In short
Podcast Summary: First Time Founders with Ed Elson – How This German Founder Built The Nation’s Most Valuable Startup
Episode Overview In this episode of *First Time Founders*, Ed Elson interviews Alex Rinke, co-founder and co-CEO of Celonis, a leading process mining and intelligence company. The discussion revolves around Rinke's entrepreneurial journey, the challenges faced by the European startup ecosystem, and effective management strategies as companies scale.
Key Themes
- Challenges in the European Startup Scene
- Limited Unicorns: Europe produced only seven new unicorns last year compared to 71 in the United States.
- Risk Aversion: Rinke highlights that the European ecosystem lacks the same risk appetite as the U.S., with venture capital being disproportionately lower.
- Immigrant Influence: Rinke draws a parallel between his family's entrepreneurial spirit and the cultural context in the U.S. that promotes risk-taking in business.
- Celonis and Process Mining
- Definition: Celonis provides process mining services, offering insights into business processes to identify inefficiencies and optimize operations.
- Value Creation: The company has worked with over a third of the Fortune Global 500, unlocking over $5 billion in value for clients.
- Applications: Rinke describes how Celonis helps organizations visualize complex interwoven processes and improve operational efficiency.
- Understanding Business Processes
- Complexity in Growth: As companies grow larger and adopt more systems (like ERP), understanding their processes can become increasingly challenging.
- The Need for Clarity: Rinke emphasizes that many companies lack visibility into their operations, leading to inefficiencies that can accumulate over time.
- Management Style Evolution
- From Founder to Executive: Rinke discusses the need for founders to evolve their management style as their company grows from a small team to a larger organization.
- Delegation Importance: The transition from micromanagement to empowering a team is crucial for the success of larger companies.
- Setting Simple Priorities: As the organization scales, focusing on a few key priorities and fostering a culture of accountability is essential.
- Cultural Differences Between Europe and the U.S.
- Venture Capital Infrastructure: Rinke notes that the lack of developed venture capital in Europe inhibits the growth of startups.
- Entrepreneurial Culture: While Europe has a strong educational background and entrepreneurial heritage, the risk aversion present in the culture limits investment in startups.
- Advice for Entrepreneurs
- Follow Your Passion: Rinke emphasizes the importance of pursuing what you are passionate about, as this leads to better outcomes in business.
- Authenticity in Leadership: Being genuine and committed to a mission is crucial for attracting the right employees and investors.
Key Takeaways
- The U.S. startup ecosystem benefits from a more robust venture capital infrastructure that encourages risk-taking.
- Understanding and optimizing business processes can lead to significant value creation.
- Founders must adapt their management style as their companies grow and focus on empowering their teams.
- Pursuing personal passions can lead to greater success in entrepreneurship.
Conclusion This episode offers valuable insights into the European startup landscape and highlights strategies for effective management and the importance of understanding business processes. Alex Rinke's journey with Celonis serves as a compelling case study for aspiring entrepreneurs navigating the complexities of scaling a successful company.
Written by AI. May contain mistakes. Listen to the episode to check what was said.
Transcript
Automatic transcript. May contain errors.0:00Rinse takes your laundry and hand delivers it to your door. expertly cleaned and folded so you could take the time once spent folding and sorting and waiting to finally pursue a whole new version of you like tea time you or this tea time you or even this tea time you said you hear about Dave or even tea time tea time tea time you so update on Dave it's up to you we'll take the laundry rinse it's time to be great AI agents are getting pretty impressive You might not even realize you're listening to one right now. We work 24-7 to resolve customer inquiries. No hold music, no canned answers, no frustration.
0:42Visit sierra.ai to learn more. Scott, why are there so few unicorns in Europe? Oh, wow, we're going to need a bigger boat. I get asked that a lot here. One, it starts with immigrants, and that is the example I use when I'm asked that in London is that my father in Glasgow and my mother in London in their, you know, like when they were 19 and 23, left and took a chance to come to America. So risk-taking, a crazy idea that willing to kind of give up a good career or great prospects and take a chance on a crazy idea that might become crazy genius, we just have more of that secret sauce than anyone in the world.
1:23We have the best universities in the world. I've said often that you can't find a$50 billion plus company in tech that isn't a bike ride from a world-class engineering university, and we have most of them. You have more kind of hardball, full-body contact competition where the government opts for a lack of regulation and capitalism over regulation. We have a much greater risk appetite. There's$5 million in venture capital for every one startup in the United States, and there's$1 million for every startup in Europe, and there's five times as many entrepreneurs per capita in the United States. So we're more risk aggressive.
2:08We have stronger IP. We have more capital. And it just kind of all adds up to what is an ecosystem where there's been more wealth created in the last 24 months in a seven mile radius of SFO International because of AI than in the last 10 years in Europe. These are big, big issues baked into the DNA of America. And I don't, quite frankly, I don't see anything really changing in the short or the medium term.
2:42Welcome to First Time Founders. I'm Ed Elson. The European startup scene is struggling. Last year, Europe produced only seven new unicorns. Meanwhile, America made 71. My next guest, however, is a rare success story. Born and raised in Germany, he is one of the few Europeans who is leading the world in software and technology. His company, valued at$13 billion, is the second most valuable startup in Europe. What does the company do? Something called process mining. And we'll get to what that actually is in a moment. This is my conversation with Alex Rinker, co-founder and co-CEO of Salonis. Welcome, Alex.
