Opinion

London vs Berlin: Which European city reigns supreme as the startup powerhouse?

6 min read

20 July 2016

Laura McLeod, senior digital marketing manager at 99designs, compares the two cities that claim to be Europe’s number one hub for digital startups – London and Berlin – to find out which really is the best place for a tech startup to flourish.

UK-based tech startups are understandably concerned about the current business climate in a post-Brexit world. The true impact of the decision made on that fateful day in June is impossible to call, particularly given the current state of flux we find ourselves in – even more so for people looking to start new businesses. However, if subsequent research from Tech City UK is anything to go by we should endeavour to be optimistic, as over a third of tech businesses are taking a “businesses as usual” approach.

Furthermore, only 22 per cent expect to scale back ambitions for growth. But is the UK the best place for a startup to flourish, or should we be looking to one of our European counterparts who some would argue is more worthy of the startup crown?

The UK recovered from the 2007 global financial crisis, and the tech industry has become a key contributor to the country’s economic growth. In the first quarter of 2015 alone, £459m of venture capital was invested in emerging digital companies. This represents an increase of 66 per cent over the first quarter of 2014.

It’s hard to believe, but five years ago there were only 250 digital companies in the British capital. Since then, development has exploded: there are now over 3,000 such companies in London, employing a total of 1.5m workers. So, it is not hugely surprising that London has the biggest startup ecosystem in Europe and the fourth largest in the world. Entrepreneurs in London benefit from easy access to wealthy consumers and large corporations, ambitious British government initiatives and an established funding landscape.

But there’s another city that claims to be Europe’s number one hub for digital startups: Berlin. Germany’s capital and cultural centre has a reputation for nurturing creative people and lifestyles. Every year, its galleries, museums, music venues and theatres attract millions of tourists. It also features several charismatic neighbourhoods, like the Bergmannstrasse, which are filled with activity, culture and entertainment – the perfect breeding ground for creativity. It is also increasingly becoming a multicultural city, with an estimated 44 per cent of new business started by entrepreneurs who are not originally from Germany.

Read more on various startup hubs:

The city also offers creative minds a wide range of incubators, co-working spaces and innovation labs. And it’s not only the private sector that’s in on the game: the German federal government has outlined a high-tech strategy that provides resources to help tech companies succeed. These conditions provide startups – as well as established – companies optimal conditions in which to grow.

In 2010, there were almost 43,000 startups in the German capital – an impressive number for a relatively small city. In fact, this translates to a whopping 124 startups per 10,000 residents. Overall, an estimated 60,000 people work in the digital domain. According to the Global Startup ecosystem ranking, in 2015 Berlin was actually the fastest growing startup city in the world. Data tells us that every 20 minutes a startup is founded in Berlin. By 2020, the startup ecosystem has the possibility to create more than 100,000 jobs.

London has similarly always been known for being on the cutting edge in art and culture. In the past few years, however, the city has witnessed a migration. The city’s population is growing disproportionately fast, resulting in an increased demand for residential and commercial properties, which drives up prices. And as property prices keep going up, the creative classes are forced out.

Both cities have a lot to offer entrepreneurs: there are booming creative scenes with great cultural activities and nightlife for employees; the governments are helping to fuel tech growth with economic incentives; and there’s a large, educated, eager workforce. London has the edge in terms of technical ease of starting a business – it’s cheaper and faster. However, the fact that salaries are approximately even across the two cities makes the significantly lower cost of living in Berlin a smarter place for a startup to put down roots.

Both cities balance centuries-old culture with vibrant tech scenes. They also both claim to be Europe’s number one hub for digital startups, but only one can take home the silicon crown. Add to that a hugely uncertain economic scene from the Brexit fallout and the decision about where best to locate your hot new unicorn company becomes even harder. But what is clear, is that these cities, both known for their resiliency, will continue to prosper as tech powerhouses and the startup scene should undoubtedly remain ever optimistic.

Laura McLeod is senior digital marketing manager at 99designs.

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