Some data points on how startups rock Berlin
The debate around comparing Berlin to Silicon Valley has slowed down recently. I think the last major contribution to it was done by Matt Cohler on Tech Crunch in June, but at the same time many people here grew tired of this discussion. I think that it is a pity and it is high time to fuel it a little bit more so that we do not come off the nice trajectory :-)
I have two stories to share that might contribute to the conversation. They will focus on the relative importance of startups and tech to Berlin’s economy.
At our Point Nine SaaS Founders Meetup which took place in Berlin a few weeks ago, someone asked Mikkel Svane, the CEO of Zendesk, what was the key reason why they decided to move the company from Kopenhagen to San Francisco. He said the following. To some extent it is about the US market and talent - they are important, but they are not key. The key thing about San Francisco and the Valley is that it is the only place where startups and tech are the key thing of the area. If you are based in London or New York, or literally in any other large city, there always are other big industries that the tech industry needs to compete with for attention, people and money. In London it is finance, in New York it is finance and media/advertising. It is only in Silicon Valley that startups are the hottest thing around, they are the core, front and center of the hub. It is the only place in the world in which technology entrepreneurs are at the center of events and Zendesk wanted to be part of it.
Then Mikkel asked the participants of the event what it is like in Berlin and what its key industries are. And people were not sure what the right answer would be. Some said it is government and public administration, some said it was fashion or arts, some said startups, but there was not a single answer everyone would agree on. My impression is that the right answer actually is that tech and startups are becoming this thing. They are not dominating Berlin yet (although some areas are clearly dominated by startups), but we are getting there and it seems very likely that startups will be at the front and center of Berlin soon.
So it does feel like tech is becoming the key element of the Berlin area. I tried to find out whether it is just a feeling or whether there might be some numbers out there to support it. I came across this study by the Industriebank Berlin (IBB), which offers some nice stats. First, Digital/Media is one of what was identified as 5 key areas of Berlin’s economy, which are Healthcare, Digital/Media/Creative (unfortunately, mixed together), Energy, Logistics, Optics. Digital/Media accounts for 30k, i.e. 67% (!!) of the total of 45k businesses active in the key business areas and for 23% of the total of 134k businesses active in the whole of Berlin. It also accounts for close to 24bn Euro in revenues out of the 59bn of the 5 key areas (40%) and 154bn (15%) in revenues of all of Berlin. It also employs 165k employees, i.e. 12% of all employees in Berlin.
The data clearly shows that tech (or IKT in German) already now is a very relevant part of the economy of Berlin and, given its growth, stands good chances to become its key driver. And this really is something that makes it comparable to the Valley, in a way. Add to that that Berlin is a very large city - 3.5m inhabitants make it the largest city in continental European Union - and that it is the capital city of the largest European economy. This mix makes Berlin really unique and likely is the key driver behind the fact that so many young people from around Europe move to Berlin these days.
The second story is much shorter. It is an anecdotal indication of another aspect of the trend outlined above. Recently, I had a discussion with two of our investors. One of them is from Berlin, the other one comes from outside of Germany, but knows the bay area well. The one from Berlin was telling a story about his kids going to school with the kids of other Internet entrepreneurs. He said that it feels kind of strange that he meets so many people from the tech industry at the school of his kids all the time. And the other investor said - that’s pretty interesting, that is very much what is the case in San Francisco! I think it is a nice story.