In a recent series of blog posts in the Economist, the Schumpeter columnist compared start-ups in two European cities: London and Berlin. Both are major cities in Europe that are popular to tourists, but are less well known for being leading cities for start-ups. Comparing the two, Berlin has only recently seen an increase in digital start-ups. In contrast, London has seen a large increase in tech start-ups during the internet boom in the late 1990’s. Increases in technology and international business could result in more cities beginning to experience tech start-ups.
Some start-up tech companies that are based out of Berlin include SoundCloud, ResearchGate, 6Wunderkinder, and Zalando. Each of these companies has only been around for less than five years. Two popular gaming start-ups based out of London are King and Mind Candy, which are both over ten years old. Both cities have favorable environments to establish and run a tech start-up, so where is the big difference in the markets?
One area that London has been able to get ahead of Berlin in is attracting tech giants such as Facebook and Google. With large tech companies in the area, start-ups in London are able to have a large pool of talented employees to choose from. In comparison, Berlin does not have these tech giants in their markets, lowering competition and the cost of experienced developers and managers. Despite lower competition and lower costs, Berlin start-ups are still not able to obtain the necessary talent to grow.
Another area that London start-up firms have historically had an advantage in is exposure to local money and venture capitalists. Some venture capital firms in London include Balderton Capital, Index Ventures, and DFJ Espirit. Despite start-ups in London’s exposure to these VC firms, there is an increasing trend for these firms to look at international opportunities. A lot of American VC firms are beginning to look at investing opportunities abroad. Increases in international business and interaction between different markets have opened up new opportunities for start-ups in areas that traditionally have had limited access to capital.
As business and economies around the world begin to develop, many cities are going to see an increase in start-ups and innovations as Berlin has seen in the past five years. Not only does this promote growth in the country, but provides opportunities for foreign investors and companies.