3:30Thank you for joining me. Thanks for having me. You came in from New York, right? You're around. Came on the subway. On the subway, exactly. So we got a lot to get into, but I want to just start off with what Salonis actually is and what it does. So Salonis is a process mining company. And what does that mean exactly? So basically, big companies hire you to do an x-ray, essentially, of all of their business processes. It could be manufacturing processes or compliance processes or financial reporting processes, etc. Any process that has multiple moving parts. You come in, you visualize the process, you do that with data, and you identify all of the inefficiencies in that process.
4:16Have I gotten anything wrong? Yeah, I think that's where we started. And we've built a lot more around it. We call it a process intelligence platform. So it doesn't just mine the process. It gives you real-time insights in it. It flags when things are going wrong. It helps you orchestrate and optimize processes. But you captured the essence of it, 100%. And it turns out that this is process mining or process intelligence, a highly valuable business. So you've worked with more than a third of the Fortune Global 500. you have unlocked more than$5 billion in value for your customers. And your company is now worth, or at least at its latest valuation,$13 billion, which makes it the second most valuable company in Europe.
5:01So my first question to you, what drew you to processes and process mining? And how did you know that this was going to be such a big business opportunity? So when we started, we really, it started, we got fascinated by the technology. You know, we were all students at university and we didn't know much about business processes. And in some ways, when I look back, I'm happy how little we knew because we were quite naive. But one thing we didn't know, so first we got fascinated by the technology. And then we talked to some prospective clients and some, you know, the university had these businesses that you could cooperate with.
5:41and there was all sorts of programs at the university to work with businesses. And we very quickly found out that processes are one of the most horizontal opportunities. They really are the fabric that run every business. The way you sell. I mean, the way you produce this podcast is a process. Everything a business does can be described and expressed as a process. So when we look at a company, whether it's a bank or an automotive company or packaged consumer goods, We look at it as a collection of interwoven and enacting processes. I guess what I'd love to know a bit more about from you is why companies have such a hard time with their processes.
6:21Like, how is it that a company can get to a point where they don't even understand their own business or how their own business works, and they need to hire someone like you to come in and tell them this is how your business works? Like, how does a company get to that point? So I have two stories about this. One is the story how it happened and then the story how we found out about it. So the first is the story how it happened is very simple. So my grandfather, you know, he was a farmer and he grew up as a farmer and then he had a potato trading business. He just passed away at 96 years old. So, you know, he got pretty old.
6:57So back in the day, you could see the whole process, right? You would go there, you could see potatoes coming, trucks coming in, everything being sorted. It's going out, you know. If there was an issue, you could see it and quickly fix it. But then obviously companies grew much, much bigger than that. And you had ERP systems. People said, hey, we want to digitize our processes in ERP systems. In many ways, these ERP systems, our processes had to fit these systems. So we had to fit our processes into these systems, which generated quite a bit of friction. And then you had more and more systems come along.
7:32So it doesn't just stay with the ERP system like SAP and Oracle. You had CIM coming along. You had the cloud revolution. So you had CIM systems coming along. And then you had a lot of cloud applications, HR, IT service management. So over time, we added more and more systems. This really happened in the last 50 years, from the 70s, 80s, all the way to today. And now companies have an ERP system. And I think on average, a big company has over 250 core systems that operate the different parts of their business, supply chain, HR, finance, inventory, warehouse management, all sorts of processes. Banks, I mean, when I talk to our big banking clients, they have thousands.
8:17They're even more complex. And in many ways, our processes had to sort of be stitched together across all these systems. And then you have changing products, you have globalization, you have acquisitions. So over time, these businesses tend to get quite complex, and you can't see the process anymore because it's in systems. Not like with my grandfather where you could see it. And in many ways, we also had to change our organizations and our processes to accommodate the way these systems were set up. So companies have a huge opportunity. We say that every process out there is waiting to be optimized.
8:49And now with AI coming in, you're going to have a huge wave of what we call process reengineering because you want to reimagine your processes in the age of AI. and we can talk about how we think it's going to play out and how we see it playing out. The story of how we found out about it is also quite interesting. So when we started, we actually thought the same as you. We thought, well, process mining is kind of an interesting technology, but that's a little bit boring. We were excited about processes, but we said, well, but if we could simulate processes, so if we could basically take the mining and then build simulation models where people then could say, hey, if I hire like five people here or if I automate this, you know, how does it change?
9:30And we built a simulation product that was based on process mining. We took that to market. It didn't work because it was way ahead of its time. So we were about ready to give up until someone said, you know, we explained how our technology works and they said, well, this process visibility part, that's really interesting, right? That's where I would like to start. And even though we do way more today, it's like we really found out and there was a home run that people need that x-ray of understanding exactly how their processes operate. What's like the worst process you've ever seen? Like you go to a client and you look at how they do anything, whatever it is, and you're like, oh my God, this is the slowest, most inefficient, most ridiculous process I've ever seen.
10:10You don't have to name them by name. Often, very successful companies, it's very high margin, actually don't have very efficient processes, right? So you have that. I mean, we've seen crazy stories. One of our clients found out that they paid hundreds of millions worth of invoices twice. Okay. By the way, a lot of clients do that. Usually it's more in the millions to tens of millions what you can save. But one who's in the hundreds, it happens in every company. If you don't have a system, you get an invoice, someone gets a copy, maybe it gets into the system with slightly different data. You're from the UK, so the date format is different than the US.
