The Long Shadow Of The Valley Reaches Berlin

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The Long Shadow Of The Valley Reaches Berlin

 

This following is a guest post by Jonathan Gebauer.  Jonathan is the founder/CEO at exploreB2B, based in Berlin, Germany.  

There is a lot of talk about startup hubs world wide – the places where the next Facebook will originate from, the next Instagram, the next Pinterest. I am from one of these places, Berlin, the capital of Germany. There is no lack of technology startups in this city.

But to be a place where new technologies and innovations thrive – well, there are a lot of things missing.

I was born in Berlin, I live here and we founded exploreB2B here. I breathe the air of this city and feel at home. But when we started, the air tasted different – I thought I could feel a vibe in the air that consisted of innovation in the startup scene. Today I know: this taste was more hype than vibe.shadow megaphone

A story that got me thinking

Let me start with something that has recently happened to us, and which inspired me to write this article. I received an email from a US based VC which read: “Hey, we love what you are building at exploreB2B, let us know if you would like to talk to us.”

(I am sure Silicon Valley startups receive these every week.)

So far so good – naturally I wrote back. When they found out that we are located in Germany everything turned stone cold. They replied how sorry they were but since we are located in Germany, they would need to inform their European team and they would get in touch.

Their European team never got in touch. So far, not so global.

This is no big deal – it just got me thinking. Why is it that the European arm of a Venture Capital firm seems to think and act so differently from their U.S. counterparts?

This also was not the first time something like this happened to us. The story of our PR failures has already been published. We Berliners often make ourselves believe that Berlin will become the “next Silicon Valley” – but being second does not matter. Silicon Valley is not going away – so: who cares about Berlin?

The exceptions: Berlin startups that reached international fame

There are, of course, exceptions to the general rule. Innovative tech companies that reach international fame and success. Let me list the few that come to my mind: Soundcloud, ResearchGate, Aupeo, Wooga.

The same timespan in the US has brought us: Facebook, Instagram, Pinterest, Dropbox, Zynga, Box, Yammer, Foursquare, Twitter, Quora, Groupon, LinkedIn… The list goes on.

There are a lot of things missing here. And the successful cloning of successful US startups (which happened with Facebook, LinkedIn, Groupon, and many more here in Germany) is not the same as innovation.

Tech is not global – why no startup hub can really prosper without Silicon Valley’s support

 

At first glance, Berlin seems to have it all. There are startup competitions every other day, meetups, hackathons, conferences, … There is a network of business angels and investors, the city has had a couple of exits recently. A couple of tech blogs write about the city’s tech companies (both in German and English). With Ashton Kutcher’s not-so-recent investments in Amen and Gidsy a slice of Hollywood glamour was introduced. The area in the city center where most startups reside likes to be called “Silicon Allee” now – noting a resemblance to Silicon Valley.

There also is a lot of talent in the city – talent, which startups can hire. Three universities and multiple “Fachhochschulen” offer a supply of well educated developers and marketing minds while the city’s historic background shows a tradition for risk-taking – including the risk to start your own company.

But technology and innovation needs more than just founders and employees.

It needs a community and this community needs to include established tech people and companies as well as access to the traditional economy. Not just people who are new to the industry but also professionals from companies of any size and stage. It needs access to the likes of Apple, Microsoft, Google. You need to be able to see the shining light of Bill Gates talking on stage. You need investors who have a crap-load of money to invest on nothing but a crazy idea and feeling in their gut. You need access to marketing experts that can give advice, to tech companies that provide exit perspectives.

Berlin does not have those things.

Silicon Valley can provide this to other so called startup and tech hubs. It does so in some cases. But other tech hubs currently only exist by way of Silicon Valley’s support. They get as big and as successful as Silicon Valley allows them to be.

We Berliners might not admit that this is a fact, but we do know it in our hearts. A common first prize in our startup competitions is a trip to the valley. Or office space in the valley. Or a trip to attend a tech conference Or… You get the picture.

The consequences for young companies

 

This situation forces companies in other startup hubs to adjust. In Germany, the Samwer brothers face a lot of criticism for their cloning operations of international and US startups. It is true: they have been involved in cloning Groupon, Facebook, Zappos, Pinterest, Fab, Amazon, and many more. What is also true, is: This is a way to deal with our situation. Cloning companies also means you have access to information on how marketing strategies will perform and how you can achieve growth. When expertise and support is lacking, this is a valid way to replace it.

Another strategy is to prepare for an early exit. Selling your company early for comparatively small sums seems to be quite common in Germany – creating concepts for a global approach is not. The latest example for this is the formerly hyped startup Gidsy (which got famous by the Ashton Kutcher investment) – which just sold out to a competitor in a not so glamorous way.

