Berlin – An Attractive Place For Startups
The German capital’s low rents, cool image and open attitude has attracted an array of creative startup businesses and the startup scene continues to flourish with a new startup being founded every 20 minutes, according to advisory agency Gruenden.
The city has grown up and become more professional according to Ahoy! co-founder Nikolas Woischnik. As a result, bigger companies are moving to the East German city and a lot of talent has been produced from the first wave of start-ups who are now churning out additional start-up businesses.
I recently started this post (well title idea and left it as a draft for a couple of months) and I am now resumed writing it in post-Brexit Britain, which has left many commentators (including myself) whether Berlin can topple London’s start-up and fintech scenes respectfully.
The Berlin start-up scene has already overtaken the UK capital in terms of venture capital investment and many argue that it offers a pool of talented international developers who may avoid the UK once new migration laws are put in place, in addition, commercial rents that are about a third of those in London, and has a better party scene.
From taking a huge interest in fintech this year, one thing that particularly fascinates me since the majority of the nation voted to leave the European Union is will UK fintech sustain its reputation for being the European fintech capital.
The likes of Berlin in my opinion have an opportunity to steal its fintech crown. For example, fintech start-ups such as Chicken Financial have already expanded their operations in the German capital after the Brexit vote.
Chicken Financial’s co-founder Samuel Ely told The Guardian last month that : “We expect there will be a long-term shift of fintech and banking from Frankfurt to Berlin and that Berlin could eventually become continental Europe’s new financial capital.”
Fintech giants TransferWise mentioned that they will not close their London office, however, they we will probably not grow the team based in the capital much more. Headquartering elsewhere is a possibility mentions Taavet Hinrikus (company co-founder) but the company hasn’t made a final decision yet.
Image source : FT
Any UK fintech might take inspiration from Berlin company Number26 (now N26) who has recently been given a banking license and giving a huge opportunity to shake-up financial services across the continent.
What’s even more inspirational besides fintech champions such as N26 is that compared to the likes of London and New York, it does not host a stock exchange or even have a major bank.
Unlike German banking giant Deutsche Bank which does come from the country’s financial hub, Frankfurt. The David vs Goliath battle here between N26 and Deutsche Bank has recently gained media attention, with the Frankfurt based bank currently going through an identity crisis, there has been reports that the bank is thinking about splitting itself into a lender focused on capital markets and another targeting retail and corporate clients.
Whilst Deutsche Bank seems to be going through an identity crisis, in the German capital N26 has attracted 200,000 customers with its virtual banking model. In addition, the fintech is already operating in six European countries.
N26 are working on some new features such as allowing customers share expenses between friends with a simple swipe between friends (similar to splitting an Uber fare).
N26’s chief executive officer Valentin Stalf, was recently interviewed by Bloomberg’s Caroline Hyde, she asks Mr. Stalf about the importance of being based in Berlin, she questions that many would have thought that Frankfurt would be an obvious place for a fintech company. Stalf mentions that he feels that it is a good thing not to be in the centre of finance, he stressed that at N26 they wanted to build a product that didn’t like it has been created from a traditional bank, Berlin is the place to attain the best creative people in Europe. N26 are very happy to be in the city where they can get the minds to work with them. He also mentions that Berlin (post Brexit) is even more attractive to Europe.
So what can we learn from Berlin? Firstly, from looking at the N26 example, the fintech has stayed in the capital because of the array of both domestic and international talent, the city as a whole is an international magnet for talent, similar to London which has attracted many tech enthusiasts and young entrepreneurs.
In order to keep its talent, Berlin has helped people relocate, it’s common for start-ups in the city to help with paperwork and with an employee’s first month of accommodation.
They also go that extra mile and provide free language classes, as well as help people open their first bank account and register in the city.
Start-ups in the German capital work hard to give their employees reasons to stay. Employees seem to stay at one company, and rarely switch from one role to another. The likes of offering flexible working hours to offering loyalty programmes are some of the methods used by Berlin start-ups.
In addition, Berlin definitely has more of a grass roots feel compared with London which has more of an established start-up scene. Berlin has a tenacious approach, and a main reason why the city has been put on the start-up map. A ‘we can do it’ attidude (whether that involves money or not) is apparent in pretty much all the start-ups in the city, with a strong ‘nothing will hold us back’ approach.
We’ve learnt from Berlin that all you need is a forward thinking and engaged approach for your start-up as well as having a strong community focus, this can make so many differences, regardless of where you are situated.
This type of philosophy that the German capital has on the start-up scene might sound very tempting for London start-ups and fintechs who are looking to relocate due to the Brexit vote, with lower rent prices compared with the UK capital and also having a wealth of talent in Berlin, many would find relocating to the East German city very tempting.