Scaling serendipity: 3 reasons for VCs and Startups to connect with Berlin

Miguel Encarnacion
11 min readAug 28, 2020

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A network science approach to building the startup ecosystem of the future

Image Credit: Michelle Patrick on Shutterstock

‘Made in Germany’: the original merchandise mark was passed into law by the UK in 1887. The purpose was to prevent foreign manufacturers from marking inferior goods with the logos of renowned British brands. In just over a century, Germany has reinvented this into a tag that has a strong positive connotation in many parts of the world. Today, it is associated with high quality engineering.

That reputation is more befitting the original German innovation that ushered us into the modern world. And yet, Johannes Gutenberg’s printing press was less a product of technological innovation than of pure ingenuity of combining existing technologies topped with entrepreneurial grit and a hefty serving of serendipitous circumstances.

I will highlight the impact of serendipity and talk about how Germany’s capital city, Berlin, is trying to concoct similar circumstances to build the startup ecosystem of the future. It is a strategy that is very unique for a city government and difficult to evaluate in the short term. Yet, it is in fact supported by the burgeoning field of network science.

Gutenberg’s Germany (was full of serendipity)

When Johannes Gutenberg invented the movable-type press in 1440, he borrowed and combined many existing ideas and technologies. The impact was revolutionary: they could print 180 bibles in the same time 1 could be hand written. Yet, the innovations were actually simple. Every step of the way, serendipity played a part.

He used varnish as ink because of its adhesive properties. To find the right kind of varnish, he borrowed a formula used by painters, who were ubiquitous in Renaissance Europe. He modified a mould casting method to produce duplicates of a single letter. This was also made easier by geography since Germany was one of the fastest growing areas for metalworking skills. Best of all, he didn’t lack inspiration for the core innovation of his creation. In his hometown of Mainz, a major wine-producing region, all his neighbours probably had one: a wine-press.

Image Credit: Unifier Ventures

Many other components of Gutenberg’s business model benefited from the environment in which he was in. His most exotic raw material was paper from Italy and even that he could source twice a year just up river in the Frankfurt fairs. For working capital, he sold letters of indulgences (to seek forgiveness for sins) and he benefited from being in a cathedral state with the most senior archbishop in the Holy Roman Empire. His final product — the bible — was also made possible by the religious economy of the time and clearly received a boost from his hometown’s strategic location in the middle of independent states mostly ruled by Bishops. All these rich cities in close proximity served as ideal markets for books due to a concentration of literate customers. Finally, the major rivers of Germany that spread out across the entirety of Europe also provided the perfect distribution network.

“Revolutionaries, the more recognizable kind of genius, turn conventional wisdom on its head. Unifiers ‘take a lot of distinct, unconnected ideas and put them all together in a way that is completely unopposable. Completely defensible.’ Unifiers connect the dots. Revolutionaries create new dots.” — The Geography of Genius, Eric Wiener

Gutenberg was the one of the greatest Unifiers in history. He benefited from the diversity of ideas in central Europe during the Renaissance. And in a virtuous cycle, he facilitated the dissemination of these ideas and the prolongment of the Renaissance through his invention. This diversity, of people and viewpoints, is in fact a common ingredient across genius clusters throughout history. There is clear anecdotal evidence of this. Network science will provide the empirical proof in the coming decades.

The science of networks (will soon demystify serendipity)

Network science is a relatively young field that is experiencing revolutionary advances with the help of big data and machine learning. We now have the computational power to make sense of complex systems. A key concept in this field is network centrality. It has been identified as a major driver of success across numerous industries, including tech startups and venture capital. Yes, it sounds obvious. However, there are hundreds of measures of centrality and distinguishing them from each other will shine a light on how we incorporate intentionality into ecosystem and network building. This has many implications for founders and investors. Governments can also learn a lot.

First, let’s define 4 of the most commonly used measures of centrality:

  1. Degree Connectivity: the number of nodes that a node is connected to. Let’s simplify that to ‘Volume’ or ‘how many 1st degree connections do you have’.
  2. Prestige Centrality: the aggregate value of the nodes one node is connected to based on relatives scores for all nodes in the network. Let’s simplify that to ‘Value’ or ‘how valuable are your 1st degree connections’.
  3. Closeness Centrality: the sum of distances to connect one node to all other nodes in the network. Let’s simplify that to ‘Distance’ or ‘how far do you have to travel to reach all the other nodes’.
  4. Betweenness Centrality: the number of times a node is part of the shortest path between two nodes in the network. Let’s simplify that to ‘Bridge’ or ‘how many times do you serve as the bridge to connect the entire network’.

