John and I just landed from a few days in Berlin. We had 20 one on one meetings with entrepreneurs and hosted drinks at the home of our friend Colette Ballou (merci Colette!). As we boarded our plane, we shared our joint amazement at the quality of entrepreneurs we had met and shared some perspectives on what has made Berlin the “real deal” as one of the most vibrant startup hubs in Europe, if not the world.
· It’s cheap. Compared to London everything seems like a bargain in Berlin. From rental prices for housing, to office space availability to the salary burn. A startup that we met had 19 employees, dedicated office space in a co-working environment and had a burn under 20k EUR. That level of capital efficiency is impossible to achieve in London or New York, let alone The Valley.
· Rocket. Whatever you may think about Rocket (and for the record I am a fan but not a shareholder), their model or culture, the lasting legacy they will provide the European startup ecosystem will be the legions of smart, hungry entrepreneurs they have trained. The alumni know their unit economics cold, they are ruthless on operational efficiency and they have learnt that bold ambition is a right.
· Ambition. We met 3 companies back to back which already had users in over 100 countries. Berlin entrepreneurs of today are building for the world (versus a few years ago they would have been building for Germany or Europe). Favourite quotes of the day :
“We want to be the global brand for XXX and the next billion dollar company in our space”
“A bazaar shopkeeper in Kabul got to experience family life in Berlin through our App. We are mobile and therefore we are global”
“Germany is a good test market but the growth of Asia e-commerce means we need to be an global company NOW!”
· Iconic Spaces. The population of Berlin is 3.4M (with Mitte district which is a nice way to self-select creative types, is 330k). And in this big yet small city you see cathedrals to entrepreneurship, from the 16,000 square meter space at Factory Berlin that includes co-working space and the HQ for Soundcloud, to the insanely large building Rocket Internet will soon call “Rocket Tower” with 22,000 square meters. These spaces make entrepreneurship visible to all and provide inspiration and aspiration to a new generation of entrepreneurs.
· Tight knit. The angel, entrepreneur and VC community is amazingly tightly knit. We knew this, but were still amazed at the amount of high fives, fist-bumps, hugs as people walked into our drinks reception. As discussed with many of the leaders of the tech ecosystem, three companies seemed to have ignited the scene with many of the funders and founders tracing their careers back to them: Jamba, Gate5 and Rocket. Every entrepreneur we met this week had some connection (employee, investor, advisor) tied to these three companies.
· Funding sources. The density of funding sources has accelerated in Berlin with active super-angels like Christophe Maire supported by new early stage funds VCs like Point Nine and Project A and Earlybird relocating from Munich to Berlin and every major European fund from London, Stockholm and Paris sending team members to Berlin on a regular basis.
· Talent. The must-have ingredient for any tech hub to thrive is a deep and competent talent pool. A number of factors mentioned above have helped accelerate this in Berlin. First, it’s a fun yet affordable place to live if you’re a young dev. Would you rather pay an arm and a leg in London or use the extra cash in Berlin to go to one of their famous dance parties? Second, its proximity to Eastern Europe attracts talent from East and West. Third, it has a edgy cultural component that attracts “the misfits, the rebels.” The best example is the dance-party swedish due of Alex and Eric from Soundcloud who moved to Berlin. At our drinks reception we had Americans, Czech, Australians, Polish, Swiss entrepreneurs (and a random Salvadoran VC).
Berlin has organically grown into one of the leading tech hubs in the world and as the recent Compass survey highlighted, it has the most momentum across its peers. The next few years will see a new generation of entrepreneurs emerge from Zalando, Wooga, Soundcloud and ResearchGate and we certainly hope to have the opportunity to partner with them to help them achieve their ambitions.
Christian Hernandez is the co-founder and Managing Partner of White Star Capital, an early-stage Venture Capital fund backing exceptional entrepreneurs with global ambitions on both sides of the Atlantic. www.whitestarvc.com