People say we disrupted something. No, because disruption involves a certain degree of destruction, which we didn't have. It's actually a kind of process innovation. And the cool thing is that it's tangible. AI and digital are all well and good, but if you can touch it, it's real. There's so much awesome stuff out there that you could work with without having to reinvent the wheel or create some fancy shit. And Deutsche Bahn is absurdly expensive. I would fire the entire board of Deutsche Bahn and the supervisory board too.
Today we have a founding story that is one of the most extreme in recent years. The product is something almost everyone knows and has used—Flixbus. Even though I no longer count myself among them, I've used it several times. (Laughter) But the obvious promise behind Flixbus is that you can get from A to B at a great price, or a very, very good price if you want to save money. We are even punctual compared to Deutsche Bahn! (Laughter) Deutsche Bahn doesn't even have a good price or conditions. During my background research—probably supported by AI five minutes earlier.
No, no, no, you have to start it earlier because deep research always takes a bit longer.
There's not that much to research, (laughter) right? Honestly, it's better than with some employees sometimes, that's why it works so well. And you actually started founding much earlier, before Flixbus. So take us along and start with your first entrepreneurial beginnings. Because there was no before for me, and for Erik there wasn't really one either, but for you there was. So over to you and welcome.
I have to add one thing, because you said you did research via ChatGPT. We met in Munich at a dinner organized by OpenAI—not funny—they sat us next to each other and we realized, holy shit, we get along extremely well. Then we met in London again and realized we're on the same wavelength. And now we're here. As I said, we need to meet more often, because two out of three times we met when Bitcoin was at an all-time high.
Yes, a really good omen. So you only want to sit with Erik when his net worth is high. That's when he's in a better mood, understandable.
Yes, thank you for that. The truth is, there's always a lot of myth-building. That first company—whoever, ChatGPT or Grok or Cloud, I don't know which one you used. I'm basic, I'm open and free. The company was called KSIT Consulting. Kraus Schwemmlein, right? Jochen Engert, Andre Schwemmlein, Daniel Kraus—the three Flix founders. That was already some form of business, but not comparable to what we do today. Why it was incredibly helpful: no matter how big your place is, you have to do everything yourself. You are fully accountable. If you screw up, there's no one else. And beyond that, Andre and I have known each other since school, almost 30 years now, and he's two years older than me.
Age, you understand that too well. (Laughter) Am I the oldest here?
Yes, okay. It was clear and everything's fine? He looks too old, but he just turned 30. I've certainly taken the stress of the last 10 years with me.
Okay, then I'd rather be old and look much younger (laughter). He's actually even older. We played volleyball together and knew each other from school, but it developed because we carpooled to internships. I was at a company called Markwart, an automotive supplier, and Andre was at Marketing Porsche. We commuted together from the region over the Swabian Alb, and I would be on the phone handling small infrastructure tasks, websites, doctors, small firms. Andre would ask, 'What do you get for that?' Sometimes I got a cash tip, like fifty euros, sometimes nothing because it was a favor. Andre said, 'This has to stop.'
What year are we talking about? We're talking about 2005.
Then I said, 'I don't care.' And he said, 'Alright, from tomorrow, 75 euros an hour. I'll handle customer acquisition, invoicing, everything around it, and you just keep doing what you're doing.' And that worked brilliantly until the end of my studies. We had a few other students working for us—I was basically a pimp. (Laughter) So, yes, I've never thought of it that way, but you could almost say that, right? He basically kept me running. We learned that we not only work well together competitively and personally, but also in business, and that we are very complementary. Then we completed the team with Jochen when Flix was created.
And how did that go? You eventually stopped. We sold the client base. I know that was hilarious, and we were proud it ended cleanly, but I think we should have looked more closely at the buyer's due diligence. There were calls afterward like, 'Dude, what is this company that's now handling our stuff?' No idea, it was some other IT consulting firm that was a bit bigger, and we sold the client base for a pittance—and obviously we were better. That's always a question of quality and customer focus in any service. That company didn't seem to be top-notch. I didn't care further because the impulse was that we sold our first company for what might have been a four-figure sum at best—tiny. Then we both went abroad independently. I was in China and Detroit for work, so we couldn't continue.
