If you are in the technology and Internet business, then Germany is quickly becoming the place to be. Venture capitalists invested more than £86 billion in German technology companies in 2014, more than double the amount from 2013.
The growing technology centres in Berlin, Munich, Dresden and Rhine-Main-Neckar (RMN) have become popular alternatives for investors and startups over the last few years with a highly educated workforce helping to drive the industry forward. Three quarters of the German population are educated to university level and in a study by consultancy firm McKinsey, they estimate that Berlin tech-startups could generate as many as 1000,000 jobs by the year 2020.
The wealth of talent has seen large technology giants like Google, IBM and Amazon expand their operations to Germany, with a large number of smaller organisations following the trend.
Within the tech industry Munich is better known for “hard” technology while Berlin, arguably the epicenter of the emerging sector, is recognised for attracting creative people that tend to favour the internet, e-commerce and mobile apps. RMN has an IT cluster situated in the south-west and is often referred to as “the silicon valley of Europe”.
For years Berlin has been one of the most talked about startup hubs in Europe and the area known as Silcon Allee is starting to rival Silicon Roundabout in London. While the technology sector is undoubtedly important to London, the city can also rely on the financial sector for economic prosperity with many other industries also competing for attention. Berlin in comparison is starting to build its economy around its burgeoning tech scene with aspirations of become the technology hub of Europe.
What makes Berlin particularly attractive among startups is that while housing prices in other European countries – notably London and Paris – have skyrocketed over the years, Berlin remains relatively affordable. The cheaper housing and rent provides a lower-risk platform for entrepreneurs to jump-start their careers and organisations.
A report published by global property company DTZ states that the average annual cost of a workstation in Berlin including rent, maintenance and tax was £5,684. When compared to £9,496 in New York and £9,881 in London, it’s no wonder fledgling companies are opting to move abroad.
To help keep the momentum a number of fast-track programs have been instigated by both the government and private sector to help startups get their companies off the ground. The Google for Entrepreneurs program (created by Google) has helped open The Factory, a working space for startups that sits on the site of the old Berlin Wall. The communal work environment aims to curate a neighbourhood of company founders that brings innovation and businesses together. It’s home to both large and small organisations including SoundCloud, the undoubted poster boy of the German tech scene.
SoundCloud is an audio distribution platform based in Berlin that enables its users to upload, record, promote, and share their originally-created sounds. The service attracts more than 175 million unique monthly users and with a valuation of just over $1 billion is seen as on of the great successes of Berlin. The publicity has sparked interest from overseas investors and the injection of capital continues to encourage the formation of new companies throughout the city, drawn in by the growing access to funding and a booming tech culture.
Startupbootcamp in Berlin is another startup accelerators program that mentors, invests and partners with new companies to fast track their growth. Mercedes-Benz, Cisco and Bosch are all part of the program understanding that new ideas and innovation can’t solely be restricted to their own personal R&D centres.
Microsoft has its Microsoft Centre in the heart of Berlin and has launched an initiative called Microsoft Ventures that offers support and seed funding. The momentum has seen a number of successful exits including Jamba (£180 million), Brands4Friends (£129 million), Citydeal (£109 million) and Daily Deal (£109 million).
As companies like SoundCloud are starting to gain traction outside of Germany, the rest of the world is starting sit up and take notice. Entrepreneurs, investors and new startups are actively taking part and the numbers are looking promising for the future. If the talent, innovations and hordes of tech companies keep flocking to Germany, Berlin may just have what it takes to challenge London’s Tech City for the crown of Europe.
This post was written by Open A European Company.com. We offer our clients a number services including company incorporation in Germany, bookkeeping, virtual offices, tax planning, accounting, and immigration advice.