There is no tech community in Berlin – just a startup community. This makes it hard for companies to break out of the startup hemisphere. Gidsy was criticized for its lack of professionalization, but you have to ask the question: How can a group of crazy founders get professional if there is no community to help with the process?

The few exceptions to these rules are companies and founders that usually readjust their geographic locations sooner rather than later. Soundcloud has offices nearly everywhere, others are moving their operations to San Francisco.

How to bend the rules: A way out for those that still want to think big

 

I do not like rules that cannot be bent – and I do not like to go small when others hit it big. I like to compete and I do not like failure. I did not invent exploreB2B for a small audience and I do not want to think small. In a world where creative minds are thinking up solutions, there are always options to become more competitive.

Those of us being unlucky enough to have founded our companies in places like Berlin, London, Paris or Sao Paolo still have a lot of options – the whole tech industry was created by people who bent the rules but refused to be bent by them.

In the beginning I told you about a VC not noticing where we are located – well, this sort of thing happens to me all the time. I receive emails, tweets, Facebook messages asking me whether I will be able to come to a meetup in San Francisco, or New York, or London… I always answer: “Hey, I am in Berlin.”

Most of the time the next message is: “Ok, give me a call when you are back.”

The way out for us is to stop worrying about Silicon Valley. In today’s world it is like any other place in the world: a place on the map.

I get emails from London, have Skype calls with bloggers in France, worked with a PR agency in the US (that didn’t go so well…), had articles published on an Australian blog (Big thank you to Jeff Bullas).

The community we need is there – you do not have to see people face to face to be able to get their advice. When you are creating a company on a global scale stop thinking narrow. Never limit yourself to the things you can do in your city.

By doing that we will force Silicon Valley to do the same. The big investments might not yet have reached our startup hubs, but they will come.

We need to stop picturing ourselves in direct competition with Silicon Valley – Berlin will never become “the next Silicon Valley”. But it does have its own strengths. As does London, as does any other city in the world. Each one of those places should play on its own strength – instead of highlighting its shortcomings in comparison to the Bay Area.

For Berlin, I can think of a lot of strengths: the talent supplied from universities, its geographic position and its history of being a place where eastern and western Europe unite, its history of being a place where people take risks.

We need to play our local strengths – and remove our weaknesses by acting globally.

Think less local.

We are entrepreneurs, we are founders, we are innovators. We were born to break the rules

What's your take?  What should entrepreneurs do to make tech innovation truly global?

Posted by Dharmesh Shah on Wed, Jun 26, 2013

COMMENTS

I was actually shocked reading this. I am co-founder of Wuzzuf.com, a startup based in Cairo, Egypt for the past 4 years. I've heard many people complain about the same things here in Cairo, Egypt about the startup community still lacking a lot and very few VCs and of course it is very rare to have a US VC invest here.  
 
The reason I was shocked was seeing you complain about a similar situation in Berlin which many people would image should be in a better situation than in Cairo. We do have many promising startups here in Egypt and in recent years, despite the revolution had many new incubators, startup competitions, angel investor groups, but only a couple of real VCs. But still something is lacking and it's very difficult for many startups to get enough support to build something global.  
 
But hearing what you say made me feel that the challenges are not just in Cairo or similar emerging startup hubs. It seems that this is the norm, the only thing that's really different is Silicon Valley and all other startup hubs need lot of support and time to come even close.  
 
The thing I agree so much with you is that, as entrepreneurs there should never be any limitation to what we can achieve. With all the knowledge and experience coming from startups in the US (OnStartups is a great example together with other great sources like Quora), we're able to get access to first hand experiences as if we're all in Silicon Valley or Boston.  
 
So cheers to all those who are sharing and spreading the knowledge and experiences... including Dharmesh of course :) 
 
 
 
 

posted on Wednesday, June 26, 2013 at 1:27 PM by Ameer Sherif


Dear Ameer, 
 
Thank you for your comment - and I agree: the situation for startups in Egypt is probably worse than the situation in Berlin.  
 
In writing this article my intention was actually not to complain. I love what I do and I love the place where I do it. I think it can be a great place for startups, and it does have a lot of strength that startups can and should capitalize on. I believe, that we entrepreneurs should stop looking at what the places we found our companies in do not provide us with and start to see what advantages we have.  
 
It took me a while to come to this conclusion. Silicon Valley's advantages are just too obvious: A lot of money and a great community. But the community (in today's world) can be taken advantage of from anywhere in the world. And not having all the money in the world available can also sometimes be an advantage.  
 
I would love to hear about the situation in Egypt - not only the disadvantages, I would also like to hear what you think about strength that startups can capitalize on? 
 
