Startup Scene

Berlin's chance to steal thunder from Silicon Valley

Kreativ-Festival South by Southwest in Austin
SXSW welcomes tens of thousands of participants every year. Source: DPA

It’s no secret that Berlin’s startup business is booming. Germany’s capital has built up a reputation over the years as a city of silicon dreams – a place where techies can live cheaply while honing their digital products and making new contacts.

Despite this, the scene still has much room to grow. London reclaimed the title of Europe’s biggest startup hub last year, more than doubling Berlin in investment capital for young entrepreneurs. Germany in general has often struggled to attract venture capital to its budding new businesses.

But opportunities in tech are globally changing, said Stefan Franzke, of the Berlin Partners for Business and Technology agency, which supports startups in the German capital.

While protectionist policies from the White House stand to close the borders around Silicon Valley, it ultimately puts Berlin in a position to prosper. Over the next few days, more than 100 startup representatives from Berlin and its neighboring state Brandenburg will travel to South by Southwest (SXSW), a popular music and interactive media festival in Austin, Texas.

“They are saying … ‘Is America really the right place to expand in?’”

Stefan Franzke, Berlin Partner

It’s the first of many organized trips across the Atlantic to digital summits scheduled this year, meant to help Berlin techies get a leg-up internationally while also putting the word out about its thriving scene.

“We have had different inquiries lately, and heard from people with dual nationalities or who come from the seven countries banned from entering the U.S.,” said Mr. Franzke, referring to the U.S. president’s controversial travel restrictions that restrict visas to the United States from Muslim-majority countries (the order was reduced to six countries this week).

“They are saying … ‘Is America really the right place to expand in?’ We are seeing that is having an effect on Berlin, mostly in that more talent is coming here,” he added, speaking at an event in Berlin to present some of the capital’s startups heading to Austin.

The travel restrictions are also having an effect on Berliners. One of the attendees should have been a German-Iranian techie invited to SXSW last year by former U.S. president Barack Obama. “This year he wanted to come, but had no possibility because of the reason of his dual nationalities,” said Mr. Franzke.

Fears about what “America First” could mean for fledgling startups is also inspiring American players to think about leaping across the pond. That includes startups in the promising financial-technology or ‘fintech’ space.

“At the moment, we have much to do with a very large fintech headquartered in the U.S.,” said Mr. Franzke, though he wouldn’t divulge the name. The company is being shown around Berlin and considering it as a location, largely for reasons of finding the right talent. The company’s fear is they “can’t do that as well in the U.S. anymore, it’s too uncertain.’’

But there are challenges to doing business in Berlin too – particularly when it comes to finding investors. Germans remain more risk-averse than their U.S. peers. It’s part of the reason why, despite the rather tense U.S. political climate, many budding Berlin-based startups also see an opportunity in traveling across the Atlantic.

Roman Sick is the chief of operations behind Holoplot, a highly-advanced sound technology that is up for an innovation award at SXSW. He’s hoping to hobnob with as many Americans as possible at the festival, as the company is “always searching for investment.”

“Perhaps there are more (investors) that would be open for (investing) in Europe right now,” he said. “That would be interesting.”

Berlin startups, and agencies supporting them such as Mr. Franzke’s are also looking to London. After the Brexit referendum, Berlin Partner started a massive ad campaign, together with the Berlin Senate, to charm British startups over to Germany’s capital. The agency opened an office in a London co-working space in September.

It’s not just a matter of Berlin being in the right place, at the right time, Mr. Franzke emphasized. The city is known for its “creativity and tolerance,” and it’s that perfect storm that makes it attractive to startups and investors now more than ever.

“Berlin is open-minded and that is worth a lot today, when you look at Brexit, Trump and nationalist movements,” said Mr. Franzke. “Berlin is an island where people from other nationalities are welcome.”

Barbara Woolsey writes for Handelsblatt Global in Berlin. To contact the author:

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