10:49So people type it the wrong way and someone gets in the system twice. System thinks it's two invoices get placed twice. So that's just one example of a process that's ridiculous. But it happens. We see a lot of friction. Where companies really pay attention is friction in customer-facing processes. Like, you know, if it takes you days to book an order. We had one client once that was in a complex business, to be fair. But they, on average, changed the date that they confirmed to the customer 13 times. Wow. So imagine that, right? I mean, they were very successful companies, so their products were so unique that customers would put up with it.
11:26We helped them fix it. But, you know, imagine on Amazon, you get on average 13 emails. It's like, no, we're not coming on Monday, we're coming Tuesday. You sometimes get those emails, but you don't get them 13 times on average. You know, we have lots of customers that shipped products but never invoiced them, right? So they had revenue leakage because they ship products that they never invoiced. We have lots of customers that have, you know, that negotiate contracts with their suppliers. but then they actually don't take advantage of them. So they buy off of prices that are actually higher than what they negotiated.
11:56So it's a really exciting space because you can see the impact. And what's particularly exciting, we do projects with Northwestern Medicine. They are looking at, as patients go through the imaging, like a mammography or other imaging techniques, how long is the wait time? How can we cut that cycle time down? How can we make sure that we get it right the first time? What do the drop-off rates look like? How can we release patients out of the hospital faster? How can we move them through faster? So they started within finance and procurement, but they moved into the core medical operations. We have customers, a lot of government customers.
12:29Now we're talking about government efficiency. So we saved the state of Oklahoma. For example, I helped them really as they came in and said, we want to really understand how are we spending money and where's money, taxpayer money going out the door. and they were able to save taxpayer dollars and get more transparency into that process. So we work with an increasing amount of government agency and we're excited about how we can make sure that government takes better care of taxpayer money. So there is no shortage of opportunities. Ten years ago, this is probably the most boring concept ever, but suddenly it's very exciting to people.
13:08And I think a lot of it is because of the renewed interest in government waste And just the fact that people are so upset about the idea that we don't have transparency into how our government really works. We don't know where our money really goes. And now we've got Elon Musk and Vivek Ramaswamy heading up the Department of Government Efficiency, which is like the biggest thing in the news right now when it comes to government. So you're kind of at the forefront of that. Do you think you'd ever work with Doge, the Department of Government Efficiency? Is that kind of like the sort of golden use case for Salonis?
13:43Well, we hope so, right? And it's not just Doge. Doge is really facilitating it. It's the agencies on the federal level, the states, and it's really governments around the world that I think have a very strong interest. I mean, with high inflation, with increasing debt, I think everybody has an interest to make sure that government money is spent transparently, efficiently, the same way businesses do. I think everybody can get more efficient. It's the same way that humans always get better. And the starting points are different, for sure. But often, actually, the best organizations, if you want to get better, if you're already good, you need the best and most sophisticated systems.
14:25So it's not that I would say we work with inefficient companies. We work with everybody. And I think that everybody has an opportunity to get better. So you've seen how these processes work. you've probably seen more inefficiencies than basically anyone in the world. Yes. So I feel like you are well positioned to take a good guess at what is inefficient in the government right now. I know you haven't done an x-ray of it, but if you were to do an audit of the US government, what would you think are the big problems that need to be streamlined right now? Well, I think one, you know, because you also want to drive and pick quickly, right?
15:04So if you want to drive in quickly, the first thing you focus on is where money goes out of the door. Yeah. So you look at procurement, you look at invoicing, you look at the controls around that. All the money flows that go out of the door, how can we make them more transparent? Where do we maybe have things that we don't intend to happen like that? Where is potential fraud happening? How can we increase the accountability of that? And that's a complex thing because on the federal level and then even on the state level, you have multiple payment systems. You have like, you know, hundreds of billions going out of the door of the government every year.
15:36So I think that's where I would probably start. Yeah. But then you can get into everything else. I mean, you can get into labor efficiency. You can get into the efficiency of the core processes of servicing, you know, the citizens really in every single department, right? So you can get into really the corporations of these agencies that provide these services, right? Yeah. Whether it's you pick up your new driver's license or you hand in your tax return. Please, please go fix that. You can imagine the kind of use cases, right? As a citizen, you can really go anywhere. We'll be right back.
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17:54We're back with First Time Founders. What would you say makes a good process? I think about this a lot in my work. I mean, I don't have massive payment system processes, but, you know, we write scripts and we work as a team and we got to figure out how we produce this podcast. And I find that there are often just processes I just don't like. Like they just feel awkward, slow, they irritate me, but I'm never fully sure how to address that. Like, you know, sometimes I'll just be like, oh, let's have a meeting and like figure out how to make this better. But then even that makes it worse because then we start nitpicking everything and it takes like an hour to have the meeting.
18:36And then it's like, it's even worse. So I guess from your perspective, what is a reliable way to make a process within an organization better? It's a lifestyle that you have to embed. I think what some people think, it's like they're too on and off about it, right? So you should be like, let's get a meeting, fix this process, and then never talk about it again. That usually doesn't work. It's more about how do you get 1 % better every week, okay? So, you know, one of the things I always tell our teams is, you know, we're really selling a lifestyle. And the lifestyle is called continuous operational improvement.
