Berlin’s ecosystem strength has a lot to do with its inception. Berlin’s scene is young, fresh and vibrant.
Around the world, digitalization is generating change in society and shifts in industries, but there is something special about the German capital that make it the perfect construction ground for the next generation of relevant multibillion-euro companies in Europe.
There is something in the air in this city and its tech ecosystem that is different from any other ecosystem in the world; this is because at its core it is a product of Berlin’s unique counter-culture.
Culture matters more than any other factor when it comes to business innovation.
It takes an enormous amount of courage to build a company against the flow.
It takes a rebellious mind to dare new things and become entrepreneurs.
In Berlin this type of marginal behavior has a long history. The city has long been a haven for those people who refuse the rules and conventions, even before the wall came down.
The city has a history of social experiment and social freedom that carries to this day.
Fifteen years ago, when I started my company, gate5, in Berlin, my two co-founders were part of a pioneer movement dedicated to the exploration of digital technology.
Neither A Financial Nor Industrial Center
A large group of our engineers were affiliated with the Chaos Computer Club, a gathering of hackers and programmers. This was a place for digital rebellion and questioning the establishment.
The willingness to question status quo and the openness to innovate generated the most interesting companies in the city — and is what is attracting talent from across Europe and beyond.
It also helps that Berlin was neither a financial nor was it an industrial center.
As a result of the separation of Germany and Berlin’s unique position, very few large companies were in Berlin after the reunification. Young people coming to the city had to create their own opportunities — and so, first came the artists, then the DJs, then the entrepreneurs.
Today tech adds up to around 10% of Berlin’s still emerging economy and I am willing to bet that this proportion will grow to 30% within 10 years. Berlin is the only major capital where innovation/tech is center stage.
This means entrepreneurs are part of a thriving and compact community and it also means few opportunity costs for talent — Berlin’s best jobs are start-up jobs.
That development happened from the ground up, rather than being the product of top-down government initiatives.
The ecosystem has not (yet) benefited from any government foresight or central planning comparable to that you see in London’s Tech City initiative or Israel’s “Yozma” government incentive in the ‘90s, which boosted venture capital’s availability in that ecosystem.
Instead, Berlin’s entrepreneurs got used to hustle and travel to London, Munich and Silicon Valley to raise money.
Companies Built By Immigrants
Entrepreneurs also got used to thinking global from day one.
In the past 10 years some companies certainly failed — or sold too early — due to lack of local professional investors.
The overall result, however, is more resilient companies with founders that are used to getting around with less.
The result is original companies such as SoundCloud, GetYourGuide, ResearchGate, 6Wunderkinder, EyeEm, Monoqi, Clue and Medigo that are able to compete globally and with ambitions on par with the best in the world.
These companies are mostly built by immigrants finding in the German capital the right terrain to build and create.
They thrive on Europe’s diversity and on a renewed confidence in Europe’s ability to innovate.
Rocket Internet also played a positive role in the development of the city with their “reinterpretation” of what innovation/entrepreneurship is about.
With their exacting focus on fast replication and global execution of models invented elsewhere, they were probably the first to industrialize venture.
Not only did Rocket Internet help create multiple public companies and thousands of tech jobs in Berlin and elsewhere; it also generated a steady flow of second-generation entrepreneurs — talent that would have otherwise be lost to banking or consulting.
Of course Berlin is still small and fragile in comparison with older ecosystems.
Work In Progress
It still needs more successful public flotations and the establishment of standalone companies (rather than exits to the U.S.).
The next level of development will require new venture funds — there is room for at least ten times more — and more experienced angels who are able to harvest the thriving ecosystem.
These are probably the only missing pieces to become a lasting ecosystem with an impact beyond Europe’s frontier.
Innovation and entrepreneurship are a key driver of economic progress and re-invention of industries is in many ways a rebellious act.
Berlin is on its way to turning itself from a place of counter-culture into a place of entrepreneurial innovation.
Work in progress for sure, but it certainly makes for an exciting place to work.