Berlin: The Startup City That's Still Starting Up
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BERLIN -- My flight landed here in Germany’s capital city at about 8 a.m. on Saturday after a long, overnight journey from New York City. Despite my burning, blurry eyes, and having been here only about a day or so, one thing is immediately clear: the startup scene is alive and well in Berlin.
I’m here for a few days this week attending the sixth annual Dell Women’s Entrepreneur Network Summit. It’s an appropriate city for the event. Visit neighborhoods like Mitte and Kreuzberg and at once you are submerged in a vibrant, maturing world of startups, with founders coming here from all around the world.
But, as with any startup hub, Berlin has its flaws, too.
Nestled in northwestern Germany on the banks of Rivers Spree and Havel, Berlin -- as we all should be well aware -- is a city with a complicated history. In 1945, after After World War II, the Western part of the city was controlled by the United States, the United Kingdom and France while the Eastern part was controlled by the then Soviet Union. With the rise of communism came a more permanent division -- the Berlin Wall -- which separated West Berlin from the rest of the country from 1961 until the end of the Cold War in 1989.
Today, Berlin’s 3.5 million residents are creating a bright, new history for their city -- and business is often at the heart of it. “Because Berlin was cut off during the decades of the Cold War, it is a capital again, but not with the usual infrastructure around it,” explains Nicole Simon, a startup mentor and head of publisher sales and blogger relations at Berlin-based blogfoster.com. “The city itself is a startup.”
What attracts entrepreneurs to Berlin
The creative industry is vibrant here -- music, fashion, film, art and design -- and it attracts tourists and entrepreneurs from all over the world. Two other important details that attract businesses: a still relatively low cost of living and a relaxed visa-application process. You can start a tech company in Berlin and attract top software engineers from around the world without jumping through the typical visa process in the U.S.
“The startup scene for me is a very heterogeneous group of people who are intrinsically motivated to change the status quo,” says Markus Schranner, who moved to Berlin in 2011 and serves as chairman of entrepreneur advocacy organization Startup Germany. In addition to the arts, Berlin seems to attract numerous tech companies (green tech, financial tech, insurance, online privacy, etc.) as well as social entrepreneurs, he says.
Berlin’s notable startups include Soundcloud, 6Wunderkinder, ResearchGate, Number26 and Delivery Hero, to name just a few. Larger tech companies also have outposts in Berlin, including Microsoft, Google, Lufthansa and Volkswagen.
The city also boasts numerous co-working spaces (Betahaus, Ahoy Berlin, Cluboffice, etc.) and accelerators (Axel Springer, Berlin Startup Academy, M Cube Incubator, Seedcamp, etc.). Last year, Google Launchpad Berlin, a pre-incubation program, created a nice promotional video. Check it out:
“The mix is what makes Berlin a startup metropolis,” says Tim Brandt, the startup coordinator at IHK Berlin, the city’s chamber of commerce. “Berlin will never be a tech hub such as Silicon Valley, but Berlin startups thrive on the various influences that the capital has to offer.”
Access to capital: Hit and miss
Berlin’s hip image and growing tech startup scene makes it an attractive hunting ground for opportunity-seeking venture capitalists. A report earlier this year ranked Berlin second behind London in the number of venture-capital deals and transaction volume. Paris ranked No. 3.
Much of this is seed-stage investments up to about 1.5 million Euro (about $1.7 million), which are “quite easy to get nowadays,” Schranner says. The difficulty comes when companies looking to grow begin seeking larger investments in Series A and beyond.
“But we see some movement here,” Schranner says. “International investors are opening more offices in the city and also we see more and more local funds. Also, lots of Asian and Arabian money is attracted by Berlin.” Of course, Berlin also has its share of public funds and crowdfunding opportunities.
Severe gender gap among entrepreneurs
We talk a lot about gender issues and a lack of women business owners in the U.S.; Berlin is no different. According to Telefonica’s Startup Genome report in 2012, only 3 percent of the city’s entrepreneurs were women (compared to 10 percent in Silicon Valley). That number has since grown to 13 percent.
“I believe one part is that guys play a bigger game -- they want a startup and to get VC money,” says Simon. “Most women would rather work in a startup or have a normal job. If they want to launch something, they often lack experience and drive to go big.”
Schranner agrees. “German statistics say that companies started by women are mostly companies in less risky areas, not with a goal to grow huge,” he says. “We just hope we can accelerate change.”
In 2007, Simon founded Witas Berlin, a sort of “meet up” for women in tech, media and startups. Other Berlin organizations that support women in business include Geekettes and Rails Girls.
“I think there are lots of women who have built successful companies here in Berlin,” says Charlette Prevot. Born in Berlin, Prevot co-founded software startup 6Wundkerkinder -- maker of the Wunderlist productivity app -- in 2010. The company was sold to Microsoft earlier this month, reportedly for between $100 million and $200 million.
“The problem I see is that the society wants to change [the gender gap] in a second. But a mindset change is not done easily and quickly -- it takes some time,” she says. “Of course there is still a lot to do.”