SMART CITIES

What can we learn from Berlin as a start-up city?

Berlin, Germany’s capital, is one of the most vibrant and changing cities in the world. A place where the past and history contrast with the present and evolution. More than Germany’s capital, maybe Berlin’s importance lies in three main aspects: first, the location of the Bundestag or German Parliament, as the other federal ministries headquarters, that make Berlin the centre of political decision-making. Second, that Berlin is a start-up referent and promotion hub for innovation. Third, it is a city that attracts, holds and promotes talent as it nourishes the business ecosystem.

It’s incredible what a city can achieve coming from a difficult historical past. After the Second World War, Berlin was left completely destroyed and divided among the French, English, American and Soviet sectors. With the construction of the Berlin Wall, the city was divided for a little more than two decades between West and East Berlin. It was from the German reunification in 1991 that the city truly began its reconstruction process.

That’s why to analyse Berlin as a start-up city we must consider two factors that made Berlin the city it’s today: unlike the rest of Germany, in Berlin there were no big industries and the infrastructure wasn’t the best in the country; second, most of the people who came to live there were artists that promoted a cultural agenda different from every other German city. Both factors created an environment open to creativity and international collaboration.

Some of the fist start-ups, now multinational companies, that were born in Berlin were Scout24, specialized in real estate, Zalando, the clothes, shoes and accessories e-commerce and Idealo, an online price comparison site. In the year 2000, at the dawn of the internet, the companies were revolutionary and from their growth came an interest in VCs from the city’s opportunities.

Berlin as a start-up city

Currently, Berlin is a city that has created around 60 thousand jobs in the digital economy, most of them in emerging companies with a tech and software development focus. However, to get to this point the start-up ecosystem had some years to mature.

The city has accelerators, incubators, coworking spaces, innovation labs and public policies that provide financial support to different companies through associations like the German Start-up Association of the High-Tech Strategy, that encourage research and development for strengthening the economy.

First lesson learned: short-term strategies do not work if we want to strengthen entrepreneurial ecosystems and encourage start-up cities; well exemplified with Berlin. This must be understood through public policies working on local and federal levels.
 

Migration and start-up companies

Our visit to the Federal Ministry of Education and Research with the state minister Judith Pirscher made us realize that Germany’s richness lies in education investment, promoting early since primary school the interest for professional careers in STEM. This way the country aims to encourage curiosity and interest from the little ones to create a society focused on technology and innovation. This can only be achieved through political commitment, academic and corporate exigence and an understanding of the demographic composition of every city, even when governments change, which allows to potentiate talent and resources.

A crucial aspect about Berlin is that 22% of start-up founders are not German. According to a study called “Migrant Founders Monitor 2022” from the Friedrich Naumann Foundation for Freedom, from this 22% the 59% are first generation migrants born overseas that arrived in Germany to start their company. Berlin has become a German city that attracts more foreign founders.

Despite that, 43% of them report that their biggest challenge is finding funding. We could note this when analysing Boreal Light up close, a company founded by Ali-Al Hakim, who invested four years of his own savings while working three jobs to launch an enterprise that creates and supplies solar salinization systems to regions in Somalia and the Middle East. To this day, the company has a wide customer portfolio and a completely international workforce. Despite their global presence, their primary language is German; this is because, according to Hakim, since they are in Germany it is necessary to fully integrate themselves which is achieved through working like a German company.

The second lesson learned for our region is that it must facilitate the attraction of opportunities for business openings. For many migrants, self-employment and entrepreneurship is the only way they can begin their integration; this is only possible if their academic titles are recognized or the integration to local universities is promoted.

The role of universities

In Germany, 89% of the foreign founders have some degree of study on STEM or economy. This tells us about the large academic skills and the role German universities play in promoting talent since 63% studied in Germany.

A case we could see first-hand was the start-up “Incubator Berlin”, from the Berlin School of Economy and Law where students can test their business ideas and materialize them through special networking opportunities and scholarships. We met two students, one from Colombia, who are developing a forest fire detection and prevention system using drones to reduce the climate change effects seen in regions like California, Australia and Southern Europe. Identifying and preventing possible fires allows potential clients like insurance companies to sell their services to city planning departments, environmental preservation localities and families who want to protect their assets against forest fires.

The third great lesson learned is the role universities play in promoting their students' ideas, bringing them closer to the innovation ecosystem. In Mexico, this is a great area of opportunity since universities and the public sector can create alliances to strengthen these long-term initiatives.

We could say that the cornerstone for the creation of a start-up city lies on the alliances between universities as talent catalysers and strategies of the public sector to potentiate those efforts, adding education programs for the younger one towards STEM careers.

More benefits

Beyond promoting the creation of start-ups, transforming cities is more attractive to tech companies and direct international investment. An essential part of innovation ecosystems is that they bring entrepreneurs closer to the private inversion sector because from this relationship one can learn from those with great experience or encourage the acquisition of smaller start-ups by bigger companies.

In the case of Berlin, Tesla will soon finish the construction of their biggest plant in the Oder-Spree region in Brandenburg. Even if these opportunities will bring more job and exchange opportunities with entrepreneurs, we learned from the Oder-Spree Liberal Democratic Party (FDP) committee representatives, Dr. Manfred Dietrich and Wolf Dieter Zumpfort, that this also presents a challenge for the region in matters of infrastructure innovation and connectivity of the plant, mobility and agreements with powerful corporate leaders that should prioritize the interest of the local community.

Because of that, it is very important to understand all the implications foreign investment has, as well as how planning challenges for keeping the city accessible, providing its citizens with life quality while it attracts new talent.

Many cities in Mexico have the conditions to become start-up cities. Through policies like the creation of no cost, online SAS companies, the country can build a framework that facilitates the opening of businesses. What makes Berlin a start-up city that other cities in Mexico could replicate? Constant transformation, forming sustainable alliances and adaptability to change, three characteristics intrinsic to every entrepreneur.