Editor’s Note: This article has been contributed by guest writer Gemma Ghelardi.
Are you searching for the ideal European city to launch your startup, and wondering if Berlin should be at the top of your list? Look no further!
As someone who has experienced the startup scene in Berlin, London and Rome, I have collected a selection of opinions from other Berlin-based founders and VCs to give you a complete lowdown of the situation, the good, the bad, the ugly and the future.
The Good:
- Affordable and liveable. The first few years of starting a company can be tough, with limited funds and low salaries. But Berlin, gentrifying as it may be, is still a cost-effective alternative to other major European cities like London, Paris, or Amsterdam. With lower rent prices, affordable transportation, and an overall good quality of life, you can focus on your business without breaking the bank – plus, you can always find some Club Mate to get you through long nights at work! And, with a diverse and inclusive community, you’ll feel at ease whether you speak Deutsch or just English.
- Software Hub. Berlin has a thriving startup scene, especially in the software sector. While it may not be as big as London (even post-Brexit), you’ll find plenty of talented individuals with a variety of skills across various sectors. Tech giants like Amazon, Zalando, N26, Microsoft, and SAP have already established divisions in the city, attracting and training the best and brightest talent – which your startup can then benefit from. And, with top universities like TU Berlin, ESMT, and CODE, you’ll have access to highly skilled graduates.
- The techno. If it’s your thing.
The Bad:
- Not as much exposure to international VCs and angels. Don’t get me wrong, Berlin has plenty of capable venture capitalists and accelerator programs – and together with Paris, it’s a true leader within the EU. But it’s not quite yet on par with London and the US in terms of big VC money and angel investors with international appeal and vocation, so if your strategy is to maximise networking opportunities, you might be better off choosing to set up elsewhere.
- Not tailored for hardware, deep tech or finance. Berlin may be a hub for software and it certainly provides talented individuals with a variety of experiences, but it lacks the specialisation and customer development opportunities that other cities offer – so if you already know you want to pursue specific fields and have no additional reason to be in Berlin, you may find other destinations more beneficial. For instance, London is the place to be for fintech – with many available experienced engineers, PMs, but also VCs. And Munich might be a better option for hardware, thanks to its connections with the manufacturing and automotive industries, meaning better chances to collaborate and partner up with potential B2B customers, but also more specialised talent with relevant work experience in the industry. Plus, infrastructure in Berlin is also a concern, with slower internet speeds that may require deep tech startups to rely more heavily on cloud service providers or increase operations costs.
- Heavier bureaucracy (in German). Whilst succeeding in a highly regulated market can be a testament to a startup’s abilities (right, SumUp?), the admin side of things in Berlin can be a hindrance to incorporation, tax, and customer development: bureaucracy is never fun, but it’s even less fun if you’re not a German native speaker. It is also not as lean as the UK system, for instance, where you can get a company off the ground in as little as 48h and easily handle most shares and structure aspects online. Moreover, there are additional obstacles for non-EU citizens, as a residence permit is required in order to start a business – which is not the case in the UK and other EU countries such as Estonia, thanks to their e-visa for founders.
- The techno. If it’s not your thing.
Future Outlook: It’s looking good for Software and AI, with growing interest and talent availability. But, the legislation is a bit of an incognita, with friendlier locations which may steal the show – as it happened with Web3 and Lisbon.
In general, raising funds might become tougher, but this is not unique to Berlin. Proper de-risking will be key (even more so as German investors tend to be a little more risk-averse and analytical than their UK counterpart), and founders will increasingly need to showcase their industry influence to secure investment. But fear not: Berlin is also home to many angel investors who can be a great alternative to traditional VCs.
Key Players
Berlin is home to hundreds of VC companies, with prominent names such as Lakestar, Point Nine, and Earlybird Venture Capital leading the pack. However, rather than focusing on size, finding the right fit is crucial.
In terms of startups, several have achieved unicorn status, but the spotlight is now on the younger, up-and-coming players at the Series A or Seed stage, particularly those embracing the AI revolution (check out Merantix, the world’s first AI Venture Studio). Among the leaders paving the way are N26, Trade Republic, SolarisBank, Wefox (fintech & insurtech), Flink (foodtech), and Contentful (SaaS CMS). Other noteworthy start-ups include InFarm (urban farming), SumUp (fintech), Urban Sports Club (sportstech), Choco (foodtech), and Sennder (freight).
In Conclusion: Berlin’s startup ecosystem is thriving, particularly for software and AI startups. The city offers a plethora of funding options and a rich pool of talented individuals with various backgrounds, creating an overall liveable, open and inclusive vibe that’s perfect for founders. However, it’s worth noting that it may not be the best choice for non-EU citizens looking to start a business or for those who want to build in fintech (non-Germany focused), hardware or deep tech.
Read the orginal article: https://www.eu-startups.com/2023/06/navigating-the-berlin-startup-scene-strengths-weaknesses-and-future-outlook/
