Michael Sainsbury
August 4, 2016

Startup dream: Berlin mon amour

StartupLand

Startup dream: Berlin mon amour

Berlin chill: This is the coolest city in the world, hand-down, no question

There were more than a few people who questioned the government decision to make Berlin – or indeed anywhere in Europe – one of the five 'landing pads' for the startup centrepiece of its still developing National Innovation and Science Agenda.

People were asking why not Bangalore, Mumbai or Hyderabad as a landing pad site. This would have added a South Asian facility to the other based in Southeast Asia’s Singapore and North Asia’s Shanghai. It would have completed the coverage of the fastest growing region in the world in terms of both the economy and population.

But to build a strategy around technology and startups and ignore Europe – which with the US, remains one of the two global epicentres for innovation and high technology – would not have made sense.

Unlike Australia, Europe’s technology companies have carved out significant niches across every sector, including automobiles, pharmaceuticals, software, communications and industrial machinery.

Europe also has highly sophisticated tech ecosystems, investors and built-in experience of helping companies develop cross-border and multi-language capabilities.

In the business software Germany’s SAP continues to reign supreme in a very US dominated sector, in application land Skype was founded in Europe.

Two world’s top three communications equipment makers are European Ericsson and Alcatel Lucent.

Significantly in the increasingly mobile internet world Vodafone, T Mobile, Orange and Telenor all have networks that operate across at least half a dozen countries.

When the United Kingdom’s citizens made the shock decision five weeks ago to leave the European Union after 40 years, InnovationAus.com noted that it helped to at least underscore, if not bolster the decision by the Turnbull Government to choose Berlin rather than London as the European ‘landing pad.’

Since then, the commentary has pointed to Berlin continuing its rapid rise as mainland Europe’s tech and startup hub, and possibility taking London’s crown as the European tech capital.

Ahead of the Brexit vote Berlin was, with classic German efficiency, already preparing to pounce.

Meanwhile, post-Brexit vote it’s been largely bad news for London with financial services firms considering shifting thousands of staff at a time to mainland European finance hub Frankfurt or to other Ireland, the only English speaking nation that will remain in the EU when Brexit occurs. Concurrently UK media has seen Brexit as a negative for the tech sector.

Brexit will certainly to have a negative impact on the movement of talent, a key factor for the sector that includes the decision on headquarters for startups.

There is also the potential that the UK could get kicked out of the 2015 EU initiative known as the Digital Single Market. Ironically the DSM is led by Britain

Having spent five days in each city (on a long overdue break in Europe recently) we thought we would share with you a few observations about each city that are would be relevant for Australian companies trying to break into the highly competitive lucrative European market.

London, for many Australians, is familiar territory and English speaking, which is still a huge advantage. It’s amazingly cosmopolitan, sometimes you can look around and wonder where you are until a red bus flashes past, or you pay for something. Despite sterling falling back about 15 per cent since Brexit London still edges Sydney in terms expense.

Rents are also egregious, and that’s where the rubber starts to hit the road for startups, getting elsewhere in Europe is also timing consuming (low cost flying is generally from London’s far flung airports deep in the countryside) unless one pays for Eurostar well ahead of time.
Public transport, like most big European cities is breathtakingly good and most time of the day much, much faster than driving.

And Britain’s industry – which comes with built R&D that lead to continuing innovation – has just not kept up with northern Europe, it’s been mainly flogged off to the Europeans, Chinese or Indians.

London is the world’s leading financial centre – although perhaps, if Brexit proceeds, not for too much longer. This clashes with the Turnbull Government’s backing of Sydney as Australia FinTech centre with the impossible aim of making it the hub of Asia.

That race is effectively over already, with the spoils (outside the massive but almost impossible to conquer Chinese market) to Singapore.

More than ever, London feels like a city for the wealthy, and in holiday mode one can at least pretend for a few days. Yet there’s less edge than 20 or even 10 years ago, and saving pennies in London is very big sacrifice for startup wannabes. Not that one would ever rule the place out.

Berlin on the other hand is arguably coolest city in the world and will cement its place as the de facto capital of Europe as it’s only rival, London, flips the bird to the continent.

The economy of Europeans greenest city in terms of planted hectares against buildings, is finally booming. Cranes dot skyline like an Asian metropolis and property prices are finally in the rise.

Yet it is also awash with shared workspaces, the German with their kollectivs do that stuff brilliantly and its part of a far more collaborative mindset. It is the antithesis of the stitched up British obsession with privacy.

And London’s overdone free marketeering and the privatisation of the Thatcher/Major/Blair decades has ratcheted up the gap between the rich and the poor.

Berlin has a strong tech reputation, second only to London in Europe is the home to legendary German tech investor rocket Intenet that has made a big bet on Asia.

InnovationAus.com ranks Berlin as the best startup country in Europe, unless your company is in FinTech.

Its affordability, despite being the epicentre of Europe whose other capitals (except Madrid) are significantly more expensive. For an Australian comparison, in quantum, it’s cheaper than living even in Hobart.

That would make it prospectively the cheapest landing pad with the huge bonus of having access to Germany’s world beating tech and Europe’s massive and well-heeled market.

As Dennis Denuto, representing Daryl Kerrigan in the film The Castle tolls the High Court judge “It’s the vibe of the thing”. In the tech sector that actually means something.

And even with its often stark, functional cold war mix of architecture nestled amongst tree a European grandeur of luxuriously wide tree-lined streets and avenues, Berlin feels like the future and opportunity.

While London is the (relatively speaking) glorious present, with a less certain future an extra risk to add what would be an expensive grind to sustainability, for any but the best funded new businesses.

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