19:12How do you get better all the time? How do you find these increments? It's like these little changes that add up to really ultimately a revolution, right? That's really how you have to think about it. And, you know, the one thing that I really figured this out initially where the whole culture of the Toyota quality management system, Kaizen, and optimizing manufacturing processes, because manufacturing processes is like you need perfect quality. It's very expensive if you screw something up. Like if you have a car and you're missing one little screw. the whole production line stops okay so so you know those companies invented this kaizen lifestyle right and that's really not from a technology standpoint but culturally what we are evangelizing and when you think about it now with ai that is exactly what companies need every company needs to embrace this i'm like a hundred percent convinced because the way ai is going to manifest you're not going to have this like one AI system.
20:11You're going to have lots of agents in your processes. So a company is going to have, I don't know, 100 ,000 employees and 100 ,000 agents, right? And these agents are going to automate little processes and things and tasks so that ultimately the whole organization is much more efficient. Yeah. You know, one person is going to have way, way more impact and it's going to do way more. And in order to do this, if you think of each of this agent, it's a small process change, right? And you're not going to do that overnight. And you're not going to do this with one big bang or one year sprint. You're going to do this by implementing this tool set, educating the organization, really promoting this as a lifestyle where people are constantly automating, constantly optimizing, constantly embedding AI into what they do.
20:58And then two or three years later, they're going to be way more efficient than before. That's how it's going to work. Are you doing that within your own company as well? Are you employing AI agents to automate the processes within Salonis itself? We have a big Salonis for Salonis program, and that's exactly how we approach it, right? How do we get better every day, right? Like, how do we make our customer experience better? How do we make our customer onboarding better? How do we make our customer support better? How do we really embed those processes? And, you know, for us, it's challenging because we're growing so fast, and we have grown so fast, that sometimes you take the eye off the ball, even though you are, you know, the process company.
21:35You take the eye off the ball. So it's something we constantly remind ourselves and go back to. I feel like this could be an entire sector or a department. I feel like we're going to see chief process officers or something, right? We already see this, that organizations are moving from very functional organizations. Yeah. Think about the process of getting a lead, converting it into an opportunity, selling your product, shipping your product, maybe manufacturing it, and then billing it. It's called lead to cash. Yeah. It's a very important process. So today, you have like a sales development team, you have a sales team, you have an engineering team, you have a post-sales team, you have deployments, you have invoicing.
22:16So it's like seven different departments or so that are involved in this. And what we see already is that people are embedding process owners. So chief process owners, call them different ways, enterprise process owners, and for end-to-end processes. So what already a lot of companies are doing is that they're moving from a very functional structure to more of a process-centric structure of the organization. And AI can automate more of those process tasks. That makes a lot more sense, right? So that you can really look at this end-to-end and say, what's our customer experience end-to-end? Because if I sent them the wrong invoice or I provision the thing that they haven't bought, those breakpoints really hurt the customer experience, right?
22:57customer experience is an outcome of a process. It's not just your product. So we see already that companies are sort of pivoting their arc charts towards more of these process-centric structures. Hearing you talk about this, you sound, both your accent, but also your philosophy, very German.
23:17You do. I mean, the attention to detail, the obsession with order, process, structure, it does not feel you're not like an American cowboy. You're like an attention to detailed German. And I want to talk about that, or I'd like for you to talk about that, because we've been talking about this a little bit on our podcast, where in Germany, there is a dearth of entrepreneurship, but that's also true of Europe in general. I'm just going to go through a couple stats here. There are 760 unicorns in the US, and there are only 130 unicorns in Europe. Salonis is the second largest of all of those. On a per capita basis, the U.S.
24:00has 13 times more unicorns than Europe. And when we look at the U.S. stock market, the U.S. stock market is now three times larger than the European stock market. And back in 2010, it was only one and a half times larger. So the gap is growing. Why do you think Europe is struggling so much to build new, successful companies such as Salonis? I think the primary reason is the venture capital infrastructure. I think it's gotten a lot better, but the structure around risk capital in the U.S. is absolutely phenomenal. In the U.S., companies that have a 10 % chance of working out can raise$30 million seat rounds.
24:45Right. Think about that. And so people are willing to give a team that doesn't even have a product yet$30 million. And maybe it has a 1 % chance of working. But there's so much capital that goes into technology and emerging companies that sort of on the whole, that system works, right? Some people are more successful than others. But on a whole, that's an incredible infrastructure that doesn't exist in Europe. In Europe, you have an increasing amount of venture capital. But for example, when we started, we bootstrapped for almost six years. Yeah. No funding. And part of that, because there wasn't enterprise-oriented venture capital infrastructure, the few VCs that were there said, oh, early 20s, you're too young to start a B2B business.
25:31Thank you. And then we were fine bootstrapping, but that doesn't work for every company. So I think that is the primary reason. I think there are other reasons. Obviously, you have a huge domestic market, so that helps. I think you have a very entrepreneurial culture, a very good culture on failure. But look, you know, people talk about the entrepreneurial culture in the U.S. I mean, companies were started in Europe, right? Like, you know, BMW was started in Germany, right? There was an entrepreneur there that wasn't afraid of failing. And, you know, it's like I think that the cultural differences are not the biggest deal.
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26:06I think there's a tremendous amount of entrepreneurial history and heritage in Europe and tremendous amount of great talent, right? You have a pretty strong education system. I think the top European schools are just as good as the top U.S. schools. I think – and you can actually say that in Europe, education is more affordable and more accessible for people. So I think that the infrastructure around education, the talent in Europe is actually quite phenomenal. It could certainly be improved a lot. But I think that's not the primary reason. I think the primary reason is that the venture capital infrastructure is so much less developed.
