Berlin is in — Venture Capital is experiencing a renaissance
If you ask the company founders who come here to Berlin not only from other German cities, but often from abroad as well, you hear the following reasons in particular for choosing the location: Affordable office and residential space, opportunities for contact and exchange with a large number of similar start-up companies in the immediate vicinity. There is also a dense network of financing business angels, most of whom already have start-up and exit experience themselves. There are many qualified potential employees who enjoy living and working in Berlin and, last but not least, it is the city’s quality of life, which has continued to increase in recent years.
The above-mentioned factors are also partly self-reinforcing, so the attractiveness continues to increase with the influx of more entrepreneurs and companies.
The best-known examples certainly come from the Internet and e‑commerce. Successful start-ups in Berlin include Soundcloud, wooga, gameduell and Zalando. But there are also success stories in other areas, such as cleantech / renewable energies. In addition, a number of Berlin VC-funded companies have recently made a successful exit — for example DailyDeal to Google, brands4friends to eBay, Citydeal to Groupon, kaufDa to Axel Springer… In addition to the aforementioned office opening by Earlybird, VCs such as European Founders Fund, Ventegis, Hasso Plattner Ventures and Econa have long been represented here, and foreign funds such as Demeter Partners from France have opened their German office here. In addition, IBB Beteiligungsgesellschaft and the funds it manages are very active co-investors, especially in the technology sector. Berlin is also home to a number of venture capitalists that vary the traditional VC model and are sometimes referred to as “super angels” or “company builders,” such as Rocket Internet, Team Europe Ventures, Project A and others.
There is much to suggest that this trend is more sustainable than the first — brief — flowering of Berlin’s startup scene at the turn of the millennium.
The question remains: What is different this time? — Most notably, the fact that most startups get by with much less seed funding and most business models cash-break even within a relatively short time — or are abandoned before they’ve burned through much money. Startups have become more efficient and arguably more professional.
But financing has also changed: Many founders here in Berlin are now not doing it for the first time, and financing is often provided at the beginning by business angels who have themselves gone through start-up and exit experience and therefore bring a lot of their own know-how with them. The Super Angels and Company Builders mentioned above industrialize this process. Established VC funds are in the process of repositioning themselves in this landscape and in some respects also adapting their business model. This also increases the diversity of financing forms and structures. This is also an international trend.