Start-ups are driving force in Berlin’s growing economy

Australian-born Biunca Perera came to Berlin last year before starting to work with the online fashion group THEICONIC.

“The scene is buzzing here. There is just such an incredible amount of energy here that was lost for me back in Sydney,” she said.

About 2,500 start-ups have so far set up shop in Berlin and are now a major driving force behind the city’s economy, which has struggled to gain full momentum over the 25 years since the collapse of the Berlin Wall.

Perth-born Rob Morgan is in the process of establishing his second start-up in Berlin in two years.

“European investors seem less risk averse than many of their counterparts in Australia,” he said.

“I really enjoy building companies from day zero.”

Investors have poured 1.4 billion euros into the city’s start-ups during the first half of this year alone.

There is a large pool of young talent from around the world in Berlin who have been drawn to the city’s lifestyle, combining an endless supply of bars and cafes with some of the world’s top cultural institutions.

The city also has a global reputation as a hub for all kinds of creative endeavours, from film and TV through to fashion and software.

The flow of money into Berlin’s scene — now rivalling Europe’s biggest financial centre, London — is all the more remarkable because the German capital has not had a big name in recent years as a town for doing business.

Instead, Cold War isolation, followed by the collapse of the command economy in the eastern part of the city after the implosion of communism in 1989, turned it into the country’s home of welfare, as jobs vanished in the face of economic stagnation.

Now, according to real estate agent Jones Lang LaSalle, the new young entrepreneurial class, who have brought the digital economy to Berlin, have taken over about one quarter of the city’s office space.

The German start-up sector expects to create about 50,000 new jobs across the country over the next 12 months — with a high percentage in Berlin.

In fact, every second start-up in Germany is in the capital.

“Start-ups’ role as a job machine is gaining momentum,” Florian Noell, who heads up the German Federation of Start-ups, said.

“It’s definitely a competitive landscape,” Mr Morgan, who came to Berlin two-and-a-half years ago, said.

“It’s on the map, and you are less afraid of running out of money.”

The less risk averse nature of the European investment community means those attempting to carve out new internet businesses in Berlin often have access to large amounts of cash.

A lot of Germany’s big companies, including Springer, Lufthansa, Deutsche Telekom and consumer electronics group Saturn, are keen to open new business ventures in the digital economy.

But analysts say they are not agile enough to react quickly to the demands of the digital business world.

As a result, they are prepared to plough funds into smaller companies or entrepreneurs who have the flexibility to quickly put together a team to drive new ideas.

“For me, the biggest difference is that Australia is a couple of years behind in the e-commerce [and] start-up scene,” Ms Perera, who now works for payment platform OptioPay, said.

“In Berlin you will find countless opportunities in start-ups.”

Also underpinning Berlin’s digital economy is a solid network of incubators offering management services, such as Factory Berlin, Telecom T-Labs and Rocket, which last year became one of Europe’s biggest emerging tech stocks.

And Berlin as a city is still a relatively affordable place to live and work, compared with other start-up centres like San Francisco, London, New York, Hong Kong and, of course, Sydney.

“This means that you are not burning all of your cash on essential resources,” Mr Morgan said.

In the meantime, Berlin’s start-ups have been developing a strong focus on green businesses, for instance in the transport sector, while food delivery internet businesses such as Foodora have also caught the attention of US investors.

And finally a small note of caution in this sea of optimism: one of Berlin’s start-up food delivery groups, Hello Fresh, just this week put on hold plans to make its stock market debut.

Investors felt the company’s 2.6 billion euro capital raising plan was just too high.

This article was originally published in ABC.