26:40and for technology companies in particular, you need capital, right? It's a capital intensive business now with AI, it's even in some ways more capital intensive and I think that's the biggest gap. And obviously, because we didn't have that, you then have the issue that a lot of, you know, you are really behind. So, for example, out of Salonis, you know, I get calls every month from former sellers starting a company. I just actually put an angel check into one of them and there's great companies there, right? I don't know how many of them will work out, right? But that obviously these successes feed the next successes and because we didn't have as much of that, you know, the US gets further and further ahead.
27:24I am bullish on Europe from an entrepreneurial ecosystem because of the talent. Quality of life is very high. I think people want to live there. I think people from all over the world, still a very attractive place. So I think Europe has a lot of opportunities. If Europe is able to use them, I think there's a lot ahead. But I would say the capital infrastructure is the main gap. I feel like another way to say this is America's rich. And the reason I bring that up is because those guys who are down to put in a$30 million check for a company that has maybe a 1 % to 5 % chance of success, I feel like the only guys who can do that are the mega, mega billionaires or the mega funds who can make these bets.
28:10I'm starting to think maybe it's just we're like a little too comfortable in America. I think America is rich for sure. But Europe is actually also quite rich. So, for example, in Germany, there's a lot of wealth. Yeah. But that wealth isn't going into risk capital. Right. So, for example, if you have a pension in the U.S., there's a high likelihood that a portion of that goes into the top VC funds. If you ask the top VC funds, who are your investors? Yeah. They will say it's the pension fund. The teachers. Yeah, exactly. The teachers' pension, right? Right. And Jeremy, that actually used to be forbidden.
28:44Pension funds couldn't invest in risk capital. Right. Now they can like a very small percentage. I think there's some changes, but it's a whole different scale. So actually, Europe historically was, I think we're falling behind more and more, But there's a lot of wealth in Europe that could be directed towards riskier asset classes. There just hasn't. There are two stats about Germany's economy, which I find really interesting, and I think kind of illustrate your point. The first is public infrastructure spending, which is 2.5 % of GDP, which is one of the lowest rates in the world. And the second is the debt-to-GDP ratio, which is 60%, which is significantly lower than the rest of the G7, certainly way lower than the US.
29:27and I feel like that is a good illustration of where Germans heads are at which is they're very afraid of spending and also very afraid of debt and it does paint this overall economic picture of like they're just not willing to take risks and I feel like that's sort of reflected in in the VC environment where it feels like the entire setup of the German economy is like we're afraid that something might break so we want to play it really really safe we're not going to go out and over leverage ourselves um and maybe we're not going to go out and make bets on on young companies that might not succeed that's what everybody says i don't know if i totally agree i think you know when you think about the founders epoch in europe and particularly germany there was a tremendous amount of risk taking you look at siemens you look at bmw you look at basf a lot of those companies actually got started within a within a reasonably short time window So it's not that like the cultural heritage is totally risk avoiding.
30:27Certainly, there's a different culture around risk, which is also not necessarily all bad, right? I mean, some of the good U.S. companies, they took risks, but they were also built on solid principles of entrepreneurship. So I wouldn't expect Germany to have been the leader, you know, in the early days of the crypto industry or something like that. That is certainly true. There's a more conservative mindset. But if you think about deep technology, where you need to make long-term bets, you need to have an engineering-driven mindset, I think that Germany actually has a great heritage on that. And there's a lot of first taking.
30:57I think that the system didn't enable it, right? Like if you say, hey, we can't invest any of our pensions in a venture capital, how would you expect the venture capital industry to work, right? So it's like, it's not that, you know, there's like 80-something million people that are afraid to take risks, right? But I think there's a system that didn't encourage people to invest money into ventures, right, and technology ventures. And I think that is the primary challenge. I mean, SAP was bootstrapped too, right? And it's been a long time ago. Obviously, that was a different time, right? Venture capital wasn't a thing then.
31:35But still, I mean, that was the last German big technology company that went public and went on to be successful. and there hasn't been any really big successes since. Yeah. You know, it's like SAP and then a bunch of car companies basically, right? Yeah, exactly. And I mean, the car companies got started way, way early, right? So, you know, hopefully that changes. But I think the culture and attitude also has strength. I don't think that's the main reason. I think the system is to blame and it's other European countries too. I want to talk about how you built this company. So you started the company in 2011.
32:15As you mentioned, you spent the first five years bootstrapping. So you did not raise any outside funding. Briefly walk us through how you bootstrapped. And I'd love to know if you would do it again, given the choice. You know, it was a pretty intense period. Like you have to be pretty hardcore to bootstrapping. We had$12 ,500 when we started. You actually have to, like, you know, to form a limited liability company in Germany, you have to guarantee$25 ,000. so we had to promise another 12 and a half thousand but you only have to put up half of it so the other half at that time is it is that the same in america no you can start with one dollar they've changed the system in germany you can also start it well by the way that's another great example of what we were just talking about exactly that's fair yeah yeah in the u.s it's like 500 bucks for the lawyers or whatever and you've got a you've got a delaware ink or whatever you want so you're right so so you know we're 12 and a half thousand and you know we literally we We slept in the car.
33:12We drove around in an old Opal that was my co-founder's, and we pitched clients. The good thing of it was really enforced focus on the customer because if clients were not willing to sign up for salonists, we wouldn't have any revenue to pay employees and build the business. We sent out handwritten letters to people because we figured out if they get a regular letter, the assistant throws it away. But if they get a handwritten letter, it could be the grandmother. or husband or wife or whatever. So those letters actually got opened. And when you got a letter from us, it was a great gift because you got a voucher for a free demo.