A mnemonic: ‘To measure network centrality, start with Volume and Value but also consider the Distance to be traveled and the Bridges to be crossed.’

Image Credit: Systems Innovation Youtube Channel

The image from Systems Innovation shows the same network measured across the 4 common definitions of network centrality. It identifies dots from least (blue) to most (red) connected. There are very few blue dots for both closeness (2nd image) and degree connectivity (4th image) because the network is relatively small so the upper bound is easy to achieve. In contrast, Betweenness and Prestige always have high variability, as with most real world networks. Homophily (tendency to have ties with people similar to us) and geographic limitations ensure that there are always fewer nodes that are ‘in- between’ or bridge social circles, business networks and borders. Preferential attachment (preference to build connections with people of more prestige, power, wealth, etc) ensure that the ‘rich get richer’ across every type of resource exchanged in a network.

The evolution of diplomacy (from ambassadors to open networks)

It is easier to understand network centrality by looking at the evolution of modern diplomacy, another innovation coming out of the Renaissance. In the 17th century, the ambassador system emerged as a way to disseminate information. This trend picked up steam in the 20th century as globalization made diplomatic missions necessary and invaluable in the promotion of a country’s interests. For many decades, the global network of ambassadors along with consuls and complementary Chambers of Commerce representatives served as primary hubs. They had outsized influence on cross-border trade, investment and global expansion due to an unmatched betweenness centrality.

However, the digital revolution has permanently changed the nature of network centrality through the permanent reversal of 2 social phenomena:

  1. Asymmetry of Information: Pre-internet, the network of diplomatic missions had a significant monopoly on information flowing across borders. That information on international supply and demand dictated the flow of resources. Today, embassies still control geopolitical matters and that still affects some key industries. However, there is a long tail of private market transactions that can occur with very little diplomatic or government intervention. Information and news travel faster across social media channels as individuals curate their own networks by connecting with relevant individuals and groups. As a result, freelancers, small businesses, startups and angels investors have the same, if not better, access to information. Domain expertise transcends borders so betweenness centrality is now dispersed across the full array of resources.
  2. Physical limitations of networks: Since information flow is more free, platforms could capitalize on a much more visible global supply and demand. The rise of the platform economy has democratized access to resources. In the last 2 decades, innumerable micro entrepreneurs emerged and surfed the tidal waves of Alibaba mostly to access suppliers and Amazon mostly to access end consumers. They imported items from China and sold to markets far broader and at a faster pace than they could have targeted with a brick-and-mortar distribution strategy. These platforms across every imaginable field in almost every corner of the world have brought down geographic limitations permanently. Platforms are the new superstars in the realm of betweenness centrality.
Image Credit: Applico Platform Insight

In a sense, Alibaba serves as another Chinese embassy all on its own with a global reach allowing it to promote the country’s economic interests at a speed and scale that no single embassy can match. As a starting point, Alibaba provides online business training for sellers. They also have teams helping merchants with marketing, promotions and analytics. There is also an escrow payment service that transfers payment to sellers only upon confirmation by buyers that products have been received in good condition. But before all that, the first task of platforms is the most critical: curation. By enforcing an online certification test for merchants, they reduce illegal transactions, improve overall legitimacy, and maintain the integrity of the platform. In the end, buyers can trust the platform and the entire network benefits.

Ultimately, these platforms have shown us the ability of individuals and private groups to influence national economies and to become critical nodes themselves. Having proven their ability for self-organization, private citizens are already taking this a step further in decentralized open networks. As blockchain technologies mature and pervade every system of exchange, we will see a further optimization of value chains. People will start transacting directly with each other without the need for centralized platforms.

In fact, we are in an ongoing phase shift. The virtual graduations of the past few months have actually released the first batch of true digital natives into the workforce. The 2020 graduates were the first to be born into a world with Google and all grew up with social media. They will bring an unprecedented level of tech savvy that will allow them to unlock the full potential of all these technologies and market networks in the coming decade.