Feel free to email me at jonathan (at) exploreb2b dot com

posted on Wednesday, June 26, 2013 at 3:42 PM by Jonathan Gebauer


I just read your email and just would like to make a comment.. The STARTUP is just the first step in an ongoing business...well just about, and if the aim is to go global with it , you need to employ those tools that will get you there ..your first choice is the internet,(your global reach) ... with all the social networks therein , is it is a matter of CROSS LINKING. your CROSS LINKING MUST POINT EVERYTHING IN YOUR DIRECTION/YOUR COMPANY while making irresistible offers to those techies that you wish to attract and build your enterprise...look at the example of Virgin... wanting to make commercial flights in space, just an idea ,no capital...issued an incentive to create the means to an end.. attracted the expertise, the investment and created the "product" and today he all smiles having gone global with just an idea targeted to those capable of producing/actualizing that idea via niches in global network marketing. 
hope that you all can read between the lines. 
thanks for allowing me to share, 
"nineofnine" 

posted on Wednesday, June 26, 2013 at 6:37 PM by JOHN FORDE


a global perspective 
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posted on Wednesday, June 26, 2013 at 6:45 PM by JOHN FORDE


This is the most timely blog post I have ever read - I was just in a little debate with a Canadian I am very close with. I am American, and usually we criticize the US together for its alarmingly increasing number of shortcomings, but when I said that the greatest things are happening here, in Southern California, and such a phenomenon couldn't happen anywhere else, it was received very well. Well, case and point. ;) 
 
Another very interesting insight is the statement about the Samwar brothers merely adapting to the fact that they can't really innovate there, so they just clone things to find success as entrepreneurs. Of course, I don't think this will change the poor opinion of them, but it does offer some clarification on how that behavior was prompted. 
 
Great post!

posted on Wednesday, June 26, 2013 at 10:55 PM by Jimmy


I also found this article very timely. I'm in the early stage of founding a social startup (bootstrapped, pre-seed, soon-prototype) focused on creating a platform for improving political discourse online, and have been feeling very positive towards the culture of art, risk, design, and entrepreneurship in Berlin. Only recently have I been coming to grips with the reality of a city with fundamentally fewer opportunities for funding. However, I did hear an interesting further take which you did not explore in your article. A friend in the Valley (working for one of the big names) recently expressed that he thought that the talent (programmers specifically) that I would find in Berlin would be better than California, as so much money and demand (with the best going to google and fb) driving up prices and attracting alot of bad work.

posted on Thursday, June 27, 2013 at 10:44 AM by Benjamin Snow


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posted on Thursday, June 27, 2013 at 6:10 PM by meet hk


@all Thank you for all the thoughtful comments. 
 
@Jimmy Glad you liked the post. My intention was not to promote the Samwers, merely to analyze and understand. Their focus is on execution, not innovation. In essence their success is a pain for the Berlin startup community - but their success is undeniably there.  
 
@Benjamin I did cover this at least when talking about Berlin's strength. Berlin has a lot of talent available for founders via universities (and because it is a desirable place to live in). Talking about the difference in developer salaries in the two locations would have exceeded the scope of the post imo.  
 
You are of course right in saying that developers are generally available for lower salaries here - but since funding is so much harder to find, this does not matter as much as you would think. And development costs are rapidly increasing over here as well. 
 
I am switching to complaining again - this is not what we should do, though. The world is getting smaller by the minute, and I believe we startups can use this to our advantage.

posted on Friday, June 28, 2013 at 4:04 AM by Jonathan Gebauer


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posted on Sunday, July 07, 2013 at 9:38 PM by MLR Institute of Technology


Very sensible article. Also some sensible comments as well. 
 
I think there's still hope for Berlin to become an important e-commerce destination. However, at the moment, we're hanging dangerously between oblivion and overrating. Let's not forget what attracted businesses to Berlin in the first place: the affordable conditions that the city offered combined with talented people to take the wildest ideas ahead. Well, the city is not so affordable anymore. Though it's still cheaper than most, things are changing rapidly. And moreover, lots of old timers who really got the things going, just fled! That's scary! 
 
Now, as Jonathan says, we have good universities and colleges. And Berlin attracts, more than ever, highly creative people. If we can get pass that feeling that we're soooooo innovative and groundbreaking, and the whole e-community put an effort and hard-working in making our start-ups go past the embrionary phase to the real deal business, there's a great chance of establishing our place on the map. Who cares about San Francisco anyway? The important is finding our own possibilities so we can build an identity in the e-world. 
 
Anyway, good article, wise words.

posted on Monday, July 29, 2013 at 8:04 AM by Dennis Meisener


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