The economy of Germany has been largely dependent on huge corporations and a number of small and medium-sized companies for the longest time, but today, Berlin, Germany’s capital, is perceived as the startup capital of Europe. As such, it is very attractive to young business owners from different parts of the world.
Berlin is proof of German resiliency and fortitude. It regained its former glory after it was destroyed during World War II. It was rebuilt to showcase great cultural and economic growth after 1945.
When the Berlin Wall finally came down in 1989, it lifted the outlook for the reinstatement of Berlin as the country’s capital. Finally, due to the reunification treaty in 1990, Berlin’s status was restored. It became a state, announcing the return of the city to its prominent position in European commerce and culture. Berlin is home to about 3.7 million people in 2018.
Status of the German business environment
From being dependent on big corporations and other industries, Germany had a second phase since 2005. The country started to be a great hub for startups engaged in digital businesses. The startups started to become more important for the country because of the number of jobs they generate and their contribution to the economy.
These startups develop innovations and generate jobs increasingly that lead to the promotion of competition among peers. A company is considered a startup when it is not over five years in existence. It is estimated that there are about 6,000 digital startups in Germany and they have provided 80,000 jobs already.
Germany started to give more focus to digital developments when e-commerce companies started doing business. Many of the ideas adapted by German company owners were from the United States. However, startups in Germany became more innovative and daring.
They now have their own creative and different ideas and are busy launching them. The German universities are responding to the trend. Aside from the standard courses in economics, the universities are adding to their curricula, offering subjects on setting up digital companies to would-be entrepreneurs. Various incentives were offered to their employees by top German research institutes such as the Helmholtz Association, the Max Planck Society and the Fraunhofer-Society, so they can develop patents and innovations into digital business models for the students.
Additional support
The German Federal Government has established the Digital Agenda 2020. The government commits to preparing a digital economy for a worldwide competition as well as turning the country into Europe’s number one in digital growth. Support for students and entrepreneurs was provided by the Federal Ministry for Economic Affairs and Energy since 1998. The ministry has provided startup scholarships called EXIST to graduates and students alike. It also has added investments into the High Tech startup fund along with several investors and the Kreditanstalt für Wiederaufbau (KfW). They continue to promote these digital startups in Germany.
Berlin, a hub for investors and startups
Berlin is teeming with several private investors. Standing out among the rest is Rocket Internet, which is a listed Internet company in Germany. It has stakes in several German startups.
The company was established by individuals and groups such as Alexander and Oliver Samwer and Brothers Marc. They are innovative leaders in the field of digital entrepreneurship. Just two years ago, Rocket Internet effectively had 30,000 employees as the group has stakes in several companies operating in 110 countries across six continents.
Another Berlin-based investor is the German Startups Group. It ranks second in Germany as a source of venture capital. It is also expanding and already has stakes in 40 startups that are predicted to grow rapidly and start generating revenues and profits.
Berlin and the rest of Germany are not lacking in national investors and venture capitalists that are working alongside Rocket Internet and the German Startups Group to provide seed capital to startups engaged in digital business pursuits. Likewise, Germany is attracting several foreign investors because of the profitability of the country’s digital startups. The United States for one is eyeing the startup scene in Germany and the amount of investments American investors are pouring into them is rapidly increasing.
About €3.1 billion was invested in 2015, which is five times the investment made in 2013 and twice the amount poured in 2014. About €1.8 billion was used to finance online trading and business services sectors. Insurance and financial service providers (FinTechs) received the second-highest amount of capital investment. The FinTechs, with their online platforms, are now competing with traditional insurance providers and banks.
Berlin, the startup capital of Europe
Out of the €3.1 billion of startup capital that Germany received in 2015, €2.1 billion were given to Berlin’s startups. Other European cities that received large startup investment capitals are London, Stockholm and Paris, in that order.
The startups with the biggest gross earnings are also Berlin-based. Other successful German cities for startups include Frankfurt am Main, Stuttgart, Cologne/Düsseldorf, Hamburg and Munich.
Berlin is very attractive to the technology sector and creative industry entrepreneurs. Its startup scene is now the most international among the cities in Germany since 34% of its workforce come from other countries.
Some of the key advantages Berlin offers include low rents and very good institutes for higher education. Berlin is gearing up to be on the level with other international startup centers like Silicon Valley, New York and Tel Aviv.
It looks that Berlin will soon achieve its goal because it continues to attract digital talents from outside the country, making its startup scene more diverse, dynamic and agile.
