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Factory Berlin is housed in an old brewery in central Berlin.
  • Why it matters

    Why it matters

    Established companies are on the lookout for innovative ideas and creative solutions, in part as a bulwark against digital disruption of their business models.

  • Facts

    Facts

    • Developer Udo Schloemer opened the Factory Berlin startup hub in 2014.
    • It houses big names such as Google, Uber and the music platform SoundCloud, alongside many startups.
    • Mr. Schloemer’s new startup networking club has already attracted Google and Japanese pharma firm Takeda.
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    Audio

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There were times when someone in a business suit wouldn’t have dared step foot in this old Berlin factory.

A long time ago beer was brewed here. Later the Berlin Wall ran beside it, turning the area into a no-go area unless you were risking your life trying to escape from East to West. Then in the wild years after the Wall fell, rock bands hunkered down and lived in the abandoned space. Today it is simply called Factory, and it is Berlin’s premier startup hub.

Chief executives from top companies visit all the time, looking for young, promising companies to invest in. Politicians are also regular guests: Germany’s President Joachim Gauck has visited, as have the French economics minister and Britain’s finance minister.

Factory opened in Berlin’s Mitte district in 2014 with former Google boss Eric Schmidt on hand. Today it is the workplace for 800 young people employed by 90 mostly small firms.

“A startup can subject itself to questioning every day – an established company can’t. But (a big company) has processes, structures and money that can be useful for a startup.”

Udo Schloemer, real-estate developer

Udo Schloemer brought them here. The real-estate developer from Stuttgart came to Berlin in the 1990s and recognized the potential for the startup scene – not only in terms of rent revenues and investment properties, but also as an impetus for innovation in the German economy.

Now Mr. Schloemer wants to hoist the project to the next level: He is setting up a club for companies that want to meet young, creative professionals. The membership fee is €120,000 ($135,000) annually. Google has already joined, as well as Japanese pharmaceutical company Takeda.

The networking potential that makes the club attractive doesn’t come solely from Factory’s main campus. It also has partner offices in hip, creative cities such as London, Tel Aviv and San Francisco.

Mr. Schloemer has 50 employees who organize events called meet-ups, fireside chats or “hackathons.” Their main purpose is to bring together people who can learn from each other — startup entrepreneurs, leaders of big companies, representatives of German industry and IT experts from the United States.

Deutsche Bank has already worked with Factory, as have Volkswagen and Air Berlin, Germany’s second-largest airline.

“A startup can subject itself to questioning every day – an established company can’t,” Mr. Schloemer explained. “But (a big company) has processes, structures and money that can be useful for a startup.”

There was no thought of such a club a few years ago when Mr. Schloemer convinced the rockers living at the site to move out. A truck full of beer did the trick, he said.

The developer said he invested in startups early on, when “no one in the German economy took them seriously.”

At the Factory, he provided startups with offices to their liking, equipped with wireless networks and flexible workplaces. They included telephone cells for confidential conversations inside the large space, and sleeping cabins for tired programmers.

The idea wasn’t revolutionary at the time. In 2009, the Betahaus in Berlin’s Kreuzberg district was the first co-working space, and Ahoy! Berlin opened in 2011. International providers such as the Rainmaking Loft and We Work have since opened branch offices in Germany’s capital.

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Startup firms like the flexible workspace on offer at Factory. Source: Factory Works

 

Demand seems unabated. The Factory is currently being expanded with a new building. Together with branches in Berlin’s Friedrichshain, Kreuzberg and Treptow districts, Mr. Schloemer intends to have operations on some 40,000 square meters (430,560 sq ft) by 2018. Startups talk of long waiting lists.

Factory includes such prominent names as Google, the music platform SoundCloud and the ride-hailing app Uber. Star chef Tim Raue has a restaurant on the ground floor.

Just as important, word has got out that it is possible to establish contacts to industry here. For instance, one of the founders of Relayr, Jackson Bond, was biking to his office when a Factory employee called and asked whether he could come and present his startup. A slightly sweaty Mr. Bond delivered his lecture about building blocks that make it possible to read data from almost any object – from an elevator to a house plant.

Only later did he realize who was sitting in front of him: Thorsten Müller, head of Bosch’s connected devices and solutions division. In the meantime, Bosch has become a customer of Relayr.

Established companies are on the lookout, also outside their own industry, for innovative ideas and creative solutions as a bulwark against digital disruption. There is scarcely any large company today whose portfolio doesn’t include a startup.

“The entrepreneur of every small and mid-sized company knows he has to digitalize,” said Klaus Hommels, an investor who operates Lakestar, one of the largest European funds.

Mr. Hommels is familiar with many family businesses. He has invested in Mr. Schloemer’s project and helps to establish contacts — he considers Factory to be an ecological system, a sort of miniature Silicon Valley.

He observes that in California, all large companies invest in small startups. But he sees no sense in buying just anything. He would prefer to send two employees to Berlin for a few months in order to get to know the scene.

His advice to companies struggling to face the digital future: “Turn your gaze to the eye of the hurricane.”

 

Miriam Schröder is based in Berlin and covers the city’s startup scene. Kai-Hinrich Renner is Handelsblatt’s media reporter. To contact the authors: m.schroeder@handelsblatt.com, renner2@handelsblatt.com

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