A Guide to Berlin 3.0: more mature, risky and techie

Olga Skipper
Jun 7, 2016 · 4 min read

One of the youngest and fastest growing startup ecosystems in the world - Berlin’s startup ecosystem is on the cusp of its third wave: the post-eCommerce era. While still being a toddler, new Berlin is way riskier and techie. Nerdier than ever before and doesn’t accept any old patterns, rules and players. Berlin is going through its 3rd version and the majority haven’t noticed it yet. Welcome to Berlin 3.0.

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Lisa Lang, CEO and Founder of ElektroCouture in her office in Berlin.

When you land in Berlin you immediately notice a few things: affordable lifestyle comparing to London and SF, diverse talent pool, the large number of eCommerce, AdTech companies, on demand services and marketplaces, rising amount of VC money and Corporate Innovation labs.

Though Berlin startup ecosystem is booming, you still can’t compare it directly to other high advanced tech cities. Berlin is still finding its unique angle and its right to be a startup capital of Europe.

New Breed of Startup Founders

In the last 3 years, Berlin eCommerce success stories brought to the city significant amount of technical and design professionals. “Kids” of the second wave, former Delivery Hero, Outfittery, GetYourGuide, etc employees, lately became founders and are building a new type of companies. They are not interested in business models to start with, they are interested in radical innovation and R&D.

The new kids on the block include:

Finally, technology comes first. Geeks take over the city to build more risky companies and concentrate their efforts on IoT, AI Interfaces, VR, Fashion Tech and Big Data.

Berlin gets a chance to compete with London not only in the visa policy and costs of living, but also in pure creativity and new tech.

Investment Gap

If you spend enough time in Europe, you will notice that European investors (excluding surprisingly Estonia-based angels and funds) typically favour investing in user acquisition and growth in a hyper-competitive environment, while they might be having a better return on investment by investing into the technical edge that removes competition and provides outsize returns.

Despite the fact that media is continuously reporting the increasing amount of the venture capital in Berlin (194mln euro in the Q1 2016 according to Tech.eu), the majority of Berlin venture funds live in the 2.0 era. Technical and design founders have a hard time raising capital. The amount of money that is allocated to high tech startups is significantly lower than to their eCommerce ancestry.

eCommerce-driven Valuation Models and Due Diligence Process create a chicken and egg situation where “old” players, such as business angels, seed and series A funds and even accelerator programs, do not get access to the new type of founders and any disruptive tech they are building.

Luckily for the tech founders, a new type of business angels has emerged with “fair” pricing models and significant entrepreneurial expertise. Such angels include Chad Fowler, Stefan Jeschonnek, Matthaus Krzykowski, Hackers and Founders Berlin etc.

Selected new funds also see the ecosystem change and dare to talk to the new type of founders in their own language. They understand that business development role is an employee role, not a cofounder core competence. The new type of funds concentrate on company’s technical stack more and offer their strong network in the US or at least UK. If you follow Berlin 3.0 success stories, the majority of the companies establish their US office as soon as possible.

I would recommend looking closer into BlueYard and Fly Ventures activities.

Corporate Innovation Matures

The hype around Innovation has dramatically increased the number of initiatives targeting startups, especially in Berlin.

First, companies learned that innovative people require creative and innovative hubs, so they stopped importing talent into C-level convenient headquarters and partnered with accelerators. They also saw the writing on the wall about digital, and tried to buy that competency with independent digital teams. Now, the learnings are that digitally native makers and technologists require a seat at the leadership table in order to drive their solutions to adoption and make the future a reality.

While many companies are launching accelerators and innovation labs, the more experienced organizations are moving into the 3rd stage of Corporate Innovation: solving integration chasm, focusing on communication translation layer and co-creation.

Hope this post helps you to get a feeling, where Berlin is going and how the ecosystem has been changed in the last 2 years.

Please share your observations about Berlin Startup Ecosystem with me and feel free to connect with me on twitter to continue the discussion @olgasteidl

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