'Raw and Direct': The Growth of Berlin into Europe's Start-Up Hub

Web developers from around the world are converging on Berlin, with the German capital becoming a significant center for tech start-ups. In a new series, SPIEGEL ONLINE will scratch beneath the surface to find out more about the people, companies and ideas responsible for the buzz. Is Berlin about to take off, or will it be a repeat of the dot.bomb?

A Silicon Allee Breakfast meet-up for Berlin start-up entrepreneurs is held each month at the Sankt Oberholz cafe, one of the hubs of the local tech scene.

Foto: David Knight / Silicon Allee

With cafes serving up lattés for breakfast on nearly every corner and after-hours clubs with DJs spinning well into the next afternoon, drawing people from around the world, Berlin is buzzing. That's been true for some years now. What is novel, though, is the onslaught of entrepreneurs and programmers from around the world who are descending on the hyped capital city to establish their own tech start-ups.

Attracted by the city's creative class, its world-class culture, a rich alternative scene and its affordability, more and more tech entrepreneurs are setting up shop here . They meet up in "shared working spaces," at regular start-up gatherings like the Silicon Allee Breakfast meet-ups organized on Facebook as well as almost legendary watering holes like St. Oberholz where iPads are as ubiquitous as beer or coffee. Berlin is currently home to dozens of Internet start-ups, with some observers estimating that more than 100 such companies are based here. Whatever the figure may be, it is clear the city has shot ahead of other German tech hubs like Hamburg, Cologne and Munich as the favored destination for people in the country with Silicon Valley ambitions.

In the coming weeks, SPIEGEL ONLINE International's reporting team plans to fan out across Berlin to get a better picture of a city that has become the successful home to companies like fast-growing SoundCloud or social video games developer Wooga and an incubator for up and coming ones. In a small series, we plan to share the stories of young start-ups as well as the faces and ideas behind them.

Ironically, the hype surrounding Berlin has actually created less of a splash in Germany than it has abroad. It gets occasional coverage in papers here, with headlines like, "Cooler than New York," but not the kind of attention it seems to be drawing from the tech scene abroad. Technology and Internet reporters from the rest of Europe and the United States have been reporting on the surface of the scene for some months now, and they have also helped to raise awareness of the new tech hub taking shape.

'A European Portland or Austin'

• In August, CNN Money  declared that Berlin is "fast becoming Europe's hottest start-up hub."

• Wired UK  described Berlin as one of "Europe's hottest start-up capitals," ranking it favorably next to London and Amsterdam.

• Influential blog TechCrunch  hailed the city's start-up scene as ripe for takeoff. "There's no question London has a much more advanced, sophisticated start-up ecosystem now," an article stated. But it also added that Berlin is a more natural gateway than other Western European capitals "between Europe's mature Western economies and the surging talent in Eastern Europe." The city's creative class, it added, is largely made up of outcasts. "It's become the place where misfits in Europe -- people who want to be artists and creators, people who don't fit in rigid social structures of cities like London -- flock to do what they want. ... If London feels like a European New York; Berlin feels like a European Portland or an Austin or a Boulder. And perhaps one day a European San Francisco."

• The tech site Next Web  was impressed by the design of iPhone, iPad and Web apps designed in the city, many of which were described as "world-class gorgeous." It added, "many apps from Berlin seem to have that extra something, and even though you may not have heard of many of the latest generation of start-ups based in the city yet, if you try their products, you'll see a flair for design shine through."

• In Germany, the Net Economy  column for the Frankfurter Allgemeine Zeitung newspaper asked German investor Klaus Hommels, a former investor in companies like Skype and Spotify and now the head of start-up incubator Springstar, how and if Berlin could become the Silicon Valley of Europe. His response? It is probably a question of when rather than if.

• Meanwhile, the Silicon Allee  blog -- a play not only on the California epicentre of the tech industry, but also on the many back-alley tech start-ups that characterize the Berlin scene -- follows the start-up developments in Berlin through the lens of a handful of expat transplants connected with the local tech industry.

• And what better place to check the pulse of the Berlin start-up scene than on tech forums? Dozens of stories have been exchanged  on the trials and tribulations of people looking to the German capital and explaining why they are moving to Berlin in order to transform my idea into a successful Internet company.

But why Berlin? The reasons are manifold. The city has a flourishing creative scene -- and not just when it comes to the Internet and computers. Berlin offers a high quality of life, relatively modest living expenses. The city has excellent transportation -- both local as well as autobahn, air and rail connections to other German and international destinations. Besides, the city is home to both start-ups as well as their potential clients. The buzz surrounding Berlin is almost like a self-fulfiling prophecy: The city is a meeting point for the creative elite precisely because it is the kind of place where the like-minded creative class indivduals converge and quickly build networks based on mutual interests that quickly grow and prosper.

Berlin Can Hold Its Own Against Any World City

Still, only time can answer the question of whether Berlin's start-up boom is one of hype or substance. SPIEGEL ONLINE surveyed some of the city's start-up blogs for their takes:

• Martin Weigert, of the German-language Netzwertig.com blog covering the tech business, believes the Berlin start-up scene is on track to grow in the long term -- even if German bureaucracy and uncertain English among German officials still proves to be a hurdle today. He points to Sweden as a model, where establsihing a business can be as easy as filling out an online form and waiting just a few days for it to be approved.
• Alexander Hüsing of Deutsche-Start-ups.de says, "there still aren't enough international start-ups like Wooga, Amen or SoundCloud to ensure that Berlin will be taken seriously as a (tech) base over the long term." But he says the hype is justified: "A year ago people from London looked down on Berlin. Now a lot of them want to move here."

• To Schuyler Deerman, the developer of a productivity app called Moped -- which he describes as a Twitter-like service for "getting stuff done" -- and a creator of the Silcon Allee blog, Berlin is a great place for start-ups. "Berlin doesn't have a future, it has a present." The Alabama native describes the city as "raw and direct" -- a place that can hold its own against any other world city. "Add to that all the fresh young immigrants and you have a recipe for doing great things." But Deerman adds two important caveats: the city-state's complicated tax system and an apparent lack of investors -- "but those are hurdles, not barriers," he says.

Making Life Easier for Start-Ups

Weigert, Hüsing and Deerman all agree that Berlin will remain attractive for new businesses, particularly because the rents are so low and because apartment and office space is still readily available. Newcomers to the industry have an easier time finding their place in Berlin because the city still has no entrenched or rigid structures. It lets entrepreneurs concentrate on what they do best: being creative and seeking out contacts. Start-ups here can also draw from a pool of talented potential workers who might be ready to work for much lower wages than in London, for example.

Berlin, in other words, makes life easy for start-ups and developers and creative people of every stripe. Not London, not Amsterdam, not even Copenhagen can offer the same simple conditions for building up a project over the course of several months or years -- even if it's just a new and interesting life, between your morning latté and your after-hours party.

In the coming days and weeks you can read about the new entrepreneurs in Berlin here at SPIEGEL ONLINE -- what they're doing, and which ideas they hope will change the world.