It’s 1990s Berlin. Following the fall of the Berlin wall and the city’s re-unification, there is a momentous excitement in the air. The city is a blank canvas. A significant proportion of the city’s buildings are empty. Prices are low and the parties are wild.
This environment was the perfect breeding ground for a vibrant cultural scene. Fast-forward to into the early 2000 and the former Mayor of Berlin, Klaus Wowereit describes his city as “poor but sexy” – a slogan which would stick for the coming decades.
Whilst the German capital’s cultural life was booming, its economy was not. The city was in debt and relied on money from richer states like Bavaria and Baden-Württemberg. Berlin lacked jobs in comparison to other key cities like Frankfurt (a European finance hub) and the prosperous Southern regions which were successful manufacturing centres. Even in 2011 Berlin had the highest unemployment rate of any German state - 13.3% when the national average was just 7%. Now leap forward less than ten years later and the tide has turned. The Berlin unemployment rate has dropped to 7.9% and continues to fall. Today a new start-up is founded every 20 minutes and Berlin is being heralded as the next great global centre for the tech industry. Between 2015 and 2017, the German capital experienced the biggest increase in start-ups of any European city.
The question which arises is: how did this happen? Why Berlin?
Firstly, the vibrant cultural and music scene became a magnet for bright young things from all over Europe. It’s reputation for art, fashion and design made the Berlin brand synonymous with cool. Visas are comparatively easy to come by compared to other destinations, so the trailblazers came flocking. This is clearly demonstrated in current statistics - almost 50% of employees at young companies in Berlin are foreign born.
A prime example of this hot young talent is perhaps the Swedish duo, Alexander Ljung and Eric Wahlforss - the founders of Soundcloud – who were attracted to Berlin in part for its music scene. Other companies such as Kolibri who moved from a different part of Germany, cite this decision as significantly motivated by the desire to recruit the best international staff.
A further advantage for business owners establishing a Berlin base it that wages in Berlin are comparatively low in terms of European business centres – made possible by the cheap housing and cost of living. Without question, Berlin’s reasonable price of property has been an important factor for burgeoning businesses looking to snap up an office as well as young movers looking for somewhere to live. A Berlin apartment costs approximately a third of an equivalent place in London.
Normally hip new districts quickly push up prices out of reach for the average city-dweller though in Berlin this was much slower to take effect. One reason given for this slower rate of gentrification is the simple fact that there was far so much vacant space to fill. Nevertheless, as these gaps close, residents deplore the recent surge in prices. In response, the government this week imposed a freeze on rent for the next five years.
The eco-system has furthermore been strengthened by growing infrastructure for start-ups. Whilst “Silicon Alee” was once a casual monthly meeting, it is now a mature start-up complex including short term let flats for entrepreneurs, a supermarket, offices and more. Accelerators have moved in, including Microsoft Ventures in 2017. Fintech powerhouse Finleap has launched 18 disruptive companies with the financial backing of Chinese insurance firm Ping An.
There is no question that in Berlin opportunities for investment are skyrocketing across the board. One example would be Ernest young’s reported €6.2bn record investment in a myriad of young Berlin companies in 2019, an increase of 36% on 2018. On top of this, huge events such as Disrupt Berlin , hosted by Techcrunch, and Tech Open Air firmly place Berlin on the map of global tech centres.
Find out more about Berlin’s amazing tech scene on our Silicon Allee/Tech City Tour or with a company visit to one of the capital’s most innovative start-ups. Get in touch via email@example.com to find out more.