So would you not do that today for the sake of reputation? For me it was important—and I think that's what distinguishes me—to have a clean exit, that the people and companies we served continued to be served and weren't just left hanging. That it maybe wasn't so great afterward? Maybe we were just particularly good. That makes me happy as a reference, but for me it was a good conclusion.
And the idea behind Flixbus seems, at least according to the story, very strategic due to a change in the law. That's what you read. I know that chatbots sometimes hallucinate.
Exactly. That's why I'm just reflecting what one reads and I want the truth, the real shit. I believe the execution of how Flix came to be as we know it today was very strategic. But whether the idea itself—ending up in mobility—was strategic, I don't know if I'd call it long-term planning. What was planned was that we wanted to become entrepreneurial again. Andre started at BCG after his studies and met Jochen there. They worked together on a project, and my contact with them was a bit loose because I was in the US. Then I came back and started working at Microsoft in Munich. We took up our local network and met regularly.
What did you do at Microsoft? Consulting, broadly. Outside the United States, it's mostly sales and IT consulting. That's about right. No, it was a golden hamster wheel. It was cool. I could have continued, but that was the point. We met regularly again, and initially it was more like complaining about the golden hamster wheel. I find a client project stupid, and then I can't do what I think is right because colleagues say you have to sell this crap. Over time, the complaining became more constructive, and we said, 'Okay, let's change it. How can we solve problems?' Then one evening Jochen joined, and we actually just brainstormed for several months. We discussed many ideas but let them die on paper.
Do you remember what some of those ideas were? No, consulting was in some form close to us, and normally you have problems in areas you know. So we said, 'Okay, you have to liberalize and modularize it a bit, because not everyone with a problem can call McKinsey or Boston Consulting.' Then we had a topic about education. What held you back from that? You think about a business case and then think, 'Yeah, you could do it, but it wouldn't move the needle. If we don't do it, nobody cares.' And back then it was very playful. What I would now say matters, I can deduce in hindsight, but at the time it was just feeling. We went for it with education topics like a kindergarten franchise because there weren't enough childcare spots in Bavaria. But that had little to do with IT. Zero. We never clearly said we had to ride the e-commerce wave. We simply had the impulse to become entrepreneurial, and then we looked, independent of whatever was hyped. We discussed geriatric aids because my grandparents were entering a home at that time. So we met about once a week. Eventually, Jochen and Andre were on a ski trip with their then-girlfriends, and on the way back, Andre read in a weekly newspaper that the federal government, at that time black-yellow, planned to liberalize the Passenger Transport Act based on an EU amendment. They discussed it on the drive home, called me, and said, 'Come to the BCG office on Monday and act like an intern.' I had done that a few times so we could discuss properly with a whiteboard. We figured it out. Now we knew what we were doing. So I came in, and they told me, 'We're doing buses.' I thought, 'Okay. Yay.'
