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August 1, 2012

Start-Up Spotlight Berlin: Where Punk Meets Tech

Marin Perez is the editor of KnowYourCell, formerly of IntoMobile

Spend a week in vibrant, hip, modern-day Berlin, and the only remnants of its war-torn past may be a visit to Checkpoint Charlie. Germany’s largest city has become a bustling, eclectic mix of technology and the kind of world-class culture that attracts young souls as bent on keyboards and programming languages as they are on guitars, art galleries, and punk styling.

Berlin’s rapid development as an innovation hotbed is cultivating a new breed of start-ups—young companies that are eager to do for Germany’s pulsing heart what Silicon Valley does for the United States.

One example is Readmill, a company vying to one-up Apple and Amazon in the massive e-book space by making digital reading social at its core. After securing funding from U.K. venture capitalists, Readmill’s founder, Henrik Berggren, was pushed to set up shop in London. Berggren, a 31-year-old from Sweden, wasn’t sure if he could even find an apartment in notoriously expensive London, let alone a suitable office. In order to quickly grow Readmill and tap a growing talent pool, Berggren planted roots in Germany’s capital and hasn’t looked back.

“You can do great things in Berlin,” Berggren says.

The Vibe of “Silicon Allee”

Readmill’s founder isn’t alone in pinpointing Berlin as a beckoning tech hub, as the local Chamber of Commerce recently reported that more than 1,300 Internet start-ups have taken root since 2008. Many cluster around the Mitte district, in what’s lovingly known as “Silicon Allee.” The youthful, hip digerati roaming the streets reminds you of Silicon Valley, but Berlin’s lifestyle, location, and reasonable cost of living give it a unique vibe.

SoundCloud co-founder Eric Wahlforss describes Berlin as “punk meets tech,” which made it very appealing for the company that strives to be the “YouTube of sounds.” He and co-founder Alexander Ljung moved from Sweden to Germany’s capital partly because of its dynamic music and club scene. It also helped that Germany’s reputation for excellence in engineering and design is well deserved and carries over to the tech space.

If the club scene isn’t your thing, it’s easy to find others with similar interests. Gidsy CEO Edial Dekker says his favorite thing to do in Berlin is urban gardening with like-minded folk. Berggren likes to take advantage of sunny days by biking around Tempelhof, a closed airport that was the site of vital-supply airlifts during the Soviet blockade. Berlin offers a little bit of everything for those hours when you’re not in the office.

Location, Location, Location

Being smack dab in the middle of Europe is also an advantage. This provides easy access to the wealth of programming talent in Eastern Europe while still being a short flight to London, Stockholm, Paris, or any other major European city. While the new Brandenburg Airport has seen some embarrassing delays, it will provide Berlin the world-class airport it deserves once it opens in March 2013. Throw in the easing of regulations for recruiting workers from other European countries, and Berlin is rapidly becoming a melting pot.

“In our own office, we have people from over 30 nations,” says Joseph Deluca, marketing manager for Berlin-based Sponsorpay. “With such an influx of different cultures coming together, a truly creative undercurrent is cultivated that cannot be imitated.”

And simply put, Berlin is pretty cheap. That’s music to the ears of a young company. Scoring a nice office is a snap, getting a place to live with inexpensive rent is easy, and highly qualified talent can be had for reasonable wages. This low cost of living also lets workers have a nice lifestyle with modest salaries. 

The secret’s out.

On the Radar of Tech Titans, Too

Large tech firms like Google, Twitter, and Groupon are opening up offices in Berlin, and these are definitely seen as companies start-ups can learn from. But don’t mistake respect for reverence; local start-ups have huge ambitions and aim to be those tech titans’ equals or disrupt them entirely.

Gidsy wants to be the go-to resource for finding things to do, Wooga is one of the largest social-gaming companies out there, and 6wunderkinder makes some of the most well-regarded productivity apps around. There are literally hundreds of start-ups in Berlin trying to remake the world, one line of code at a time.

Copycat Stigma, and Other Challenges

Like building a great company, establishing a global tech hub takes time, and Berlin clearly has room for improvement. There’s still a stigma that tech companies here are copycats or don’t look beyond German borders. The start-up ecosystem is also not where it needs to be, as it lacks venture capitalists, lawyers familiar with tech, and incubators. Germany is in better shape than many countries, but a collapsing Euro would still be bad for Berlin. 

Berlin entrepreneurs are fresh and ready to take on the world, but there’s a benefit to having some experienced players around. SoundCloud has only been around four years, but the co-founders are considered grizzled vets, and they dole out advice and angel funding accordingly. SoundCloud will also be the headliner in the soon-to-be opened Factory, a large incubator/workspace/accelerator backed by JMES Investments that hopes to be the shining light of the Berlin tech scene.

Some regulations and taxes may seem excessive if you’re coming from the Valley. For example, a new tax in 2013 will require young freelancers to contribute hundreds of euros a month to the pension plan. Europeans are accustomed to a higher taxing structure, though, and some argue the larger social benefits those enable are key for having a robust start-up environment.

It's tough to get investments for great ideas without a clear way to make money. Sites like Facebook and Pinterest likely never would have been funded in Berlin initially, but that mentality is slowly changing. With all of the creativity, talent, and energy in Silicon Allee, it’s only a matter of time before we see a Berlin-based Internet company have an IPO or get acquired for an eyebrow-raising sum. 

When those successes happen, Berlin is also ideal for finding a great celebratory beer.

 

 

This article is commissioned by Qualcomm Incorporated. The views expressed are the author's own.  

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