33:49How generous was that? So some people actually filled out the voucher and got a free demo from us. And we really, I think in the early days, just really focused on our customers, signing up customers and then continuously building and iterating on the product to make those customers happy and grow with us. and the good news is in our business which is focused on enterprise you can you know if you land 100 customers that's a lot right whereas and you get bigger contracts so you can actually work in that mode i think if you start a consumer business so it's very hard to bootstrap that it's been done but it's much much harder right because you you don't get these bigger contracts from from your customers and then in 2016 we we decided hey we really want to take on the u.s market.
34:33It was actually a lot of European companies, when they start in Germany and they go to France and then they go to Spain and then they go to wherever, UK or whatever. We said, well, if we're going international, we're going to the US. Obviously, then we also went into other countries in Europe, but we said the first market we're really going to take on is the US market. So we went to the US and started the business here and we figured out it might it makes sense to raise some venture funding to do that. So we raised venture funding partly for the funding and partly because of the network that we could get through those VCs.
35:06Yeah, I just want to go through the fundraising. So you raised 28 million in your first round in 2016. Two years later, 50 million in your Series B. A year after that, 290 million. And then later you raised a billion in your Series D. So you're kind of a prolific fundraiser at this point. is there anything you've learned about fundraising i mean you've experienced both sides i mean you bootstrapped you built the business and then you went out there and you you did the elevator pitch and raised a bunch of money what are some of the learnings that you've you've taken away about fundraising what makes a really good fundraiser one thing that's really important is to have alignment with your investors on what the journey looks like what you want to do find the right investors that are really, you know, not just excited about the business opportunity, but also excited about the impact that you can create.
35:56You know, we say we make processes work for people, for companies, and for the planet. And that's a really important mission, right? I mean, I think I'm converting you into a process evangelist a little bit here, I hope so at least, because you realize how important this is, right? It's patients in the hospitals, it's customer experience, it's citizens and their services, it's the work that people do every day. you get frustrated. Imagine how frustrated you would get if you were in a higher transactional environment. I get frustrated cooking breakfast in the morning. Exactly. You know, you get frustrated with processes.
36:26Imagine if you had to run a UPS logistics hub or something like that, right? I'll stick to talking on a microphone. Exactly. So I think you want people excited about what you do and really bought into whatever your plan is for the future. And then I think you need to explain your story in a way that investors can adjust, right? So you need to talk to investors differently then you talk to customers, it's a different audience. Then I think you need to also make sure that you bring your customer proof points, right? I think that investors, first of all, they're going to call your customers, right?
36:57So that's clear. And then you need to really make sure that you have alignment and create the right setup. I think that's extremely important. It's not just about the money you raise, it's a lot about the setup you create that allows you to really go and be successful afterwards. We'll be right back.
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38:58We're back with First Time Founders. I love the way you say how it's like, it's a different audience. The customers are one audience, the investors are another audience. and I feel like that encapsulates well how building a company is in a lot of ways like a performance. Like your job is to kind of put on, I mean, the handwritten letters, you're going to put on a show for the customers and demonstrate, you know, I know what you like. You know, I know you want someone who's taking care and taking the time out of their day to write this thing. And we need to know if you see being a CEO as that because we talk a lot about that on our podcast, the way you're presenting an image and you've got to spend a lot of time thinking, you know, what kind of story does the audience want to hear?
39:52Is that something you think about a lot? I used to think about it more than I do, actually. I think that the most important thing is that you're authentic and people really feel that. So I think you need to think about the impact you want to create and the type of change you want to drive and the mission you have. And then you need to obviously communicate that in a simple way that people can understand. So you can't, you know, if you're very technical, then often people have the tendency to be too technically savvy. So you have to work on storytelling. But I don't think it's a performance. I think it's something that you're really passionate about and that you really believe in.
40:34And then, you know, as an actor, I don't have to necessarily believe in, you know, if I'm a good actor, I can play any role, right? But so in a way, it's really a mission where you say, hey, I really have this belief. And I'm going to gather more and more people with me on this journey. And that's why I think it's so exciting about Salonis for customers that really embed Salonis into the operations. They get so much better. I talked about some of those examples. and they embrace this as a lifestyle, right? They suddenly don't just think about their P &L statement, they think about their process health and how they can optimize their processes.
41:13How do these outcomes affect customers? How do these outcomes affect financial outcomes? How do these outcomes affect our employees? So we are changing the way companies run and operate and I think that when you attract people, I mean a big part of a CEO is recruiting, right? you want to attract people that are aligned with that. You know, you want to attract missionaries, not mercenaries, okay? You want to attract people that are going to wake up in the morning and be passionate about this, right? So in a way, you evangelize, right? And I think as a startup founder, you're always evangelizing.
41:49You're always communicating and expanding. But you need to do it not to put on a show, but because of what's in your heart, what you really believe, right? And what gets you excited. You also don't do it from a purely financial perspective. Of course, financial is important, and it's important to make all your stakeholders successful, your investors, your employees, et cetera. But that's not enough, right? You need to have a bigger mission that you really believe in. I think that otherwise you're just not going to persevere. It's very hard to start a company and to be successful. You know, out of 1 ,000 companies that start, maybe one is successful.