How did the guys become so convinced of the idea? I think it was a matter of instinct. But I also believe, as I said, in hindsight I can reason it out, but I'm not sure we were that precise at the time. I think it was about the apparent market size. It was obvious that at that time Germany had no intercity buses. There were trains, cars, and planes. What was the legal situation before and after? Because I never witnessed it from the outside. The situation was as follows: to protect investment in rail, Germany had banned or nearly banned intercity buses. Why nearly banned? Theoretically, you could file an application. That sounds very German already. Your bus did it in a bus carpooling context and fought a lawsuit with the railway. You could file an application, and if there was a train connection on the route you applied for, the railway would have the right to say no. Then you wouldn't get the concession. You can imagine how many times that happened. Just another friendly hint to the left: protectionism and nationalization are exactly where it leads. Market first, then control, not control first, then market. That's how it works. So it didn't work. Then they wanted to loosen it at that time. And if you think about it, it was clear. We didn't have that in England, the United States, Australia—almost everywhere else it existed. And many people used it. In the US, Greyhound has been around for 100 years. So the hypothesis was: we have 80 million people, surely some of them will take the bus. So it was obvious to me, and it was also obvious from the beginning that part of the idea was to create a platform, a travel tech thing—not because it was hip, but because we saw with MyTaxi and Uber that it worked well: individual players who own the supply connecting us as customers as demand, and software works much better than pen and paper. That was also the answer to the question, 'What do I do in the equation?' Andre said, 'You can turn on a computer, so we'll build a platform. A bit more than that, you can do it too.' (Laughter) Exactly. But we've discussed it several times since: what I would essentially do today is a bit like private equity—take old economy stuff that missed digitalization and bring it to another level with AI. And basically you did exactly that in the pre-AI era. What I still think is incredibly cool about Flix is that people say we disrupted something. No, because disruption involves a certain degree of destruction, which we didn't have. It's actually a kind of process innovation. The cool thing is that it's tangible. That's what made us fall in love with our own product from the beginning. AI and digital are all well and good, but if you can touch it, it's real. And b, exactly what you said: those bus entrepreneurs we had as partners at the beginning couldn't grow anymore. They had existing business like vacation trips or school transport, tenders, and some public transport. Beyond that, the piece of the pie was distributed, but they were entrepreneurs and wanted to move forward. So we gave them a technological opportunity to keep moving forward. There's so much great stuff out there you can work with without having to reinvent the wheel or create some fancy shit. So I totally agree with you.
But the interesting thing is, when you start to think about it—train can come later, but say bus and so on—you're not, let me put it differently: when you think about such things, you think, 'Oh my God, where do I start?' You need an enormous amount of capital. Only large corporations can afford that. And it's exciting to say, 'Hey, we three as a startup—let's not revolutionize, we're back to disruption—but let's optimize an industry where you first think, how can I even start as an individual?' And how did you manage to say, 'Hey, I can't start with one bus.' Yes, I believe in entrepreneurship. If my son says he wants to start something after kindergarten, I'd support that—we're back to the kindergarten chain. Absolutely. In complex things, though, like the Flix example, it benefited us that we had worked an average of eight years before. Mhm. Yes, and had a lot of experience. Especially with Jochen and Andre from BCG strategy consulting, they worked it out rigorously. So we sat there, me as a pseudo-intern, and they walked through it at the whiteboard, saying, 'Okay, we can buy all the buses, each costs between three and five hundred thousand euros, put them on the balance sheet and depreciate them. I don't think that will work. Yes, then we can rent them all. But then you're in that wage driver system, where they don't care if the bus is empty or not, or what the quality is. You have no Capex then, but Opex that doesn't breathe and offers no entrepreneurial incentive. And we ended up with the partner model.' Quick clarification on Capex vs. Opex for the audience: Capex is an investment that goes on your books and you depreciate it. Opex is ongoing costs. And you nicely mentioned that you thought about incentive structures because you were aware that people act based on incentives. What I find super fascinating is that at the beginning of the business idea, you had already strategically thought it through. And of course you'll say in hindsight it seems more strategic, but compared to my founding story, it's much, much more strategic. Really, because I was totally inexperienced and we just did 2000 cans of whatever we felt like, and if it went well, cool, if not, then not. You have to be hard in your calculations. That's what you did. I also have that experience. I often advise people who are unsure and try to build complicated decision trees. In the end, a gut feeling is also good, because it doesn't mean you decide arbitrarily, but intuitively based on all your experiences—and those eight years come into play again. So we simply worked the way we learned to work at Microsoft and BCG. It was structured and strategic, but not because we said we have to go through the business plan step by step. Things like business model canvas and all those great things that exist now in the startup bubble didn't exist back then. We simply wrote our model on the whiteboard.
But you probably also had to raise money to do that, or was it self-funded? Yes, well, Sparkasse takes care of it. No joke. I believe that. Bitpanda didn't exist yet, and it was the Sparkasse in Munich, I have to correct quickly. But I swear, for a business like that, it's calculable. You say yes and no. At the beginning, we founded the GmbH. Each of us put in maybe 20,000 euros or maybe only 10. I know I had to borrow from my sister because it wasn't enough. Despite my Microsoft job. I had bought an old MG Cabriolet beforehand, and that was a bad investment—though an old cabrio isn't a real investment. Your sister got shares? Actually, she didn't get shares, but we're square, and she knows she won't get more out of it financially. Then after the GmbH founding, we looked for capital. At that time, venture capital was almost impossible because we didn't have legal certainty yet. Mhm. So we started—contradiction: the term 'risk capital' is bananas anyway, with all the things they write in. Look, we know that one out of ten works, but we also want it to be one out of ten, right? We were profitable by the end of 2016. All those VCs—we wanted to do a tiny round—they all said it wasn't enough. Only when it was truly proven, like five years in a row profitable, then suddenly the VCs said, 'Okay.' Risk capital is sometimes the wrong word, honestly. Not only the wrong word, but also the incentive structure with management fees and carry—we could do a whole episode on that. It's an interesting industry, let's say. I'd rather stick with mobility and moving people from A to B.
How much money did you think you needed and why for the start? We weren't that strategic; we simply calculated what we needed to build the MVP platform and the essentials. A few hundred thousand euros were in the room. As I said, we tried but everyone said, 'We don't know if this law will really come or not.' Parallel to that financing story, we were already looking for partners and trying to learn about bus transport. We drove across the republic and knocked on doors at bus companies—terrible conversion rate. We used a directory on CD-ROM with maybe 4000 entries, sent mass letters, called everyone. In the end, we converted about seven after ten months. If you have an e-commerce business with that conversion, you'd close shop immediately. But one of them later became a shareholder. I have to jump in quickly because I find it really interesting, especially since you mentioned ten months—it gives a timeline. So you're at the point where you know or believe something might change, and you know that if it changes, you'll need money, but you still start building a platform and reaching out to people without knowing if it will actually change. Well, let me clarify a few things. We wanted to build the platform, but we were initially reserved because of the framework conditions, so we started too late and had to rely on third parties. In hindsight, that was a bad decision. Everything could be fixed, but my advice to everyone is: think about your USP—where you make money—and do that yourself, never outsource it. We were too late because we had some uncertainty at the time. To put it in time: we're at the end of 2011 into 2012. After the summer break, in September/October, the Bundestag passed the law, and the first buses ran in early February 2013. So we're in early 2012 now. When we tried to excite partners, one of them operated the Frankfurt-Hahn line at the time. Frankfurt-Hahn was a thing because Ryanair only flew to Hahn then. Everyone flocked to Hahn or Düsseldorf-Weeze, I think, near the Dutch border. That operator in 2012 was still filling out tickets with a pencil or pen and said, 'Yes, if we need such a platform, I need it here too.' With that pitch, we went to Sparkasse Munich and applied for a KfW startup loan. There was a young man there who really wanted to help. The first feedback was: 'I understand a hair salon, but what do you do? Software?' That's a huge problem with funding, but we can discuss later. I was once unemployed for three months because I left Microsoft with a severance agreement and thought, 'Great, I'll take this startup deal, you can shorten your unemployment period and get double.' The woman said, 'No, you only have a diploma from a university of applied sciences, so I can support you for a master's, but computer scientists are in demand, startup? Sorry.' So I even had to pay my own social insurance because I was blocked. That says a lot. But we had the case: the colleague who really pushed through and convinced that it was fundable. So with the help of Sparkasse Munich, we got a KfW loan. I think it was 60 or 80 thousand euros each. I'm not sure. With that, we had real money and could really start. We hired the first people, prepared everything. We paid back that loan normally, like rent, personally liable since the KfW doesn't accept corporate liability—so divided by three, each had a monthly Sparkasse deduction. Not like my savings plan where I know I have something for it, but I trust Erik and Bitpanda, just to pay off the loan. And with the bus operators, some were not just entrepreneurs but said, 'If what you three say is true, if it becomes that great, I'd like to be a partner and also a shareholder.' So we collected a few business angels at the beginning—two we met through business plan competitions and loved, and three or four actual bus operators who said, 'Very smart. If it's that good, I should sign there too.' When I hear that, I see a potential conflict: they might say, 'Hey, I want to be a big part of it.' Or