27/4/2015 - 12:00 am

Will Berlin Outshine Silicon Valley?

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Ten years ago, Berlin’s former mayor Klaus Wowereit declared that the city is poor, but sexy. After tons of patience and support from German Chancellor Angela Merkel, it seems that Berlin is in full blossom.

The city has generated massive successes such as music sharing service SoundCloud and games company Wooga, it has over 2,500 start-ups under its belt and has attracted hundreds of millions of euros in investments from across the world. Steve Ballmer, Microsoft’s former CEO, is one of the Americans that gambled on Berlin’s growing potential and opened an “accelerator” for start-ups because he was impressed by the “amazing emerging ecosystems”. Christian Illek, Microsoft’s general manager for Germany was quoted saying that “Berlin is the metropolis for creativity” and has become “the hotspot in Europe.

Berlin has every chance to become Europe’s own Silicon Valley thanks to its internationalism and the widespread use of English. McKinsey’s 2013 Berlin builds businesses report made it clear that the capital of Germany can become Europe’s start-up hub, although it must check a few factors before being rightfully dubbed Silicon Allee: talent, infrastructure, capital and network. “Berlin could gain an additional 100,000 jobs by 2020,” says the report. But can it forget about its rigid nature and embrace and fructify risk?

If you ask SAP, the answer is ‘yes.’ SAPVoice recently wrote in a piece for Forbes that Berlin’s diverse start-up community has a “unique blend of creative talent” that is aligned to the next generation of technology. It is fuelled by an increasingly international population, nearby research institutions and a rather cheap lifestyle (and rent) which convinced SoundCloud to move its business from Stockholm to Berlin. SAP is also sponsoring the Berlin office of TechStars, a tech accelerator which invests in start-ups worldwide.  

However, Berlin cannot become truly successful unless it uses its unique characteristics to its advantage. Although Silicon Valley has both talent and capital, Berlin’s creativity is one of its best assets, which can help it get rid of an old stigma, namely that it lacks flexibility and openness. Although it is true that young professionals in Germany are pretty conservative, as recent studies show, it can out-innovate Silicon Valley if they develop a tolerance for risk-taking.

Affordable infrastructure and cheap rent were the perks that convinced some businesses to move their offices to Berlin, but now young entrepreneurs are drawn by the presence of seasoned start-up veterans. Forbes quoted Whiteboard’s Raf Weverbergh saying that Berlin has one important ace in the hole: its geography. It is more peripheral than London or Paris, but it also has better access to the Russian and Eastern European markets.

Ciaran O’Leary, partner in the Early Bird venture capital firm told the BBC last year that the capital city of Germany “still needs a couple more years to really be one of the top one or two places in the world,” but the signs are there. Low rent is not a strong reason to convince angel investors pour their money into a Silicon Valley stand-in, but bright, ambitious people might.   

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