In 2022, Berlin’s startup ecosystem was ranked second in the EU by StartupBlink and twelfth in the world. Silicon Luxembourg takes a deep dive into the city’s scene.
With a population of 3.7 million, Berlin may be Germany’s largest city but it never feels cramped. After an efficient public transport system, bicycles are the most common way of getting around, so first-time visitors need to be on their toes to avoid getting run down. In the streets and in shops and cafés, English and German are freely spoken but delve deeper and you’ll find many more languages as the capital boasts 170 different nationalities. This diversity is largely bolstered by the universities based in Berlin, for instance, the Charité-Universitätsmedizin Berlin, which collectively attract some 200,000 students, of which 52% are women.
Depending on your definition, some 5,000 technology startups are found in the Berlin-Brandenburg metropolitan area, with 600 new entrants emerging annually, according to Berlin Partner. With such a large consumer market at its disposal, e-commerce is the biggest employer, while foodtech and delivery are growing fast with players like Hello Fresh and Delivery Hero.
Berlin is also Germany’s fintech hub, hosting giants like N26, the mobile bank, broker Trade Republic, digital insurers wefox and BaaS Solaris bank. Healthtech is also an important sector. Berlin meanwhile seeks to position itself as an impact startup city, with this sector, which includes affordable and clean energy, generating some 9% of startup jobs.
Location, location, location
According to Julie Jacobs, economic trade attachée to the Luxembourg embassy in Berlin, startups were historically located centrally around the Hackesche Markt and Torstraße, which was affectionately dubbed ‘Silicon Alley’. However, “Public actors have created ‘zukunfts ort’ ‘locations of the future’, which are decentralised so that not everyone travels to the same place as an answer to rising office rents,” Jacobs explains.
As a result, today the central ‘Mitte’ area hosts the political institutions, while startup hubs and accelerators will be found in various districts. Among them are the Impact Hub (pictured below) in north Neukölln, and Factory, which has three different sites. Accelerators and incubators in Berlin number in the hundreds. To get an unbiased overview, founders can contact the Startup Verband, a national lobbying association created in 2012.
Berlin’s 2022-2026 startup agenda outlines its ambitions for the ecosystem, starting with the development of impact startups. It has a number of programmes and funding channels supporting activities in this area. Berlin is not immune to the shortage of skilled workers and benefits from initiatives to attract tech talent. Meanwhile, the city supports startups whose technology drives the creation of digital administration procedures. There are also efforts to foster partnerships between SMEs and the capital’s universities and promote ecosystem diversity, particularly female entrepreneurship.
One of Berlin’s key attractions is its proliferation of VC funds with just shy of 1,000 active investors. According to the Berlin Startup Map in 2022 there were 660 funding rounds in Berlin, worth a total €6.2b, of which €31.6 was pre-seed funding and €209m seed. Finally, of the 24 unicorns found in Germany, 17 are in Berlin, according to Failory.
Among the key public funders is the Institutional Bank Berlin (IBB Group), the venture capital arm of the Investitionsbank and leader in early-stage financing in Berlin, which has allocated €120 million for different funds and invests in technology-oriented companies and startups from the creative industries.
The Berlin startup scholarship is an initiative of the Senate Department for Economics, Energy and Public Enterprises, offering coaching, training and scholarships, especially in the context of ICT, digitisation and internationalisation.
Another generous pot of non-dilutive funding is the Gründungs (founders) Bonus, a €50k injection for early-stage innovative startups.
Other points of contact for startup funding include The Berlin Founder Institute, The Business Angels Club Berlin-Brandenburg, the Exist Scholarship for university-based startups, as well as various federal programmes, and initiatives from private incubators and accelerators.
Sounds perfect. Where’s the catch?
Far from just forcing up labour costs to the detriment of startups, Berlin’s tech giants serve as a catalyst for the ecosystem. “Big scale-ups are the bootcamps and universities for the next talent,” says Jacobs, adding: “These are the people who create the new startups or who found a startup for the second time.”
Germany has, meanwhile, developed an attractive virtual employee stock option programme, giving employees a share in the potential future sale of the company.
The trade expert also sees Berlin’s lively entertainment scene as a key selling point, along with its numerous green parks and lakes.
One major catch remains the cost of accommodation. Rents have doubled in price over the last decade. Jacbos says that while it remains more affordable than some capitals, starting tech salaries are not as competitive as some cities in Germany, like Munich. Another drawback she identifies is the lack of industry partners found in Berlin, compared to say Munich.
Find out more
Anyone considering opening a startup in Berlin can contact Julie Jacobs at the Luxembourg embassy and Business Club Luxembourg Deutschland to find out more. Berlin Partner, an innovation platform similar to Luxinnovation, can also answer founder questions on establishing a business in Berlin. More information can also be found by visiting the Berlin Startup Map.
This article is part of a series on expanding into Berlin. Read more: