niche social network with real names and identities is still unique and very much meets the market’s demands.

With gays.com we wanted to achieve for the LGBT community (lesbian, gay, bisexual and transgender) what Facebook does for the mass market. For this reason we’ll work even closer with our German dating site gays.de this year. We aim to have 100,000 German members in 2009. We believe that we are very well placed with our offer, so we are not only happy with the progress but also very optimistic for the future.

Why did you become stuck in Shanghai? What fascinates you about the city?

China itself is such an impressive country with so much going on every day and things changing constantly that even daily life feels like a movie. Shanghai is the vibrant metropolis of this country. Everything is possible and everyone can achieve anything. This hasn’t really changed in the last couple of years.

What were your biggest challenges in Shanghai? Are you fluent in Chinese now?

Of course, the language was one of the biggest the challenges. However, from day one we were making a lot of effort to learn it because language is a key to the culture, especially in China. We had a couple of hours of Chinese lessons every day since we came here. Although we’re not perfect yet it’s enough for fluent conversation and daily life.

Next to the language, building our first company was of course quite a challenge as well. For example, in the first months any foreign bank transfer required filling out three A4 pages of forms. To anyone who has ever been annoyed by German bureaucracy: It could be a lot worse

Do you think that you could have had the same commercial success with your projects in Germany? If not, what’s most interesting about Shanghai economically and what are the differences to Germany?

To be honest, I believe that we could have achieved a lot more in Germany. Compared to 2004, there is well-developed network of entrepreneurs in Germany today that nurtures efficient interactions. The market is well funded and there are lots of highly qualified people. On the other hand, the distance to Europe and being in China for many years enabled us to focus very much on our own work.

I think that a lot of Internet entrepreneurs spending way too much time at conferences and with networking instead of actually working on their product. A lot of times you find yourself trying to cooperate with everybody instead of simply concentrating on your own core business. Most of our cooperations weren’t really successful considering the amount of time we invested.

Another interesting aspect about Shanghai is that it is a cosmopolitan city; although it’s still developing you can already meet so many interesting people from all corners of the world. Our team consists of people from twelve different nationalities, that makes you more open-minded and you learn to think less locally constrained. Furthermore, the Chinese Internet market, albeit already enormous, is naturally one of the fastest growing markets in the world. In Shanghai we are not only well positioned for China but for the whole Asian market.

What about the startup community in Shanghai? Is there anything like that? Are you part of it? How do you finance a startup company in Shanghai? Is there a venture capital or business angel environment? What impacts does the financial crisis have on startups in China (if these can be noticed yet)?

There certainly is a startup community in Shanghai. However, it is not as transparent in China as it is in Germany. Language barriers could be a reason for this; there is often a differentiation between purely Chinese and startups with international staff. Most of the Western entrepreneurs don’t speak Chinese and lots of Chinese entrepreneurs don’t speak much English so there are little relations.

Nevertheless, there are a number of events and informal meetings that have at least brought the English speaking community closer together in the last couple of years. Overall I would say the community is still quite small. But: If you have something to offer you should have no problems making contacts and raising capital.

There are definitely funds available on the market as many of the renowned venture capital firms have offices here and they seem to have more capital to invest than possibilities to do so. But they often are only interested in Chinese products and management teams. There also are a number of business angels, usually expatriates who have been in China or Asia for a long time and thus are able to offer real support in foreign environments.

Honestly, I can’t really assess the impacts of the financial crisis. Just as everywhere else companies are trying to assemble cash and cut unnecessary costs. A lot of capital was coming from overseas so obviously some supplies have been shut off and capital is withdrawn from the market. That would have affected fonds. However, I’ve not had any experiences of this myself.

What are your and your brothers’ plans for the future? Are you going to continue your trip around the world some day and become “entrepreneurs on road”? Do you think you could also manage your Shanghai employees from any other place in the world?

Our offices have now been completed and our company is doing so well at the moment that we are needed here less and less. We have reached our original goal of learning about language and culture. Indeed, it would be time to move on. Claude is doing a really good job, so we believe that business will continue to be successful with him as sole decision maker. In the meantime, The NetCircle Shanghai has transformed more and more into a startup incubator overseeing a number of independent companies (projects). We are already relatively familiar with our role as external client. We’ll see

Do you have any tips for entrepreneurs and startups in Germany?

There is certainly different advice for different situations and circumstances so I find it difficult to give a satisfactory answer to this. Generally, it is always useful to try and keep costs low. China and other developing countries have great examples of clever ventures on a shoestring budget. If you have a solid business model and low costs you are likely to hang in there for much longer and will also be much more flexible than your inflated competition.

Your first success can result in a arrogance leading you to spend lots of money on useless things or to be more accommodating than necessary. Particularly when capital is scarce you should be considering amortization periods. Of course, it would be so much cooler and impressive to equip the office with designer furniture but do you really need that? Couldn’t you possibly generate growth by investing this money somewhere else in the company? In the end, it is all about calculating with time: If investment X will return more in a certain time period than investment Y, due to a shorter amortization period, than you are likely to generate more growth at the end of the year.

If you compare product cycles of German and Chinese products you will notice that it’s much more likely to start simple but quickly in China. In Germany, companies strive for the perfect product from the beginning on. Both strategies can lead to success but the former delivers faster results and thus minimizes startup risk. Optimization is left for later stages.

Julius, thanks a lot for your great answers! I hope you and your brothers will continue to be successful and I am looking forward to hearing from you in the future!