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Wednesday, August 14, 2013

Berlin start-ups: Cool and commerce coming together?

In a new series Innovation Cultures takes an on-the-ground look at tech scenes around the world that hope in some way to emulate the successes of Silicon Valley. First up is Berlin, where Stephen Evans asks whether the cutting-edge, low-rent city is finally attracting serious investment.

When new businesses based on the computer chip began to cluster in Santa Clara Valley, it did not take long for someone to come up with the name Silicon Valley. That set a pattern, and soon there was Silicon Glen in Scotland, Kenya’s Silicon Savannah, Silicon Gulf in the Philippines, Silicon Taiga in Siberia – even the somewhat less romantic-sounding Silicon Roundabout in London.

Now there is Silicon Allee in Berlin (Allee, meaning alley or avenue in German, is part of many street names in the city), which to some observers evokes the atmosphere of the early days in Northern California. That was certainly the vibe at Tech Open Air Berlin, a gathering held earlier this month in a ramshackle complex of wooden and stone buildings in Kreuzberg, a trendy part of the city. There was soft acoustic music and falafel, and a lot of beautiful people exuding a studied coolness.

“You’re going to see a lot of amazing stuff coming out of Berlin,” says Tikhon Bernstam, who came over from Silicon Valley to attend the event. “This sort of culture that you see here, the hippy music, we had exactly the same thing in San Francisco a few years ago. I’ve been impressed by the quality of the companies I’ve been seeing here.” Bernstam’s cloud data service he co-founded, Parse, was recently bought by Facebook for $85 million.

Of course, Berlin is many leagues behind Silicon Valley. From Adobe through to Yahoo, via Apple, Intel, Google and Oracle, the Valley, as its occupants call it, has a combined wealth which most countries would envy.

Exact figures are hard to come by, but Berlin came ninth in a recent global ranking of cities with the most tech start-ups founded since 2002 that are global, or received angel funding or institutional venture capital. The top three spots were occupied by San Francisco-Silicon Valley with 201 start-ups, New York (144) and London (90). Berlin had 27, just ahead of Bangalore on 26 and Sao Paulo on 21.

But with its reputation for doing things differently, very cheap rents, and the ambition and optimism on show at events like Tech Open Air Berlin, the hope is that its scene will deliver on the buzz that has surrounded it for the past few years.

The city itself is in many ways a start up. From 1945 it was shattered and split for almost half a century. The eastern, Soviet-controlled zone was hardly a seed-bed for innovation. Industry moved out from the West. Students were exempted from military service, attracting a young, artistic and politically radical alternative scene.

Since the fall of the Wall in 1989, the city has been re-inventing itself. The vibrant alternative culture remains in place, and some see it as providing fertile ground for the creation of disruptive technologies – though others argue that a counterculture-led antipathy to money-making may hamper innovation.

One thing that is clear is that property is cheap – Berlin still has rents which are so low that they make visitors from London and New York gasp. The average annual cost of a workstation in an office in Berlin, including maintenance costs, taxes and rent, was $8,410 at the end of last year, compared with $14,050 for New York and $14,620 in the City of London, according to a report published by the global property company DTZ. Renting a 120 square metre apartment in Berlin costs around a third what it does in London and New York.

This combination has attracted many who aspire to be the next big thing in tech. In a few cases they have already succeeded, such as the social game developer Wooga or Research Gate, a networking website for scientists. The darling of the scene is SoundCloud, an audio sharing platform that has 200 million users every month. Alex Ljung, its co-founder and chief executive, moved the company from Stockholm to Berlin because he felt it offered a richer mix of people involved in music, and because of the ample and cheap office space.

Source: BBC