Berlin is a truly global city, and a political, economic, and artistic hub. That there are over 3,000 active tech startups in Berlin makes for a welcoming atmosphere as the idea of coworking has been fully adopted across the city’s office spaces, cafes, and bars. This eclectic mix promotes an entrepreneurial atmosphere in the city, evident in Berlin’s thriving tech startup scene.
While comparisons to other cities are brushed aside by Berliners, it is difficult for observers not to mention Berlin in the same breath as Silicon Valley or London. Berlin’s startup scene is worth noticing as an entrepreneur or an investor.
Alternative Global Culture Inspires Innovation
The reunification of East and West Germany in 1990 was the catalyst for Berlin’s growth as a technology hub. Becoming an important political and artistic city as it rebuilt itself, Berlin attracted bright minds with big ideas. With industry not being a main component of the sprawling city, there was space for another economic powerhouse to move in and that has proven to be tech.
Today, more than a quarter of a century later, Berlin has established itself as a serious, professional, and innovative place for business with an alternative flavour. As a city known for crazy clubs, bold fashion and art, and a tumultuous history, alternative culture is the essence of Berlin. It is also the inspiration and driving force behind the startup endeavour. With little government involvement in a primarily grassroots, community movement to make Berlin a tech capital, the city has been able to independently reinvent and define itself and the IT industry has had a prominent role in the rebirth of the city, and the region
The Technology Revolution in Berlin
Since reunification, Berlin’s technology industry has quickly progress through a number of generations in development. As the tech scene established itself, it has learned and adapted to reach its current form. Initially focusing on cloning successful software from abroad, the advancements in tech and the maturation of the startup scene shifted to innovation. A large number of Berlin based IT companies focus on B2C and niche markets, with a lesser focus on B2B and enterprise solutions.
Berlin attracts and encourages entrepreneurs, both German and international, to dive into the unknown. In contrast to Germany’s reputation as risk-averse, the German IT marketplace has demonstrated a strong propensity to develop strong entrepreneurs from within cadres of phenomenal software engineers who deliver the highest quality products. This has resulted in an interesting multi-national melting-pot not just developing talent, but also attracting strong talent from elsewhere. Many of the city’s biggest startups in the city have been founded or co-founded by at least one foreigner, and 44% of new entrepreneurs in the city are non-German. Additionally, it is considered to be the most gender equal ecosystem in Europe, with 27% of tech employees being women.
Affordable and International Tech Ecosystem
A critical aspect of building a successful ecosystem is affordability. As places like San Francisco, Seattle, New York, and Vancouver have become increasingly unaffordable to live and work in, Berlin’s low cost of living is a huge bonus. Office lease rates are affordable, space is available, and a cult
ure of coworking has made the city a great location to build a business.
From a global business development perspective, it also helps that nearly everyone in Berlin speaks English and, while that might not be great for those hoping to brush up on their German skills, it does make hitting the ground running particularly easy for founders. Open borders within the EU also expand the available talent pool, making recruitment a little bit easier.
The fact that there are over 3,000 active tech startups in the city makes for a welcoming atmosphere as the idea of coworking has been fully adopted across the city’s office spaces, cafes, and bars. Ahoy! Berlin, St. Oberholz, betahaus, and Factory Berlin are just some of the popular spots among entrepreneurs.
Aided by top-notch infrastructure, Berlin attracts people from around the world and makes it easy for them to live and work in this creative and innovative city. Most universities charge a few hundred euros in tuition fees per semester, making higher education accessible for many. Virtually free higher education is also available at the city’s numerous research and applied science universities, producing an educated, creative workforce.
A Strong Foundation for Growth
Germany’s position as an economic leader and central geographical location gives companies easy access to the European market. As a result, many startups founded in Berlin are born with global aspirations. Gaining 6 places in the 2015 Global Startup Ecosystem Ranking, Berlin now sits at 9th overall. While it is still behind London (6th), it is the only other European city to make the top 10. In terms of exit values, Berlin has grown the most since the previous ranking, expanding 20 times, in large part due to the IPOs of Rocket Internet and Zalando.
Although few tech giants have made Berlin their home thus far, interest is growing. With global names like SoundCloud, Babbel, Mozilla, and Wooga and involvement from Google and Microsoft in the community, investors are beginning to notice the potential that Berlin has. Approximately €133 million were invested in IT and internet startups in 2012 in the city, the most venture capital anywhere invested in Germany. The first six months of 2013 surpassed that with more than €200 million in venture capital being invested in Berlin-based startups. Earlybird, Partech International, and Point Nine Capital have offices in the city already.
Incubators, accelerators, and various other support services, groups, and associations provide young startups with the help they need to get started. What does seem to still be missing is a strong mentoring network and, as is the case with most tech ecosystems outside of the Valley, there is a lack of late-stage funding.
Relative to so many other Tech Hubs, Berlin is still a young city within the startup world, with lots of growth potential. Having had to evolve so rapidly over the last 25 years, it has also earned a reputation for the fast, nimble rEvolutionary growth that is a trademark of any startup. Having the freedom and reputation of being able to transform quickly to support marketplace needs is a big part of the city’s appeal.
For entrepreneurs, Berlin provides a culture that welcomes new ideas and facilitates their birth and success. For investors, the chance to find a unicorn amongst the city’s thriving tech scene is real. To find out more about the city and its startup scene, consider attending this year’s Tech Open Air festival on July 13th-15th and keep an eye out on Berlin as it continues to make a name for itself as a thriving tech ecosystem.