were negotiations manageable so they didn't expect 20% of the company as a bus operator? At that time, without venture capital, everything was not at the professionalization level we have now outside the startup bubble. So there was no obligatory 'I need 20%' and dilution discussions. We calculated that the next step would require about 4 to 5 million euros. Then we met Heinz Raufer, our first business angel. He was a juror at a business plan competition and the founder of hotel.de. He said, 'It's the same as what we did, but with transport.' He was also great—serendipity of the diligent. The competition organizer from Netzwerk Nordbayern called and asked if he could give our contact. I said yes. We drove to Nuremberg, and I think at the second meeting he said, 'I want to invest. Here's a suitcase full of money. You tell me the percentage and it's a deal.' We had to leave because we couldn't answer. 'Thanks, but we need to think.' That gave us our first company valuation. Then other business angels came in. How much was the valuation roughly at that time? If Jochen sees this and it's wrong, I'll get a scolding. I think around 8 million. That's crazy for such an early stage. Heinz believed in us and the idea from day one. He's an old-school venture capitalist, does things alone, an entrepreneur. He says either it goes through the roof or not. And again, in hindsight, we were kissed by the luck of the diligent. We didn't even have a shareholder agreement yet. Heinz came, I think it was Taylor Wessing or something, and said, 'I'll make a proposal.' How often do I see young entrepreneurs get stupid contracts from their first angels? But because you had BCG experience, you were ahead. Yes, but you're not a professional, right? Tag-along, drag-along, etc. I read that for the first time. We had a lawyer from the LMU Entrepreneurship Center in Munich help us check it. In hindsight, it was a flawless, founder-friendly contract. The important advice I would give everyone: whether investing or legal matters, keep it as simple as possible. Start simple and simple, because one thing I can promise you: the bigger it gets, the more people come in, the more complex everything becomes. Your absolute focus should be to keep each round as simple as possible because complexity comes automatically with each round. That's my big advice: make things as easy as possible. If you don't understand it, simplify even more.
Yes, I agree. So the foundation was laid, and the others were relatively easy to handle. We could start. Starting meant that because we were almost a bit late with the actual development, I first built something with third parties that was a bit of a mishmash. Did you realize you were late? Were there already signs that others were building too, because the law was approaching? Yes, there were signs that others were further along, like meinFernbus at that time. But by 'too late' I mainly meant our ambition was to be the first to go live when the liberalization happened. It was clear that would be around February or March, and eight months to build a fully functional system—I didn't think I could do it. As I said, turn a computer on and off. So we bought and integrated some components, and it worked. We were the first to go live. It's good that you had that self-honesty to say, 'Honestly folks, it's going to be tight.' Yes, better than missing it. But the learning is also what we said about risk capital: either we had to fully believe and invest the few hundred thousand we had on the bank four months earlier, or if I didn't believe, we hesitated and even paused for two months at the end of 2011 when Deutsche Bahn suddenly hinted they might do it themselves. When I think back that we actually paused and waited for the DB's decision—I mean, (laughter) who would have cared? You probably didn't fully think through those two options at the time, right? You were clear: if it went wrong, it would have gone wrong anyway; if it worked, we would have had to step on the gas. There's nothing in between. You probably didn't play that through in your head. A fully self-developed system like we have today—the heart of Flix—that wouldn't have worked with the 200,000 from the KfW. Exactly. But I find it fascinating that you all had skin in the game from the beginning, with personal liability. That's a crucial factor. Do you know the clips of Wolfgang Grupp always saying, 'We have to go back to liability'? That's so right. And if it's not liability—I don't like having loans myself, never had any, because I don't like the feeling. I'd rather have less. But individual decision. So for myself, I lived off my savings, went all in, no side job. Every time someone wants to start something and says 'I'll reduce my main job'—no, no, no, all or nothing. Otherwise it won't work, purely from the psychological aspect. You have to be fully involved and go through the pain and frustration—that's what really makes you grow. At the very beginning, during my transition from Microsoft to Flix, when I was unemployed or not really, it didn't work, and I had to pay extra for social and health insurance.
Skin in the Game means you're fully focused on your goal. We moved into the LMU entrepreneurship center. Someone asked if we had applied for the EXIST grant. We hadn't, but we couldn't because we already had a GmbH. It didn't matter because those with EXIST had a safety cushion and took it easier. I lived on water and pretzels. Entrepreneurship is a lifestyle, not just work. Motivation is often pain. In the early years, there's a lot of pain. Persistence is key.
