Berlin Vies To Become The Silicon Valley Of Europe

Author

Henri Adams

August 22, 2016

Just days after Britain voted in favor of leaving the European Union, a curious white truck ambled through the streets of Westminster. On each side, written in bold yellow font, there was a message: “Dear start-ups, Keep calm and move to Berlin.”

Paid for by Germany’s Free Democratic Party, the message took aim at entrepreneurs’ fears that if they stay in London post Brexit, they risk isolation from the continent. Though it was received with more laughter than fear, more than 100 London startups have inquired about moving to the German capital, according to Cornelia Yzer, Berlin’s senator for the economy, technology and development.

Berlin already has more venture capital than London, Paris, or Stockholm, with €2.4 billion collected by Berlin startups last year, according to Ernst and Young. And with low cost of living, a young, creative culture and Europe’s best nightlife, Berlin is becoming the ideal place for young founders to set up shop.

Yzer has also stressed to London-based venture capital funds, that if they don’t relocate to Berlin, they stand to lose out on millions from the European Investment Fund, which invests in venture capital and growth funds. According to the Guardian, Britain took advantage of €655.8 million from EIF coffers in 2015.

Lukas Kampfmann is the cofounder of Factory Berlin, a startup campus and social platform for entrepreneurs. Home to 150 companies – with Uber, Twitter and Soundcloud located in their central Berlin co-working space – Factory Berlin has solidified itself as Germany’s startup mecca.

To Kampfmann, “There is a lot of uncertainty in London right now, which is never good for business. I think this will particularly affect young fintech companies, and we think we can provide them with an advantage.”

He pointed to N26, a Berlin fintech startup that just raised $40 million in an investment round that included Silicon Valley billionaire Peter Thiel. But Kampfmann doesn’t just think fintech has an advantage in Berlin. He thinks Germany will carve out its own niche in the startup world given its industrious past, and pointed to the internet of things, hardware and mobility as areas of strong potential for German startups.

Put most simply, the internet of things (abbreviated IoT) refers to giving network connectivity to objects, from household appliances to vehicles, thus allowing them to collect and exchange data. An example is Nest, an American company that created a thermostat that learns and reacts to the habits of its users, and was acquired by Google for $3.2 billion. Berlin is becoming a world-leader in this emerging field.

Kampfmann pointed to relayr.io as an example of Berlin’s unique technical promise. The company, which outgrew Factory Berlin, helps businesses and manufacturers implement IoT solutions at every vertical, which allows them to make quicker, wiser decisions. It has raised $13.66 million in investment.

 

Factory Berlin's newly designed space located in Mitte, Berlin's most central borough. Image credit: Factory Berlin

 

Factory Berlin’s newly designed space located in Mitte, Berlin’s most central borough. Image credit: Factory Berlin

“Relayr.io is a sign that Berlin will not just be a clone of Silicon Valley,” Kampfmann told FORBES.

Travis Todd is an American expat who founded Silicon Allee, a website for Berlin’s startup community. Todd has been working on Silicon Allee since 2011, and while he loves Berlin compared to Silicon Valley, which he views as “incestuous and oversaturated,” and London, a place where “one must scrape by,” he does not view it as flawless.

His biggest criticism of Germany is that its bureaucracy can be nightmarish in its dealing with startups. While starting a business is relatively easy, shutting one down is a different story, as a company must keep its books open for three to five years after shutting down to ensure the clearance of taxes and personal liabilities.

To combat this, Todd is opening his own space, and will provide consultation to international companies looking to overcome bureaucratic hurdles. Somewhat confusingly, his space will be called Factory, though it is not associated with Factory Berlin, and will be completed by late 2017.

Where some see Berlin as Europe’s startup beacon, Shaun Kemp, who has worked in Berlin since 2013, sees it as “the land of flat hierarchies, table football, internships and copycat business models.” Kemp moved to Berlin on the promise that its tech scene would blow him away, but after three years there, he recently published an op-ed in the Local, a German news site, titled “How the Berlin startup scene is wasting its potential.” In it, he argues that Berlin is effectively 10 years behind Silicon Valley.

“Look at the websites here, they’re very web 1.0,” Kemp told FORBES. “But there are exceptions of course,” he accepted.

Todd acknowledged many of the criticisms made in Kemp’s article, namely, the lack of women in leadership positions, the inclination toward imitation over innovation and the presence of flat hierarchies. However, he argued those problems are not unique to Berlin, but are rampant across the startup world.

Todd told FORBES, “The Berlin startup scene is just taking off. Who knows, maybe we’ll be the first to solve these global problems.”

 

This article was written by Henri Adams from Forbes and was legally licensed through the NewsCred publisher network.

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