We’ve had this discussion before. You could easily say that Berlin doesn’t have much going for it as a tech hub. Very limited local venture capital, no world-class computer sciences school, no real local economy, no real structural / regulatory support, no – err – proper airport,… the list goes on.
Yet, despite it still being a very young ecosystem with a ton of homework left to do (as the silly “next Silicon Valley” discussion is still going on in the media I should really update the “Will The Real Berlin Please Stand Up?” post), it clearly has become one of the most active entrepreneurial hubs in the world. Why? One reason is of course that we live in a wold where you can build and scale great companies from anywhere. Anywhere you can attract and retain the best talent that is. And if you believe that talent likes living in urban, inspiring and english-speaking environments – well Berlin is very good at that. It’s also probably the only large-scale urban inspiring environment where entrepreneurship has the center stage, not just another / smaller part of the economy that dominates the city. We like to say that startups should be doing one thing 10x better – this is what Berlin does 10x better; while still doing many other things 10x worse that we need to fix over time. So we could conclude by saying that Berlin’s entrepreneurial surge is driven by its ability to attract an increasingly hyper mobile group of talented people from around the world.
But then this raised a few eyebrows (including mine) recently “According to Dow Jones VentureSource in the second quarter last year Germany received $375.8m in new VC for 67 deals, mainly in Berlin, while the UK won $290m for 77 deals”. More VC invested in Berlin, where there is very limited local capital, than in London where there is several orders of magnitude more VC available? (please note – this is not London vs Berlin debate – I view Europe as an ecosystem of connected dots) The data is old and there doesn’t seem to be anything newer available. But if you look at some of the rounds that have happened in since then in Berlin (e.g. Souncloud / IVP, 6Wunderkinder / Sequoia, Onefootball / Union Square, DeliveryHero / Insight, Zlando / TH Lee etc) the picture is still going to look very healthy.
But yet we constantly hear that the lack of local VC is somehow keeping Berlin (and other tech hubs) back.
I am thinking we are going to have to start questioning that. We live in a world where not only talent has become hyper mobile, but also capital.
The implications are profound and will keep European VCs on their toes. The best entrepreneurs will not want to work with a ‘local’ VC if that is also where their mindset and network ends. Entrepreneurs can now raise from anywhere. We are seeing many European venture firms adapt to this: most formerly locally focused funds are now also investing across Europe, are beefing up their US ties, etc. This is good for entrepreneurs.
We may need to rethink what ‘local’ really is and how much it even matters. What do you think?