42:19I don't know the exact numbers, but, you know, it's not a lot. And I think it's not because the 1 ,000 were bad ideas. is probably a few hundred bad ideas, but there's also a few hundred good ones. But, you know, it's the perseverance you have, really sticking with it and, you know, waking up every day and doing it, right? And I think that starts with passion and belief. Yeah, it's basically like who can last the longest at a certain point? I feel like if you're only in it for the money, it's just so much harder to wake up every morning and try really hard. And maybe for some people, that is just so motivating that it's possible.
42:54100%, yeah. And I think also if that passion and impact is missing, I think people reflect too much about themselves. Yeah. Right? Sorry, I'm going to get caught. Yeah. Yeah, I'm going to get, you know, I'm going to do this or that. You know, I'm going to be on the newspaper or whatever. I think that's usually not the right motivation, right? So I think, and again, it's hard to be authentic if you don't believe something. People will find out. So I think that this vision orientation is very important when you want to start a company. You went from three employees to now 3 ,000 employees. You've gone through the whole scaling process.
43:31How did your management style change as the company grew? I think that's one of the biggest challenges for founders. You have to basically change yourself completely at least three times. So when you start, you basically, you are in like block and tackling mode. You know, you know every detail. You know, you have to have extreme attention to detail. You probably can't afford very experienced people, but you also have a lot of control, right? And then you have to become a manager, right? So you have to manage people. You have to put a team together. You have to think about an org chart. You have to, and that's definitely a transformation.
44:11And then at some point, you have to move from being a leader to being a leader of leaders and then ultimately to being an executive. And what that means is that you have to abstract from the details. You have to find a few very simple things you're going to focus on. Like you can't lead an organization of 3 ,000 people with details, right? Like we, and every year we have three priorities or something, maybe four, right? So it's very, very simple. You need to communicate a lot. Again, from a standpoint of authenticity, but you have to communicate a lot. And you have to really create a team that is aligned with where you want to go.
44:52And then that team executes and they lead their leaders, right? And you have to really make sure that you empower an organization, that you are not just, you know, trying to manage every detail. Certainly, you know, if you, I mean, there's some CEOs that handle it differently, but certainly if you have a company that's complex, I think if you have, you know, very few products, you might be able to, like, go into a lot of details, sort of. But if you have, like, a complex platform, right, and you want to get broader and broader, you need to create a culture where people are empowered, where people can make their own decisions, where people can go fast.
45:25And I think that that is another transformation. So, you know, you have to really change yourself quite a bit, I think, in that journey. And I think that's where a lot of founders actually fail. I think that's where I fail in terms of management is just delegating to people. I find it really hard to do. How did you manage that, especially when you're just starting out? Like, what was the point where you're like, okay, I'm going to trust this gigantic process, even as the guy who obsesses over processes, I'm just going to give this to this person and I'm going to delegate and I trust them to get it done.
45:56At some point, it gets so much that you have to learn. You know, the thing is, I think this transformation, like if you can't delegate, you're not going to get very far, right? You need to delegate. The thing is, when you make this change from a leader to a leader of leaders and executive, it's a little different. Like before, you can run around the office and you have a microphone like this one. And you say something in the microphone and it happens. Because everyone knows you have 300 people. Everyone knows you. People are still close. And as a founder, you say, hey, we should build this product.
46:24We should do this. And somehow it happens, right? So I call it the founder microphone. Company gets bigger. You have more locations, more people, more senior people. You're like, test, test. You know, this thing doesn't work anymore. So then you have to think about org chart structures, leaders of leaders, you know, how to inspire people around simple priorities. And then you have to elevate yourself and just say, those details, I'm going to let my team handle that. I'm not going to get involved. You know, we have to have a failure culture. If people screw up, that's fine, right? Obviously, not too badly, please.
46:53But, you know, and I think there's, you know, some founders, they read these stories from Elon Musk and Steve Jobs and, you know, how they basically have Steve Jobs, like, debugs, you know, a button on an iPhone or something like that. And I think, you know, when I talk to founders, I always say, be careful with that, right? Because, first of all, likely you're not Steve Jobs. I mean, he was like a once-in-a-generation type of genius. And then secondly, Apple, he was so good at product management and design and so visionary that he could create the most valuable company in the world or one of the most valuable companies in the world with basically like a handful of products.
47:30You think about the ratio of products to market cap. Right. For Apple, it's extremely… Very low. Right, very, very low. So most companies don't work that way. Right. So if you compare Steve Jobs' management style to Jeff Bezos, I mean, Jeff Bezos, Amazon is like, he's a systems thinker. Right. He says, you know, I don't actually work very hard. Like he's basically, I work from nine to five, you know, but he created systems and people and accountable structures that were so good that people could make their own decision and Amazon could be in all these businesses. Right. So it's a very different model of a company that has a very different needs, a very different leadership style.
48:11So if, you know, some founders, they run around like many Steve Jobs. And sometimes I'm a little bit, I'm like, be careful. That works for Steve Jobs because you were Steve Jobs and because Apple created a business model around just having few products that are absolutely brilliant. I feel like we glorify these people. We glorify Steve Jobs, glorify Elon Musk. And I feel like there's this founder culture, especially with the founder mode thing happening, where we like glorify people who are kind of crazy, a little irrational. They shout at people, we need to do this. We can't get it done in time.
48:43We'll do it anyway. I don't care. Just sort of like bull in a china shop. But it's like, I feel like we don't respect or have enough time or airtime for all of the people that make that happen, who are like actually very organized with their time, very calm, very rational, sort of the more Bezos types who actually build those systems and make it all possible. Yeah, I think exactly. I think that there's different styles that work for different situations. Yeah. I think when you talk about founder, of course, as a founder, you need to be intense. Yeah. Like if you're not intense, you're not going to start a company.