Startups to watch out for in Berlin and other German cities
Germany, especially Berlin, has been an incubator to a number of digital and technology sector startups, making the country’s industries more dynamic with startups in big data and software, artificial intelligence, clean technology, biotechnology and finance and insurance technology. Several of these startups are already making a name in the international business stage. Here are some of them.
- Auto1 had received $1.1B in funding in seven rounds with leading investors from Princeville Global, Piton Capital, DST Global and Softbank. It’s valued at $2.98 billion in mid-January 2018. Auto1 is a tech platform connecting sellers and buyers of used cars. The company buys used cars from its business units, dealerships and original equipment manufacturers or OEMs. The company then sells the cars to a global dealership network that it operates.
- After 15 funding rounds, Delivery Hero‘s total fund has reached $2.6 billion. Funding came from numerous investors such as Luxor Capital Group, Phenomen Ventures, Kite Ventures, Naspers, Rocket Internet, Point Nine Capital and Insight Venture Partners. Delivery Hero has acquired 14 companies including Lieferheld, foodpanda, foodora, Yogiyo, Pedidosya, Talabat, e-Food and Yemeksepeti. It has also invested in eight companies. As of June 20, 2017, Delivery Hero’s IPO valuation is pegged at €4.5 billion. Delivery Hero is an online food ordering network that has partnerships with 100 restaurants located worldwide, in locations such as Puerto Rico, Panama, Venezuela, Peru, Brazil, Uruguay, Chile, Argentina, Mexico, Colombia, India, China, Switzerland, Australia, Poland, Finland, Sweden, South Korea, Austria, the UK and Germany.
- Zalando is the leading online technology and fashion company in Europe. It offers a wide variety of men, women and children’s fashion. The company carries more than 1,500 brands with 150,000 items. Its customer base, which is now at 17 million, comes from 15 countries in and outside Europe. Zalando has acquired nugg.ad GmbH, Metrigo, AMAZE, Tradebyte Software GmbH and KICKZ AG. It has invested in 7 startups to date.
- Kreditech is an online lender. Loans are offered to individuals who are creditworthy. The client’s credit standing is verified through analysis of their online data. Kreditech’s banking products include electronic wallets, credit cards, microloans and installment loans. They serve customers from emerging markets. In May 10, 2017, its total funding reached $497.3M, with lead investors such as Rakuten, International Finance Corporation, Blumberg Capital and Global Founders Capital. Three years ago it acquired Kontomierz
- Trust the Germans to look for innovation means of transportation. Lilium Aviation, a startup that receives funding from Atomico and Tencent Holdings, is supported by the European Space Agency. It is developing vertical take-off and landing jets that run on electricity in a bid to decongest cities and towns by allowing people to go anywhere easily.
- Bill Gates, Tenaya Capital and Benchmark are lead investors in ResearchGate. It is a social networking platform for researchers and scientists to collaborate, ask and answer queries and share research papers. The company aims to make research open to everyone by connecting the world of science.
These are not the only startups worth checking. There are several more.
- HelloFresh is a food subscription company that delivers pre-portioned ingredients for easy-to-cook meals prepared by top chefs and nutritionists. Interestingly, HelloFresh has even expanded its spectrum by acquiring services such as EveryPlate and Green Chef, further broadening their affordable meal subscription offerings.
- BioNTech AG is the largest privately held biopharmaceutical company in Germany. It’s a pioneer in individualized cancer and other illness therapies under one company, from diagnostics to the development and manufacturing of drugs for immunotherapy.
- BlueYonder provides cloud-based Predictive Applications for the use of retailers so they can make a qualitative shift on their core processes. The app automates complicated decisions to help attain customer value and higher profits through artificial intelligence.
- FinCompare is a one-stop financing platform for SMEs. The company helps SMEs to find clients as well as compare and acquire loans from more than 200 lenders. The company, which is based in Berlin, plans to expand to France, Benelux and Austria.
You can find a variety of technology-based startups in Berlin and around Germany right now. They serve a variety of industries from banking, finance, loans, insurance, healthcare, transportation, deep web search, efficiency services, business intelligence platforms, travel and tours, fashion, retail, personal savings, catering, freight forwarding and more.
If you are looking for investment opportunities or you want to have a startup of your own, check out the opportunities in Germany.
Resources: Fintech and Localization go together when expanding to international markets. Visit our free guide on Going Global in the Fintech Industry.
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