London and Berlin Square Off

As tech businesses around the world look to emulate the success of sunny Silicon Valley, focus is steadily heading to Europe, where entrepreneurs vie for the title of the “New Steve Jobs” or the “New Mark Zuckerberg.”

With this is mind, now seems a good time to discuss the two tech centres of Europe: London and Berlin. Both cities are buzzing with tech-savvy entrepreneurs desperate to work–and party–hard, but which one has the edge, and why?

Technology Structures

In the battle of the European tech cities, opinion differs as to what constitutes a good structure to begin with. Berlin has hubs of technological development, for example around the Mitte borough, which developed organically. London’s Silicon Roundabout, found around Old Street, was originally an independent development. While the subsequent Government initiative, nicknamed “Tech City,” has helped develop some of the infrastructure needed in the area many, would argue that organic development is superior, allowing the community to self-organize the structures, rather than having one imposed on them.

Fresh Talent

These structures, whether organic or not, will need a good supply of fresh minds from different parts of the world. Both cities are proudly multi-cultural, although Berlin may just about have the edge, being closer to Eastern Europe and therefore being the gateway for many to Western Europe. Berlin also attracts a large number of students, both local and from abroad, creating an ample supply of designers and programmers. One vital influence here is that Berlin is cheaper than London, making it easier for entrepreneurs and students alike to move to the city and bootstrap their companies. It also makes for efficient scaling of companies that rely on international, outbound telesales from Berlin.

Building Scale

It seems appropriate to consider the background and technological precedent of both cities in terms of the scaling of technological development and talent. Berlin benefits from the operational expertise of the infamous Samwer Brothers, who, with their investment vehicle Rocket Internet, are responsible for Groupon, BillPay and dating site eDarling. The same can be said of Klaus HommelsSpringStar, for which the portfolio includes shopping club Casacanda and KidsDeal, a so-called “kid’s Groupon.”

This wealth of operational and scaling talent, combined with the evident on-going growth of entrepreneurial skills in Berlin, bodes well for the city. London, on the other hand, despite lacking this type of startup investment heritage, is home to the HQs of many of the big digital media companies. This provides London with an entirely different, and yet still relevant set of executive management skills.  

Existing Financial and Business Activity

Regardless of the talent available, a tech city requires an abundance of existing businesses and financial capital, and London is certainly ahead of Berlin in this respect, with an incredibly high volume of companies and events. Berlin is, however, experiencing a current acceleration of hot startups, with names like Soundcloud, Gameduell and Zalando all starting life in Berlin.

Also, in this globalized world, the proximity of acquiring businesses is barely relevant as global and U.S. buyers are increasingly looking abroad for M&A targets. With this in mind, the upcoming breed of Berlin entrepreneur has progressively more global ambitions from the start.

Investors

As was seen with Silicon Valley, startups often require help from super angels or super connectors. Here, both cities have connections, for example with Christophe Maire in Berlin, who acted as an early stage investor in Plazes, StudiVZ and EyeEm, or Sherry Coutu, in London, who has angel investments in more than 35 companies, including Artfinder, and holds investments in two venture capital firms.

Berlin has an impressive history of startup entrepreneurs turning to making investments of their own, supplying small angel investments. These successful Berlin-based CEOs also often start their own incubator programs, allowing further opportunity for aspiring startups, such as Friendsurance.

Government initiatives and support

The British Government is very supportive of all tech development, especially in the East End of London “Tech City” development. There is also the Entrepreneurial Visa, to encourage startups to head to the United Kingdom and the Technology Strategy Board grants, which aim to encourage economic growth by supporting business-led innovation.

The German Government is, at current, seemingly disengaged with the ever-growing tech movement, although the City of Berlin does, however, have some vehicles which aim to support creative entrepreneurs. For example, IBB Bank has a Kreative Fond programme, with a total budget of €30 million ($40 million) to provide small and medium sized creative businesses with financial capital.

Ultimately, both cities have the drive, talent and innovative ideas, as well as the business and governmental support to flourish. Which city has the determination to take the lead, however, we’ll only know in time.

Daniel Waterhouse is General Partner of Wellington Partners, which makes seed, early-stage and growth investments in digital media, cleantech and life science companies. Waterhouse works out of the firm’s London-based office and can be reached at waterhouse@wellington-partners.com.