49:15Of course, you need to be very ambitious. Of course, you need to sometimes think against the crowd, right? And set like ambitious goals. Of course, you can't accept mediocrity. So there is elements there that are very correct, but there's other elements like this complete micromanagement mode. Again, Elon Musk, right? He's, I mean, the bandwidth of the guy is just incredible. We can agree, right? But his company is like, he really dives deep and he builds like these individual products that change the world, but that style doesn't work for every company, right? that I don't think would have worked for Amazon, right?
49:47Would it have worked for Salonis? Probably not. I don't think so. So if Elon Musk was interested to, you know, to give us a management coaching, I wouldn't mind, you know what I'm saying? He doesn't know what he's doing. But my point is, I think that some founders run around like this, glorify this, apply it blindly to their companies and think they are Steve Jobs, mini Steve Jobs, Elon Musk. And I don't think that always works. So I think you need to really, ideally collect some different viewpoints and then form your own independent principles first mindset of what style, what organizations will work for my company.
50:20And one of the things I talk about is, you know, people talk about product market fit. Someone once mentioned to me, you really need to think about product market people fit. And I was like, that's interesting. So it's actually a really good point, right? You have to create people and an organization that fit your product and your market. Oh, yeah. So I think that that also looks different for every company. I'm going to start to wrap us up here. and I'd like to hear more about processes in your personal life because you've built a company basically predicated on studying processes. So I'd just love to know, what role do processes play in your personal life?
50:57Do you have any personal processes, morning routine, workout routine, whatever it is? I have a workout routine that I follow like three or four times a week. I'm pretty disciplined about that. But other than that, honestly, I'm not like too much of a process guy in my personal life. I try to leave that to the business. So, you know, what I hate is I hate to do, like, think about the same thing five times. So I'm a, you know, lazy guy. I'm a mathematician. Mathematicians are lazy. So, you know, I try to think about, you know, you know, I don't like to think about what I wear every day. So I have like, you know, 10 T-shirts.
51:30And for many occasions, that's enough. That's a process. You know, that's a process. But I wouldn't say I'm hugely process-centric in my personal life. Well, I feel like wearing the same thing every day is pretty process-centric. Well, it's not every day. I always try to have a template. I don't go to the closet and think like, okay, what am I going to do today? I try to have some structure there. But I'm also a wanderer. I have a lot of different interests. It's like, you know, every week looks different from a personal standpoint. So it's not that I follow like the same playbook every day. I guess what I'm getting at is it feels like I have found in my personal life or just in my life that if I can figure out a way to automate something or do it so habitually that I no longer have to think about it and I can just go like kind of on automatic mode, it makes the rest of my life a lot easier.
52:25Oh yeah, I love that. I mean, I love that if something just works, you know, you have like, you know, you have I cook the same meal every week now. And like, I'm just like, oh yeah. What do you do? I just make like a bolognese and I just like put in a giant pot and I'm like, okay, I'm just going to do this every week. And this way I can like just not think about this anymore. And I can just get on with the rest of my life. That to me is the start of the Salonis lifestyle. And it gives you this feeling of like this sigh of relief, right? I didn't have to think about that. Yeah, exactly. And you have free up some mental capacity for something else.
52:57Yeah. That's beautiful. You know, look, I think that then hopefully gives you some room for creativity and doing things that are not very process oriented. But yeah, I agree. I think it's nice if things work. Thank you for taking the time. What would be your number one piece of advice to, I would say, entrepreneurs? But maybe let's make it a little more open, just anyone listening to this podcast. I think what's really, really important is that you commit to your passions. You know, when I decided to study math, I had no idea, you know, what I wanted to do with it. You know, after my undergrad, I wanted to study neuroscience.
53:37I had the opportunity to do Salonis and then was really passionate about that. So I jumped on it. I didn't have any clarity whether this would work out or something like that. You know, I was really always glad looking back that I did it. Now I'm like, maybe neuroscience was a great area to get into, you know, with all the AI. But just kidding. But, you know, I just think like when you love to do something, you are best at it. And you've got to try to find that and you've got to fight for that. I think obviously, you know, not every day is going to be, you know, the best day of your life. But I think that as a principle, that's extremely important.
54:14And to your point, AI is going to hopefully help with that. This is going to unleash productivity for everybody that can be distributed. But I think really, especially in your work life, finding something that you really enjoy, I think, is incredibly important and something that people need to commit to. I think people are still too focused on how will others perceive this, you know, what will be, what is the chess game of my next four career moves, you know. And that stuff, I think that following what you really believe and finding that and searching for that, I think, ultimately leads to better outcomes.
54:51Alex, thank you. This was great. Alex Rinker is the co-founder and co-CEO of Salonis, a process mining and process intelligence company. This was wonderful. Thank you very much. Thank you so much. Really enjoyed it. Awesome.
55:07Our producer is Claire Miller. Our associate producer is Alison Weiss. And our engineer is Benjamin Spencer. Thank you for listening to First Time Founders from the Vox Media Podcast Network. Tune in tomorrow for Prof G Markets. Thank you.
From the publisher
Ed speaks with Alex Rinke, co-founder and co-CEO of Celonis, a process mining and intelligence company. They discuss how his management style evolved as the company scaled, the challenges facing Europe’s startup scene, and his advice for founders navigating the fundraising process.
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