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A look behind Berlin's startup scene

September 5, 2017

From "poor, but sexy" to "just sexy," Berlin is an attractive place for startups. The city has been happy to oblige, but Berlin's reputation for rapid growth may be outpacing the infrastructure required to maintain it.

Skyline of Berlin at night
Image: Fotolia/Marco2811

For Johannes Reck, moving to Berlin from Zurich was a no-brainer. It was 2011, and GetYourGuide, the tourist attraction booking platform he cofounded, needed to grow. Zurich was too expensive and too established.

"We were a couple students in a garage,” he said. "We had to move somewhere where we could afford to live and also employ people."

Employ they did. Today, Reck is CEO of a company of 400 people in 11 offices worldwide. Zurich is still one of them, but Berlin is the heart of the operation because the city attracts a "broad labor pool," he said. Whereas London or Frankfurt's tech sectors may focus on financial services, requiring highly specialized workers demanding higher pay, Berlin has become a more affordable option for those wanting to experiment across the board. Digital solutions for shopping, media and food delivery have all become commonplace in Berlin.

Read more: What I discovered about the moon in Berlin

You can live more on less here, but Berlin's "poor, but sexy" days — a status coined by its former mayor, Klaus Wowereit — are over. "You can cross out the 'poor,'” Reck said.

Picture of Johannes Reck, CEO of booking platform GetYourGuide, sitting on his desk
Johannes Reck, CEO of booking platform GetYourGuide, says affordability is a key selling point for Berlin employers competing globally for a finite supply of applicants.Image: DW/W. Glucroft

That is true in some aspects. Berlin had Germany's second-highest increase in GDP growth between 2013-14, according to data collected by the Berlin Chamber of Commerce (IHK). Tax revenue is up. Rents have risen with the surge in newcomers, but while Berlin is short on housing, it has room to grow: Its total population, steady at about 3.5 million, is lower than historical peaks.

Number juggling

In all, incomes are rising and unemployment is falling, according to data from the state statistics office. "We spend a lot of time talking [job] candidates through the numbers,” said Eva Glanzer, the GetYourGuide's vice president of people. "When you compare the [San Francisco] Bay Area versus Berlin, or London or Stockholm versus Berlin, you see very quickly that you can have a very high standard of living here.”

Read more: Startups ask for directions on the road to success

By German standards, however, Berlin is lagging. Residents' disposable income has been rising relative to itself, the IHK-collected data show, but through 2013 was falling against the nationwide average. For the same year, Berlin was fifth in overall foreign investment at about 19 billion euros ($22.6 billion). Hamburg, another city-state, was ahead in fourth place with about 35 billion euros.

The data suggest that while Berlin is booming, its growth is a historically recent phenomenon. Because money generally grows over time, playing catch-up can be hard. Cities in western Germany like Munich and Dusseldorf continue to experience founding and growing companies. Berlin spent several decades behind a wall and under rubble. Many major German companies moved to the city only when it was restored as the capital of a reunified Germany.

Aerial photo of Facebook's campus in Menlo Park at the edge of the San Francisco Bay
California's Silicon Valley is built on decades of sustained investment, much of it public, not only in companies, but in the long-term research and academic infrastructure those companies have grown out of.Image: Reuters/N. Berger

"We sometimes behave like this is something completely new," said Cem Özdemir, the Green party's top candidate in this month's Bundestag elections. He spoke to DW following a campaign event in Berlin about Germany's digital economy. "We invented startups with the famous German "Mittelstand" small and medium-sized companies, some of which are more than a century old.

These not only drive Germany's economy, but drive many of Germany's startups. Axel Springer, the Hamburg-based media giant, launched its Plug and Play Accelerator in Berlin in 2013. Siemens, in cooperation with the Berlin School of Economics and Law, founded the Startup Incubator Berlin just this year.

Growth requirements

On the university and research level, the Institute for the Internet and Society goes back to 2012. The Einstein Center Digital Future got its go-ahead in fall 2016 to provide Berlin universities with 50 professorships in the field of digitalization.

These new efforts reveal Berlin's long-term challenge of establishing a base of higher education specifically suited to foster new jobs and companies in the digital economy. The current wave of startups may be able to make it in Berlin thanks to reasonable rents, low wages and imported skills, but with costs rising as they are, the city requires its own infrastructure to keep up with its reputation of rapid growth.

"There are all sorts of things you need when you cross the threshold from 10, 20 or 50 to 100 people that you didn't need at a smaller size,” said David Carter, a front-end developer for uberall, a digital marketing platform for business.

"Things like people dedicated to finance and making sure the invoices go out. Of course we have a huge sales operation, but also people supporting the sales operation,” he said, ticking off a few of the growing company's needs. In other words, the people and parts that comprise a professional enterprise, which startups do not concern themselves with at first, positions that require education and training. "Although we have great people already, we're not currently in a position to hand-pick people to work for us,” Carter said.

David Carter, front-end developer for Berlin startup Uberall, sitting on his desk in front of a computer
The development team David Carter leads is looking to double, but finding the right people is a slow process. His last two Uberall hires took two years to find.Image: DW/W. Glucroft

Coding bootcamps have become a popular stop-gap measure. These are short, intensive programs to give people without a technical background some training to put on their CV. Carter, who studied Spanish literature in the US, transitioned into tech much the same way.

That was enough for him to get him an entry-level coding job a few years ago and move up from there. The landscape is different now.

"The kind of thing you're building when you're starting out is a very different thing than when we have four years worth of stuff built up,” Carter said. "I probably wouldn't have hired myself four years ago for this job, which is a weird situation to be in.”

German versus American startup culture


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