Why Berlin Is the Ultimate Destination for Start-ups
It’s a cold, rainy September day, typical for this time of the year in Berlin. Friedrichstrasse is bleak and uninviting, but turn right to Krausenstrasse and you’ll find the SAP.iO Foundry offices, where despite the weather, the rooms are alive and buzzing with startup energy.
Electricians whizz by installing the latest HD screens in the meeting rooms. Developers mark their territory with empty energy drink cans and hoodies (from the swag boxes provided earlier in the day) and mentors disappear into office rooms for day-long deep-dive sessions.
In this corner of Berlin, 10 visionary startups from all over the world have chosen to invest in a 13-week acceleration program that will redefine their businesses.
Nothing about the weather outside seems appealing but ask any of the startup founders and they will tell you that they are here because “of course, we want to work with SAP and Techstars but also because… Berlin.”
The city has had its ups and downs and boasts a long and famed history of innovation, intrigue and trendsetting. Over the last 20 years, it has also emerged as a hotbed for startup and entrepreneurial activity.
“Poor but sexy” 💸
“Poor but sexy” is no longer the city’s tagline. We are seeing a definitive change in attitudes and demographics. Berlin is now “German but international”, “academic but chic” and “ bureaucratic but affordable.” Talented professionals from all over the world are flocking to the city to bask in its age-defying glory.
A recent article speculated that the Berlin hype might have reached it’s peak, citing the falling venture capital investment rates in 2016 (the lowest since 2012), at a total of 1 billion dollars (871 million euros). But those worries are quickly offset by Berlin’s rising performance in global rankings. This year’s Global Startup Ecosystem Report placed Berlin in seventh place. Unsurprisingly, Silicon Valley ranked first.
Wir Sind Berliner 🍩
When comparing Berlin to Silicon Valley, people have often said that the German capital is lagging behind, but Ram Jambunathan doesn’t see it that way. “I don’t think that Berlin will stay 30 years behind Silicon Valley. The gap will close because many of the learnings will be brought over through venture capital.”
He argues that there are a myriad of reasons to target Berlin. From a VC standpoint “Berlin is doing a lot of B2C and B2B. From an investor’s point of view, Berlin startups may not have the same high valuations either which can make investments more attractive.”
Ram should know. A scientist, technologist, entrepreneur, McKinsey consultant and now Managing Director of SAP.iO, he has experienced the tech revolution from all angles. As both ex-startup founder and now investor, he believes Berlin has more to offer than just attractive valuations.
“You have a combination of talent, the cost is low compared to other startup hubs in the EU like London and Paris, and you have an expanding breadth of potential enterprise customers, small, medium and large across various industries that you can look to sell into and sell with.“
The Berlin-Brandenburg capital region has a long history of being one of the most prolific centers of higher education and research in the world. Housing the largest concentration of universities and colleges in Germany, the city has four public research universities and 27 private institutions of higher education. With an estimated student population of over 175,000, it is no coincidence that this pool of young talent correlates to an above average entrepreneurial activity within the city. According to Berlin Partner for Economy and Technology, an average of 40,000 new companies, 500 of them tech startups, are founded in Berlin each year.
Great minds live here 👩🎓
As if the influx of students wasn’t a strong enough contributing factor to Berlin’s rising rankings on the startup world charts, more than 40,000 people from within and outside of Germany move to Berlin annually. In 2016, 42 percent of Berlin’s startup employees were internationals, according to the European Startup Monitoring Report for Germany. Global geopolitical events and trends are further tipping the scales in Berlin’s favor. “Unlike Trump, who is reducing the number of visas available, or limiting the flow of immigrants into the U.S., Germany’s policymakers have gone the other way. Germany is opening its arms to immigrants, realizing that there’s strength in diversity — diversity of thought, diversity of culture. The data clearly shows that teams with diversity outperform homogenous teams,” observes Ram.
“If you can get the innovators, the capital and the customers that are willing to try out innovations in one location, you start to see a virtuous cycle. What it comes down to is talent, a growing ecosystem, and network of mentors and support, access to venture capital and potential conduit to customers — those are the success factors that will make Berlin thrive.”
Berlin might not boast the multi-billion-dollar success stories that have established Silicon Valley’s legacy yet, but Ram is convinced that there’s ample opportunity for groundbreaking innovation — all that is needed is the right focus, and more importantly the right partners and funding. “Berlin has an opportunity to pioneer.”
Made in Germany 🇩🇪
He adds: “think of classical German industries, most have traditionally flourished in design, manufacturing and the scientific fields — when you combine those three in the technological age, you get Industry 4.0. I really think, when looking at Germany as a whole and the opportunities present in particular, we’re looking for what can come out of this convergence in IoT, Machine Learning and Big Data.”
Evidently, the city is on everybody’s radar, what it needs now is a success story to cement its global place once and for all.
“There’s a big opportunity for startups in Berlin, especially when combined with SAP data, technologies, and customers. This is why SAP continues to invest in and expand its presence in Berlin. After all, Berlin is a great city.”