Tech startups in Berlin, Part 2: The infrastructure

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Business Management

Tech startups in Berlin, Part 2: The infrastructure

Location and transport first. It's easy to take an Anglo-centric perspective when thinking of technology startups, since many of the companies driving IT growth are English-speaking and based in the US. London plays to this by promoting its geographical location as a plus point, a bridge between the US and Europe. But, as IDG Connect's worldwide coverage shows, there's far more to the technology story than that.

Berlin's location puts it closer to Russia than most other would-be startup hubs, and there are plenty of Russians working in IT here alongside Europeans. The city has good transport links to the rest of Germany and most of the rest of Europe via road but, more usefully, by rail and air. It's unusual to think of a central railway station as peaceful, but while waiting in Berlin's Hauptbahnhof, one of the largest stations in Europe, it's hard not to be impressed by the relative tranquillity of the place. That's a function of good design and sheer scale.

The same can't yet be said for the city's airports. Schönefeld is growing to accommodate more traffic, while Tegel is scheduled to close once Berlin Brandenburg Airport opens in the next year or two. That should improve matters, since neither of the existing two airports could be described as pleasant. Berlin's internal transport links are excellent though, with trains, trams and buses covering the city well. That's one reason why Berlin has fewer cars per capita than any other German city.

Then there's Tempelhof airfield, a relic from the second World War and currently a wide open area where visitors can hire bicycles and trikes, fly model aircraft, go jogging, have a picnic or just mooch around doing nothing. It's a lovely space for a city of this size, and although a McKinsey report from 2013 recommended turning it into a startup venue, so far it's resisted all attempts at redevelopment. Wandering around it on a grey Sunday morning, it seems better left as it is. Even frantic tech startup workers need to slow down and breathe sometimes.

 

Space for let

It's not like there's any shortage of places in which to incubate a new startup, anyway. Factory, part-funded by Google, opened here two years ago. According to Niclas Rohrwacher, chief relationship officer and founder, “Berlin is the startup capital of Europe. The ecosystem here is growing steadily, many global players come to Berlin to promote their digitalization. They open their own innovation labs or want to collaborate with startups that provide new and innovative solutions for their market. Therefore, Berlin offers incredible potential, especially for technology startups.”

Factory is far from being the only option. Rocket Internet, known for creating new companies based on established formulas, is another major presence here. Sites such as www.berlinstartupoffices.com are useful for finding specific types of office space, and the city has no shortage of conventional business parks and commercial spaces too.

Local business organisations are certainly bullish. “Young entrepreneurs have access to everything they need to realize their ideas in the start-up city: the willingness of established businesspeople in industry to collaborate, an exemplary research environment and the necessary start-up capital,” says Stefan Franzke, CEO of Berlin Partner for Business and Technology.

“Berlin unarguably has evolved to be one of the most important startup hubs in Europe,” says Lucie Volquartz, project manager for startups at Bitkom. According to a Bitkom study, two-thirds of founders in Germany favour Berlin to start a company. “The most important reason for this is Berlin's ecosystem of a big number of fellow startups, investors and creatives. Besides this vibrant ecosystem with events happening every day, Berlin has great infrastructure, a very high quality of life and costs of living are – compared to other startup hubs like London or Paris – quite low.”

 

Finding money

When it comes to funding for startups, the picture isn't quite so rosy, at least in comparison with the US. Several of the people I spoke to told me it can be hard to get later-stage funding. That's partly a reflection of investor caution and the potential returns on offer. A significant proportion of tech startups fail, wherever in the world they happen to be. There is certainly gold here in Berlin, but a lot of pyrite too.

But even though Berlin is a relatively poor city by German standards, things are improving for IT entrepreneurs. If you speak German, this link may be of interest. And even if you don't, the graph tells the story, with Berlin second only to London for investment funding.

The funding culture is different to the US, though, and it can be hard for entrepreneurs to take their businesses to the next level. Tony Yustein, a Berlin-based ex-Microsoft Regional director who built mail2web.com and other technology businesses, thinks that youth and inexperience can be an issue. “You will hear about easy seed funding and infrastructure [...] Being this young and also trying this difficult job [getting funding] in Europe, which is not as successful as North America in converting the startups to money, is not an easy thing to do and entrepreneurs get lost sometimes in this magnitude of tasks to accomplish.”

On that note, networking is one of the biggest factors in startup success. There are sites for putting Berlin startups in touch with investors and freelancers. Events such as Startup Camp Berlin, held earlier this year, and the Hub conference cater for face-to-face networking.

Somehow it all comes together for Berlin, as lists of the city's successful startups show (here and here, for example). I'm not the first person to note that the city itself feels like a startup, pulling itself upwards as it draws together talent, management and investment. It'll be interesting to see if fulfils its grand ambitions in the coming years.

 

Also read:

Tech startups in Berlin, Part 1: The workforce

Berlin: A British perspective on Germany’s startup hub

Deutsche Bahn and e-commerce’s growing pains

Merkel is a Net Neutrality enemy

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Comments

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Codete on October 07 2016

Hello, wew operate from 2 places in Germany and we feel that what you about is true. Weird how Germany is perceived as more peripheral in the startup world, especially from more eastern perspective (our hq's in Poland).

no-images

Codete on October 07 2016

Hello, wew operate from 2 places in Germany and we feel that what you about is true. Weird how Germany is perceived as more peripheral in the startup world, especially from more eastern perspective (our hq's in Poland).

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