Berlin 2.0 hyped as new capital of web technology

By Helen Maguire Aug 8, 2011, 10:06 GMT

Berlin - Customers at the St Oberholz cafe, in Berlin's Mitte district, are greeted by an array of laptops. The music is loud, as trendy twentysomethings gaze distractedly at business models, computer code or emails from potential investors.

This cafe, on a noisy corner flanked by tram tracks and fast food outlets, is an office for Berlin's up-and-coming web entrepreneurs. Here, ideas are born that could become hotter than a cappuccino - or collapse like the froth on the milk-topped caffeine shots.

Munich, Stuttgart and Hamburg have traditionally been seen as Germany's response to the US technology hub in Silicon Valley.

In Berlin, however, a different process is taking place. The once divided city - considered cool, creative and cheap - is attracting an international pool of young, enterprising talent, which the money is slowly beginning to follow.

'Berlin is not a financial centre, but attracts the talents - and the talents are drawing in the money,' said Christoph Lang of Berlin Partner, which promotes the city as a business location.

According to the last survey in 2007, Berlin has Germany's highest number of new web technology start-ups, with at least one being founded every week. 'By now that figure should have increased significantly,' Lang said.

News recently emerged that US actor Ashton Kutcher and Madonna were getting in on the game as their manager, Guy Oseary, reportedly invested in a tiny Berlin startup project called Amen, a social networking site which test users have called 'strangely addictive.'

More established names include online gaming company Wooga, audio sharing platform SoundCloud or ResearchGate, a social networking site for academics which has relocated from Boston, US. They are firmly positioning the German capital on the web technology map.

'Berlin is super cutting-edge. You have a mixture of creative types and young innovators,' said Jessica Erickson, who left New York earlier this year to work for 6Wunderkinder, a start-up whose first product - an online task management tool - has acquired close to a million users within its first year.

Aged 27, Erickson is one of the oldest of the company's 25 employees. Their modern, spacious office is located in a converted warehouse, just 2 kilometres north of the Brandenburg Gate.

'I found New York to be one of those cities that's extremely exhausting. Everyone's in a rush, it's not an easy place to decompress,' Erickson said. Berlin boasted an excellent art and music scene, and a fascinating mix of people. 'It has that raw urban feel that I love,' she added.

Berlin's start-up scene is thriving precisely because it is so unlike the rest of Germany. The city has become an international location, where English is almost a native language.

'I couldn't get a job at a German company,' said Schuyler Deerman, a US citizen who left San Francisco to launch his business in Berlin. He said many entrepreneurs had made the same move, although they barely spoke German and their products were not aimed at the domestic market.

'They don't even have German websites. They just happen to be in Berlin because it's a great city,' he added. His product Moped - an application for friends to keep track of debts and favours - is in its final stages of testing.

Deerman has also co-founded an English language blog, Silicon Allee, promoting Berlin's startup scene. 'If German technology blogs hear of our products it does not help us. Germany is not our target audience,' he said.

Silicon Allee also hosts regular social networking events, where up to 80 web entrepreneurs show up each month to mingle, exchange ideas, or scout the talent market.

Compared to Silicon Valley, where such events are ubiquitous, Deerman said Berlin offered start-ups the opportunity to stand out.

'Here, we're still small fish, but the pond is slightly smaller. It's not like San Francisco where everyone's an entrepreneur.'

However, companies setting up in Berlin do have to deal with some German truths, such as the country's slow awakening to the benefits of encouraging skilled entrepreneurs into the country.

'German immigration law is still marked by fear, rather than seeing the opportunities,' said Lang of Berlin Partner. While EU or US citizens had few difficulties, people coming from countries such as China or Russia faced complex legal hurdles to get a visa.

'To come here with a head full of good ideas and hardly any funds is really difficult,' agreed Michael Pfeiffer, from Germany Trade and Invest, the country's foreign trade and investment agency.

There's another challenge - the readiness of German investors to put their faith, and their money, into untested business ventures.

'Potential investors in Germany - those who set up companies - are very reluctant to go into high risk,' Pfeiffer said, but the influx of international talent, and funding, was changing this.

Christian Reber, the founder of 6Wunderkinder, said European venture capitalists long insisted that an idea had to have been market-proved before investing, effectively stifling innovation.

'But in the last 12 months, I believe there has been a sharp switch,' the 25-year-old added.

'In Berlin in particular, investors are looking for young developers and founders with new technological ideas. The crazier the idea, the more likely it is that investors will invest.'