This is a guest post by Ciaran O´Leary, a Partner at Earlybird Venture Capital in Berlin. Earlybird manages €600m in funds and are investors in companies such as Carpooling.com , Peak Games , SocialBakers , The Football App , and Wunderlist . He usually blogs here. He’ll be among those attending Disrupt Europe in Berlin in October.
Some folks consider Berlin to be the next Silicon Valley. Some folks consider it to be a place where a bunch of hipsters are only building fluffy consumer apps, spare-time in between clubbing permitting. Others again are convinced that Berlin is in the tight grips of a clone army. Of course the truth is that it’s a bunch of hipsters and cloners building the next Silicon Valley!
I am of course kidding. I’d argue that all of the above views are exaggerated. But it’s fair to say this: Whereas Berlin’s ecosystem is still very young by any standards (even European ones), it is on a very promising trajectory and is already now one of the great places in the world to build a company – with plenty of room for improvement. If you haven’t read Matt Cohler’s post you should (“These are still the early days, and it’s good to be in on the ground floor” is a nice way to sum it up).
So the first key point I’d like to bring across is that all the excitement should be much more about the trajectory than the status quo.
It’s a movement. Guaranteed 100% organic
So, over the last 4-5 years thousands of startups have been founded, seemingly out of nowhere, some have already claimed their spot as global category leaders, many of the top-tier international investors have began investing here (USV, Benchmark, Kleiner, Spark, Atomico, Founders Fund, Battery, Index, etc.) and the first sizeable exits (at least a few hundred million) have been realized (more on that later). So how did this all happen?
The key thing to take away is that it’s not because of, but despite of what any government or city initiative did. There is no tax program, no special angle to the education system, no initiative to attract tech companies and entrepreneurs, no huge pots of money, no entrepreneurial powerhouse university, etc. – the list of ‘nos’ goes on and on.
That’s what makes Berlin’s tech ecosystem so hard to describe, so hard to nail down to a few points. The Berlin tech community is fueled by talented folks from around the world coming together to build companies, to the backdrop of an urban canvas. In a city which has only ever witnessed change and wants more of it. Berlin’s tech ecosystem is more about the type of people it attracts and the inspirational environment it provides than anything else.
No one is tactically engineering a tech hub – it’s a movement, 100% organic. The cab drivers know all the big startups, the local media has started tech blogs, large real estate owners now specifically construct buildings to suit startups, etc. The tech community is on its way to become the heart and soul of the city. This is also what makes it very different (not better or worse) than other urban ecosystems that are dominated by other industries.
So every $ we pore on to the fledging ecosystem is fuelling a fire that is already burning. We like that because organic things tend to be the most sustainable and it has us bullish about what can come if the community continues on its trajectory.
Berlin and the Urban Entrepreneurship Shift
But before I go in to some of the details on Berlin, its fair to point out there is a bigger trend going on that Berlin is profiting from extremely. For the lack of better words I call it the “Urban Entrepreneurship Shift”:
- The internet in general, open source software, cloud services, app stores, etc. have really liberalized entrepreneurship in every way, also geographically. You can build and scale / distribute products and services from (nearly) anywhere
- Capital is increasingly mobile. Everywhere you look the source of capital matches the increasingly global profile of companies. This is happening as early as seed and later stage companies are finding it even easier to attract very large amounts capital from around the world
- Key to building a tech company and a community of many tech companies however remains the ability to attract and retain top international talent. Talent has also become highly mobile
- International, talented folks have a strong preference for inspiring, English-speaking urban environments with a high quality of life
Therefore: inspiring, English-speaking urban environments that offer a high quality of life are going to become increasingly relevant entrepreneurial hubs: New York, London, Berlin, etc. For those of you who have not been to Berlin: good luck ordering that hand brewed coffee in German. English, Swedish or Hebrew is more likely to work.
The shift to urban centers is a long-term mega trend (even on the US West Coast the increase of activity in San Francisco is notable) and we’re in the middle of it here in Berlin. Long term. This does not mean this comes at a cost to say the Valley, which for the foreseeable future will remain the prime global tech ecosystem. This just means more additional entrepreneurial hubs in urban environments.
Berlin is not the next Silicon Valley. Neither is anywhere else (and that’s OK)
However each hub has a slightly different DNA and whereas its fine to copy best practices and some critical ingredients, I believe that focusing on your own DNA will yield better results than trying to copy each and every element of the Valley or any other tech hub for that matter – that’s why I always cringe at the notion of a “next Silicon Valley”. I’ve tried to sum-up Berlin’s DNA in this presentation:
