Keep Calm and re-locate to Berlin?
— Maybe, but not everyone, and not all at once…
While the media and politicians obsess over a potential exodus of tech startups and talent from London to Berlin in the midst of Brexit, the situation is actually somewhat more complex, and more positive, than what we’ve been led to believe.
The tone was set back in the summer, when Berlin Senator for Economics, Technology and Research, Cornelia Yzer published her letter to London’s startups encouraging them to relocate to Berlin, and a van was seen driving around Shoreditch, paid for by the Freie Demokraten party, touting the same.
Apart from being far away from the ‘pay it forward’ philosophy for which the tech sector has become renowned globally, the idea that growing tech businesses would quit London for Berlin in their droves exposes politicians’ ignorance of what scaling tech businesses require to flourish, as well as underestimating the strength and richness of London’s ecosystem. That being said, it was also pretty opportunistic and quite funny, and shows how keen Berlin is to grow into a global tech heavyweight, as well as developing a sense of humour at the same time ;-)
Doing a Samwer (in a good way)
As Berlin continues to grow in prominence, learning from what has succeeded in London over the past five years, and considering how it could be re-packaged in the German capital would certainly do it no harm at all.
One key area is how the public sector has become involved in the UK’s startup scene. The UK government has contributed significantly to the growth of London’s tech sector. Most fundamentally, has been the creation of the SEIS tax breaks for early stage angel investors securing more than £8.6 billion of private investment into nearly 20,0000 companies since the start of the scheme, with 51% of these being made in London. Additional tax incentives linked to innovation include The Patent Box, and there have been several other programmes to boost entrepreneurship at the earliest stage, including Startup Loans which has approved low interest bearing loans and advice to over 40,000 businesses totalling £230M.
There has also been innovative public private partnerships at local government level, like the collaboration of the Mayor’s Office with the London Co-Investment Fund, which has raised £25M to co-invest in seed rounds of between £250K — £1M and has recently been named one of the most active VCs in Europe . Although there are some research based grants and development bank loans available for early stage businesses in Berlin, it is not at the scale and sophistication as what has been developed in London.
Increase the Peace
A closer relationship between Berlin and London can help London cope with any negative fallout Brexit may bring. There is a strong argument for some London-founded enterprises to relocate or expand to Berlin, especially if a co-founder is German speaking. A number of scale up co-founders who I know are in this position and re-locating is a distinct possibility for them.
Berlin is also an extremely attractive destination for seed funded startups who could reduce their burn rate by taking advantage of lower operational and living costs whilst they are figuring out their business. On the other side, as the pound falls, there is likely to be an influx of European startups coming to London to test products.
So, in keeping with the philosophy of sharing and innovating that is so familiar to those working within technology, it is clear that there is much to explore through cooperation between the two cities.
As politicians get to grips with this, we will receive substance as well as show. If this is the case, then welcome to the club.