AsiaBerlin is curating the curators

Berlin is leading the way in this open network strategy for city governments. Most cities and countries already have a strategy around venture capital and tech startups. There are many government funded soft landing programs and cross border support initiatives. But they are largely bilateral. And they all have the same pitfall of conventional hierarchical systems: they are only as good as the people currently running them with a large potential to become bottlenecks during regime changes or as the organization increases in size.

Image Credit: AsiaBerlin Summit

AsiaBerlin is a community-driven collective platform that connects startup ecosystems and the investor community across Asia and Berlin through monthly events (Investor Roundtables, Startup Spotlights, PitchTanks), quarterly delegation trips, and the annual AsiaBerlin Summit. It’s an open network with some curation by the city of Berlin. Instead of a formal organizational structure, it relies on a network of ambassadors that receive no instruction nor payment to advocate for this network. We all share in the belief that Europe and Asia complement each other and the vision of Berlin to be the primary gateway to and from Europe from a technology standpoint.

There are 3 reasons that make AsiaBerlin more efficient than conventional centralized systems:

  1. Less ‘Distance’: The representatives of cross border programs and diplomatic missions that interact with people (external nodes) will have high betweenness centrality across many resources. However, no matter how exceptional they are, there is always a bureaucracy to adhere to. There are many more invisible nodes, composed of superiors to seek approval from and staff to do the groundwork, inside these large organizations. This creates more distance for resources to pass through, which in turn decreases closeness centrality. These detours are minimized in a direct peer-to-peer network.
  2. More ‘Bridges’: Of course, some cross border programs operate efficiently, including German Accelerator (founders expanding to Asia) and Berlin Founders Fund (founders relocating to Berlin). Nonetheless, they are made even more powerful by the AsiaBerlin network, which facilitates the discovery process through individuals that serve as platforms themselves. A German startup looking to expand to Asia (or vice versa) can immediately access investors, fellow startups and experts across numerous domains. Assuming curation is done properly, this n-sided platform can organically lead each buy-side party to the most optimal constellation of supply-side parties.
  3. Overall ‘Volume’: This is not a single country initiative that only welcomes Germans or Berliners. This is not a bilateral agreement or a 2-sided platform with defined responsibilities for each side. This is not an association with membership fees nor processes to follow. The objective is not to retain the privilege of the few. Rather, the goal is to improve everyone’s overall degree connectivity. In doing so, it trusts in the power of networks to manufacture serendipity. In doing so, it improves the likelihood of meeting the right co-founder, star employee, pilot customer or angel investor. In doing so, it increases the probability of finding just the right ideas, business models, and technologies to bring together in a way that has never been done before. In doing so, it creates the environment for more Unifiers like Johannes Gutenberg to emerge.

At Unifier Ventures, we help startups in Europe and Southeast Asia access talent, capital and markets in the other region. In the current ambassador pool of AsiaBerlin, there are 7 other investors like myself doing the same thing but for India, China, Japan, Korea, HongKong and the Greater Bay Area. There is also a diverse group of founders: German locals, Filipinos and Indonesians in their home countries, and some that are Berlin-based Asians who migrated from Japan, India and Sri Lanka. There are many more ecosystem builders and experts across various fields: software engineering, journalism, design, public relations, business development, blockchain, artificial intelligence and social impact. The group of 25 ambassadors have a monthly remote roundtable to talk about ongoing projects, upcoming events and any opportunities to collaborate across Berlin and the rest of Asia.

Image Credit: Dr. Rainer Seider with some of the AsiaBerlin ambassadors

Berlin curated this group. In turn, each of the ambassadors also curate the individuals and groups that can bring value and gain value from the network.

Scaling Serendipity

During the era of modern globalization, many emerging economies were built on distribution and manufacturing businesses that relied on ‘Made in Germany’ equipment. In the same way, AsiaBerlin is made in Germany but it can benefit anyone who wants to take part. For founders, investors and talent from all over the world that have been born into ‘weaker networks’, this is your opportunity to scale your network building efforts.

As a nod to Gutenberg’s serendipitous circumstances, the city of Berlin has acknowledged the unprecedented power of networks and the ability of governments to facilitate their organic development. From that standpoint, AsiaBerlin is scaling serendipity and there is an open invitation for everyone.

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