BERLIN, Germany — The low thrum of ambient electronica music pulses through a four-floor walkup in the hip central neighborhood of Prenzlauerberg as dozens of young programmers stick on nametags and swap stories.
Welcome to what locals are calling Germany’s Silicon Alley, where the code junkies have come for a Startup Grind event.
It's a pretty typical meet-and-geek. Software code is the primary topic of conversation. One young man with a ponytail shouts on his cell phone as another in a hoodie furtively dives into a spread of canapes before the buffet table is officially open. There are only a handful of women.
The big news is that this kind of event is taking place in the German capital almost every night.
Despite cheap rents and a reputation as one of the world's coolest cities, Berlin has so far failed to live up to its goal of becoming Europe's startup hub. But that may finally be changing thanks to a rapid growth in funding, a new drive to attract foreign talent and a burst of interest from industry giants like Google, say insiders like Marco Brenner, who moved here a year ago to found a startup.
“We need to grow some meaningful businesses in Berlin,” he says confidently, looking more like a PR executive dressed in his blazer instead of the usual hoodies or T-shirts. “Then the money will follow.”
Berlin's startup scene could create as many as 100,000 jobs by 2020, according to a recent report by the global consultancy McKinsey & Co.
Although the city still lags behind competitors like London when it comes to infrastructure — partly because Germany's conservative investors have long made it difficult to raise capital — the city has some of the right ingredients, including a low cost base and a hip image that helps attract top talent.
Earlier this month, Google unveiled a mammoth new startup incubator known as “Factory,” where veterans from Google for Entrepreneurs and Twitter will mentor company founders.
A 16,000 square foot space carved out of an abandoned brewery that will eventually employ around 500 people, it represents a big vote of confidence from the world's most successful internet company.
And while German venture capitalists remain more conservative than their counterparts in Silicon Valley, the amount of money available for startups has increased dramatically.
Over the past year, Berlin-based tech startups have raised over $650 million, more than three times the amount generated the previous year and more than six times the amount raised the year before that, according to venture capital database CB Insights.
Founders of some of the city's more promising startups — such as the audiofile sharing service SoundCloud, the academic social networking company ResearchGate and collaborative video-editing software maker FlavourSys — say Berlin's shortcomings can sometimes be advantages.
The city’s hip reputation attracts software engineers interested in the intersection of technology and creative projects at the heart of companies like SoundCloud. The lower level of activity here also makes it easier to afford and retain talented people than it would be in more advanced startup hubs.
Starting out here allowed FlavourSys to fly under the radar as the company developed collaborative software that enables television company video editors to work on files simultaneously from different locations.
Even though the company’s target market was always the US — which now accounts for 80 percent of its business — FlavourSys booked the National Geographic channel as its first customer before anyone in the software world had an inkling of what it was doing.
That happened at an industry convention in Las Vegas.
“It was amazing,” said FlavourSys co-founder Marco Stahl on the rooftop of the company's converted-apartment headquarters. “There were crowds of people, 20, 30, 40 people standing there watching demos. Then National Geographic came along and said, 'We want to buy this!'”
For a company that two weeks earlier had no website or printed business cards, that was a big deal.
ResearchGate co-founder and CEO Ijad Madisch has a similar story.
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Billed somewhat dismissively as “Facebook for scientists,” the company aims to break traditional boundaries that often keep academic research cloistered in ivory towers and exclude scientists from the developing world. When Madisch first came up with the idea six years ago, he found the world-weary capital of academia Boston too jaded to bite.
Berlin was different. When Madisch moved ResearchGate here in 2010, fifteen years after Jeff Bezos had launched Amazon, copycats had attracted programmers and created a nascent ecosystem for e-commerce startups, but little else. However, Madisch says it created a hunger to do something more interesting.
As a result, it was comparatively easy for ResearchGate to attract top developers, doctors and scientists.
“Everyone here is hungry to work on something big,” Madisch says. “That puts Berlin at an advantage to Silicon Valley.”