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Berlin

Known for its vibrant nightlife and its link to German history, Berlin has recently attracted attention as the emerging startup capital of Europe. As the center of the country’s media, R&D, and creative industries, the city is primed to innovate these sectors. The startup ecosystem has notable successes in eCommerce, including the breakout IPOs of Zalando and Rocket Internet. Berlin is brimming with culture and creativity; this, coupled with a very affordable cost-of-living, means bootstrapping startups and the talent they seek flock to Berlin. However, once startups begin to scale and grow, they often struggle with raising follow-on capital. Receiving Series A funding is a perennial obstacle for many startups and the impetus for some to relocate.

In This Market

These businesses offer industry expertise and are a source of startup talent and potential customers. They help fuel the local startup community.

Opportunities

  • Germany’s strong, export driven economy makes it a leader in consumer products and eCommerce.
  • Renting office space is a fraction of the cost in London and other European cities, making the cost-of-doing-business very low.
  • Berlin is the education capital of Germany and the German labor force is among the highest skilled in the world.
  • Rocket Internet has successfully applied the German reputation for logistics and efficiency to startups. This is particularly important when it comes to scaling, a consistent startup challenge.
  • Berlin’s history as a creative and cultural hub attracts youth from all over the world. The city is experiencing a huge talent migration, making it easy for startups to hire.

Risk Factors

  • Lack of Series A funding makes it difficult to attract more capital without leaving the city.
  • Startups are more focused on scaling to meet German and regional demands. This makes it difficult to attract more users/customers.
  • High dependence on the European market means that it is more exposed to economic vulnerabilities in the EU.
  • Workforce is inexperienced with the concept of “equity compensation.” This will improve with time, but can make it difficult for startups to recruit.
  • Local developer talent can be weak, though is often offset by Eastern European expats.
Methodology

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