“Booming Berlin” Reports the Tip of the Iceberg for Berlin’s Startup Scene

On 6 April 2016, the Institut für Strategieentwicklung (IFSE) – which translates to Institute for Strategy Development – released “Booming Berlin: A closer look at Berlin’s startup scene,” published in partnership with Factory Berlin. The study examined the state of the internet-related startup scene in the city, as well as how it has grown and changed between 2012 and 2016.

BoomingBerlinThe study defined a “startup” as: no more than five years old; could not exist without the internet (no hardware-based companies were included); and has an independent management. Startups were categorized by their provided service:

  • Marketplace – provides a trade platform for suppliers and demanders without being traders themselves
  • Commission Business – channeling selected product offers to customer and customers to selected shops based on payment of a commission
  • E-Commerce – trade in physical or digital goods from their own, or foreign, production
  • Social – service consists of the creation of (social) contacts that are not directly aiming at the trade of goods
  • Content – creation, administration, and presentation of digital content
  • Services – provides services to other businesses or end customers

Regardless of your own personal opinion of businesses labeled as ‘startups’ or which exist only on the internet, the quantitative analysis of Berlin’s startup ecosystem provides some compelling numbers.

Between 2012 and 2015, the number of Berlin-based startups grew from 270 to 620, and the workforce – the number of employees subject to the mandatory social insurance contributions in Germany – grew from 6,700 in 2012 to 13,200 in 2015. According to the Industrie- und Handelskammer zu Berlin (IHK Berlin) 2015 listing of the city’s largest employers, Berlin-based startups rank fifth as far as number of total employees. Berlin-based startups employ more people in the city than does Siemens AG, Deutsche Telekom AG, EDEKA Minden-Hannover Stiftung & Co. KG, and other big names.

The study notes that there is a highly unequal distribution of employees at the startups. According to the report, The actual “workforce median is nine, meaning that 50 percent of the Berlin-based startups have fewer than nine employees, while 50 percent have more than nine employees.” To drive this point home – only nine percent of all startups in Berlin have more than fifty employees.

Between 2012 and 2015, the share of workforce for startups in the Service category increased from 26% of the number of startups to 52% of all startups, while all other categories decreased in their share of the workforce, excepting for the Commission Business category, which increased its workforce share slightly, from 18% to 20%.

Looking at the amount of money brought into the city by these startups, “Booming Berlin” cites a recent Ernst & Young study reporting that “2.145 billion euros were invested in Berlin’s startups in 2015, attracting 1.254 billion euros more than the year before and making it the city with the highest venture capital investment in Europe.”

The number of major corporations founding startup accelerator programs has also grown from two in 2012, to ten in 2015. The following are the major corporate accelerator programs in Berlin:

  • hub:raum (Deutsche Telekom)
  • SAP Startup Focus (SAP)
  • Microsoft Ventures Accelerator (Microsoft)
  • DB mindbox (Deutsche Bahn)
  • Grants4Apps (Bayer)
  • agile Accelerator (E.ON)
  • Plug and Play (Axel Springer)
  • ProSiebenSat1 Accelerator (ProSiebenSat1)
  • Coca Cola Accelerator (Coca Cola)
  • Metro Accelerator (Techstars)

The growth in the number of corporate accelerators points to the difficulty Booming Berlin has with giving a true account of the number of startup jobs that exist in the city. It is likely that many of the startups funded by Grants4Apps – which are developing healthcare technologies – would not be counted in the IFSE’s narrow definition of a “startup” used in the report’s stated employment numbers. Likewise for the startups focused on innovations in railway infrastructure receiving support from DB mindbox.

While “Booming Berlin” is useful as a starting point, it reports just the tip of the iceberg as far as Berlin’s true startup scene goes. Future reports should include startups focused on hardware, pharma, infrastructure, and all other non-internet-based innovation. In doing so, we would be able to see the entirety of the startup scene’s contribution to the Berlin economy.

The Institut für Strategieentwicklung (IFSE) was founded in 2003 by a consortium of entrepreneurs, researchers and experts at the University of Witten/Herdecke, IFSE moved its main activities to Berlin at the end of 2007. The company supports its clients with studies, evaluations, strategy workshops, trainings and moderations in solving relevant strategic challenges. http://www.ifse.de

Factory Berlin is the first and largest startup campus in Germany. Opened in June 2014, Factory’s mission is to empower the next generation of entrepreneurs by closing the innovation gap between old and new economy and covering all stages of entrepreneurship (from prototype to IPO). With over 16,000 square meters of office space, Factory is home to more than 70 technology companies. http://www.factoryberlin.com

Bernadette Geyer helps small businesses, entrepreneurs, and creatives expand their reach through clear, concise, and compelling copy in English, so that they can attract more customers with consistent and memorable marketing content. Her “Rule Your Digital Domain” service helps businesses make sure their website and social media profiles are working to attract more customers. You can see her full list of services here.