“In Berlin, the streets and coffee shops buzz with people on their iPads pitching ideas, with startup events happening practically every night,” says Meißner, a corporate and finance lawyer who represents both founders and investors. “The scene is visible and active; it is the real deal.”
Investment in young companies in Berlin is one-tenth that of Silicon Valley, Meißner notes. Yet the action is lively. Incubators are popping up throughout the sprawling city.
Berlin is rapidly overtaking London and Tel Aviv as Europe’s top startup destination, largely for the same reason that attracted artists more than a decade ago: abundant and affordable housing and work spaces. “Munich, Hamburg, and Cologne have some startup activity,” notes Meißner, “but at double the living costs. [That’s why] people choose Berlin.”
The Berlin story began with the three Samwer brothers, who ignited the scene in 1999 by funding a German version of eBay and then selling it to eBay 100 days later for €38 million.
“Their model was to clone U.S. successes,” Meißner says of the Samwers, whose empire now includes global incubator Rocket Internet; European Founders, their fund for early- and later-stage Internet businesses; and Global Founders Capital, targeting startups worldwide.
Players more focused on innovation have since come into prominence, but Berlin has yet to hit full stride. “For all the activity, there are simply fewer investors here, and absent a huge IPO story, U.S. interest remains lukewarm,” Meißner explains. “Mindful of past bubbles, investors can be skeptical of new ideas, and the government has yet to fully get behind supporting young companies.”
There are encouraging signs, however. “The government created a fund that pays business angels back 20 percent if they hold their investment for three years, subject to certain criteria,” says Meißner. “Sequoia Capital recently put €18 million into a startup here, and the €88 million round attracted by online food delivery service Delivery Hero was Berlin’s largest ever. So hopes are high that Silicon Valley is coming.”
In addition, a growing number of corporate accelerators — Microsoft and Coca-Cola among them — are providing founders with funding, mentoring, and networking support. “In 2013, leading German media company Axel Springer partnered with Plug and Play Tech Center, a leading Silicon Valley startup investor and accelerator, to create Axel Springer Plug and Play,” says Meißner who, with his team, advises Axel Springer Plug and Play on its deals. “That is the kind of direct bridge that bodes well for the future.”