All eyes are on the Berlin startup scene, and it’s easy to see why. With a new startup being founded every twenty minutes, the hype has been heating up for some time. Berlin is the perfect playground for startups to thrive. A melting pot of creativity, people flock to the city for its diversity, thriving social scene, and cheaper living costs.
Not being able to speak German isn't an issue, most Germans having an impeccable command of English. Coupled with stylish co-working spaces popping up all over the city, it's the hot place to be for founders.
And it’s about to get hotter, following the recent Brexit decision. Even more companies are flocking to the city, and Berlin is poised to potentially become Europe's startup capital. To capture the atmosphere of the city first hand, and the changes to come over the course of the rest of the year, we spoke with several Berlin dwellers and influencers in the startup scene:
Roland Manger is co-founder and partner of Earlybird Ventures. Earlybird was founded in 1997 by the investment partners Hendrik Brandis, Christian Nagel, Roland Manger, and Rolf Mathies. Earlybird moved its headquarters from Hamburg to Berlin in 2012, in support of the expanding innovative network of startups in the German capitol. Seventy percent of their investments are in the city, covering multiple stages of a company's investment needs, ranging from early-stage to expansionary and growth stages. Investment sizes range between €200k and €20M.
Jana Scharfschwerdt is a startup adviser and Berlin native. She founded Somea Partners in 2011, where she supports early-stage startups as Chief Financial Officer-on-demand. She helps to set up KPI and reporting systems, and she provides support during the fundraising round. She also helps structure data driven leadership in fast growing early stage startups.
Maximilian Greschke has studied Economics at the University of St. Gallen in Switzerland, and Computer Science at Harvard University. After dropping out without a degree and failing at his first software company, he moved to Berlin to work in the tech industry, as the first Big Data Engineer with Delivery Hero’s Big Data team. In 2015 Maximilian founded Veyo Care, an online market place for non-medical home care services.
What are the defining characteristics of the Berlin startup scene?
Roland: Mostly the attractiveness of the city for young, creative, and talented people. There is a low cost of living, fairly international scene, and interesting variety of subcultures. More and more start-ups were created from this pool of talent. Some of which eventually were successful. That attracted investors like us. Now we have a critical mass, and Berlin is now Europe´s number one in terms of VC investments.
Maximillian: On the positive side, the scene is international, hungry for success, and offers a great quality of life. Rocket Internet attracted lots of hungry young graduates, willing to do whatever it takes to succeed, and that’s a thing you can definitely feel. What is changing right now is that angel capital, and mentoring, is becoming way more accessible, as more and more alumni of the bigger, and successful startups, have cashed out by now. I’m confident this will add significantly to Berlin’s competitiveness in the near future.
Jana: Young and driven, international, welcoming, with some tight-fit networks, and a lot of events.
What excited you about living and working in the city?
M: Berlin is still very cheap for a European capital city, and keeps attracting more international talent. You can find anything to do in this city, and it makes for a great quality of life, despite long working hours. No matter what you like, you will surely find it here. One thing Berlin can definitely step up though is its public Wi-Fi game.
J: I am a Berliner by heart since I was born, and partly raised here. So this is easy to answer. The city is always changing, it never gets boring. You live in one “Kiez” (area) for more than 3 years, and still haven’t checked out each bar, restaurant or shop. It can be crowded, and quiet at the same time. In Berlin, it seems you can always escape quickly if gets too busy. Try that in Tokyo or New York.
R: I am actually not living there myself. But some of my partners do. Professionally: That´s where most of the interesting startups are. Personally: Cool city.
What is the fundraising scene like?
J: Through the exits in the past 12-18 months, there is a lot more local money in the sector than is has 2-3 years ago. Especially for seed stage fundraising, its becoming easier for startups to get their first/second funding. Also, former entrepreneurs have been setting up new funds to support the system. I believe this step is necessary to get more entrepreneurial knowledge, and experience into the scene. At the same time this bears the risk that these type of investors only invest in their own bubble, which they know how to build companies in. Meaning investing in the same people, investing in the business models they already know, and ignoring true innovation. Internationally Berlin is on the map for a while already, which is mostly beneficial for big late stage or Pre-IPO rounds. Upcoming Brexit is also spreading optimism for even more growth in Berlin as a startup hub.
M: Angel capital is fairly accessible as more and more alumni of the successful startups cashed out on their shares and are looking to support the next generation of entrepreneurs. Besides there's more and more incubators popping up. Raising seed and A rounds doesn't seem to be a big problem, if you need big money for growth you will however need to look for funds based somewhere else. On the bright side, more American and UK based growth funds are used to investing in Germany-based companies than was the case a couple years ago.
What are some of the breakout startups? Which sectors are of particular interest in Berlin?
J: So many on the map... Where I see a great mix of product and team would be Signavio or Mimi hearing technologies. Both solving a global problem with a unique product and technology. Mimi e.g. has the potential to change many lives for the better. Two very young teams to watch, and who are working with disruptive technologies for existing markets may also be chatbot startup chatshopper/insurgram or NowDiscover who pipeline the right video content into any product page.
R: We are less sector focused. We are looking for opportunities that provide a good financial return on limited capital exposure. Beyond that, we want to get to know as many of the best founders as possible and for us creates a “mosaic” of the available opportunity space. From that, we try to pick the best opportunities, not the most fashionable ones.
What are some of the top accelerators?
M: In my opinion there is no top accelerators (compared to US organizations such asY Combinator or 500 startups) in Berlin that really follow that kind of acceleration approach. If I were to put out a name it would be Project A Ventures, they are definitely great guys and can support startups in many different ways.
J: I am a bit biased when it comes to judging accelerators since these programs are often too short to really make a difference. Where I know the teams behind make a great job and startups come out with big learning's and good connections is Bayer Grants4Apps, Berlin Startup Academyand DB Mindbox.
What do you see happening in 2016? What effect do you think Brexit will have? Views on Berlin vs London?
J: I believe we’ll see a big year end rally in terms of fundraising and hopefully - due to more funds now - market power shifting more towards startups. Not meaning this should result in ridiculously high valuations but boldness in taking the risks in new technologies. Brexit as touched can really bring a great uplift to Berlins Startup scene. International investors may see better opportunities to locate here than in London and when startups choose where to set up they seek access to talent. I am not sure if London will get the same number of continental European tech talent attracted in the future or even physically into the country as easy as today. Plus, most UK funds are equipped with EU grants. If these are being cut, these funds will rather relocate then close down I assume - maybe predominantly to Berlin.
M: 2016 and 2017 are definitely going to be exciting years with many of the big startups in Berlin having serious exit or IPO ambitions. Once that happens hopefully capital is becoming even more available. The top challenge remains the attraction of technical talent to the City. Brexit will likely help to bring more talent to Berlin though, especially given the EU’s ambition to create a single market for digital goods and services. If that happens I wouldn’t be surprised to see a significant number of entrepreneurs to Berlin.
R: London is a very attractive, cosmopolitan city. It still attracts an enormous amount of talent. For us talent is the most important ingredient to start-up success. How the UK´s exit from the EU will be implemented, will drive London´s ability to continue to attract talent. It's too early to tell right now.
Many thanks to Roland, Jana, and Maximillian.