You started then. How did the concept work? Was the technology already there?
We tested the technology and already made revenue. Then the law passed, and in February the first bus ran from Munich to Nuremberg.
How many buses did you have?
Seven entrepreneurs, about 30 buses. Routes: Munich-Nuremberg, Nuremberg-Regensburg (didn't work), Nuremberg-Würzburg-Frankfurt, Kassel-Dresden, later extended to Cologne. It depended on where our first partners were.
How did people find out about you?
We were lucky that Germany is not known for quick deregulation, so there was buzz. About eight companies started, including Flixbus, MeinFernbus, DeinBus, ADC Postbus, Berlin Linienbus, Bus24, Megabus, City to City, Aldibus. That generated a lot of PR.
Did you have an advantage being among the first?
DeinBus was earlier but had a different model. MeinFernbus had a similar model. The others came later. We had an advantage, especially over ADC Postbus. We had the press on our side. There was more demand than supply.
We used low prices like €1 to attract attention and fill buses. It was a strategic decision to gain market share quickly. We knew from observing other markets like Uber vs Lyft that the winner takes all. So we had to be aggressive.
That's a risky decision. Did you think about it long?
Jochen was responsible for marketing, he thought about it. It was clear we needed to accumulate market share. The alternative was to not grow. So we didn't discuss it long.
In my experience, our company improved over time and gained market share gradually. It's interesting that you had to be the biggest from the start.
I don't know your market well. But we had parallel markets like inner-city transport where Uber won against Lyft by being faster and more aggressive. So it was a supported hypothesis.
That's impressive. We didn't think that way. We were lucky to choose a market where you can grow steadily without winner-take-all.
We were lucky with our investors too. But I respect bootstrapped family businesses. Flix may not stay in family hands due to dilution from hyper-scaling.
In the digital world, speed is higher and you compete globally.
Yes, speed was our advantage. We saw it worked in Germany, then France copied the law (Lex Macron), and we expanded quickly. We celebrated 10 years in France recently.
You also went from Germany to France? I remember a green and white bus.
Yes, but when we enter a new country, we focus on domestic traffic. That requires clean regulation. For example, there is no domestic traffic in some places.
How did you realize it was working? What was the speed like?
The eight companies fought hard, with €1 tickets and marketing battles. We also competed for bus partners. It was a war.
On what levels did you fight?
Price and marketing. Also with contractors. Some like Berlin Linienbus (Bahn subsidiary) had different models. But startups like DeinBus and MeinFernbus had discussions with bus partners about who gets whom and at what conditions.
If I were naive, my value proposition would be against Deutsche Bahn, which is expensive and terrible.
I once said in an interview that I would fire the entire DB board and supervisory board. They've proven they can't do it. But we need to get people out of cars, so it's not good if DB fails completely.
It's crazy how bad DB is. I value my time. I'd rather drive 5 hours than take a 1-hour train. I have a policy of not using DB for any appointments in Germany. It's a disgrace.
When we started, DB had two apps and no WiFi. We were innovation drivers. But it's gotten worse after COVID. Punctuality is 65%, and they count up to 7 minutes late as on time. That's pathetic.
You mentioned Italy as an example. They liberalized and allowed a private competitor, Italo. Now high-speed rail works great. More people take the train.
Yes, Italy is a great example. They were more brutal in liberalization. Now Trenitalia and Italo compete and it's excellent.
What would you do if you could reform DB?
I would split the different use cases. Infrastructure should be a public good like Autobahn GmbH, run separately. Regional transport is a bidding business, not necessarily profitable, but should be demand-driven. Cargo is complex. Long-distance should be privatized and compete with us on a level playing field.
What do you mean by 'mixed environmental money laundering'?
The different parts of the conglomerate charge each other internal prices, and it's not transparent. Infrastructure should be separate and state-owned. Regional transport should be subsidized but efficient. Long-distance should be competitive.
Let's go back to your story. When did you realize it was working?
