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Blog | 27. April 2017

BERLIN IS GERMANY’S VENTURE CAPITAL HOTSPOT

The one thing young companies need most: money. They’re already rich in ideas. However, in order to develop viable business models, they need financial resources. Classic investors such as banks or savings banks are often simply not interested. Venture capital remains a viable alternative. Backers are investing in the future of promising market participants and speculating on a company’s growth and potential value. Young entrepreneurs have to be very persuasive to win these investors over. Nowhere else are start-ups as successful as in the country’s capital. Last year, a total of 220 funding rounds for venture capital took place in Berlin – eight rounds more than in 2015. In comparison, the number was 486 for all of Germany (2015: only 417).

BUSINESS ANGELS AND INCUBATORS ARE SUPPORTING START-UPS

The number of funding rounds is the benchmark for the growth of new companies. These rounds are used to negotiate seed capital and further financing. And the more there are, the more positive the overall picture. In Berlin, start-ups, particularly from the digital economy, are booming: service providers for finance, information and communication. But, nothing is possible without seed capital. Many so-called business angels – private investors who have themselves been successful entrepreneurs – support founders with both money and knowledge. Incubators also provide support beyond financial resources. They offer low-cost office space, help with marketing questions and enable the exchange of experience with other founding teams. Rocket Internet, the most famous incubator, is a Berlin original. Without the involvement of this listed investment company, there would be no such thing as the online retailer, Zalando.

DIGITAL ECONOMY BRINGS SKILLED WORKERS TO THE CAPITAL

In 2016, about EUR 1.1 billion of venture capital flowed into Berlin start-ups in different industries. The food delivery service, HelloFresh, secured EUR 85 million. The online music service, Soundcloud, and the digital travel planner, Goeuro, were able to expand their businesses with EUR 70 million each. The expansion rate of these young companies also provides more employment in the capital. As early as 2015, half a percent of all jobs came from companies that had received venture capital during the year. Nationwide, the share was only 0.04 percent. More than 17,000 jobs now exist thanks to start-ups. And the trend is growing.

More and more young professionals are moving to Berlin – a reason for the sustained population growth – and the ever-increasing need for housing. The real estate company, Aengevelt, has recently calculated that by 2030, an additional 248,400 residential units will have to be built to accommodate all existing and new Berliners. Berlin is unlikely to reach this level. In recent years, only around 5,500 apartments have been completed each year, far short of the more than 17,700 needed on average per year. As a result of this deficit, landlords should expect the rental market to remain buoyant in the long term – especially if they own smaller apartments for young or older singles.

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Blog | 27. April 2017

BERLIN IS GERMANY’S VENTURE CAPITAL HOTSPOT

The one thing young companies need most: money. They’re already rich in ideas. However, in order to develop viable business models, they need financial resources. Classic investors such as banks or savings banks are often simply not interested. Venture capital remains a viable alternative. Backers are investing in the future of promising market participants and speculating on a company’s growth and potential value. Young entrepreneurs have to be very persuasive to win these investors over. Nowhere else are start-ups as successful as in the country’s capital. Last year, a total of 220 funding rounds for venture capital took place in Berlin – eight rounds more than in 2015. In comparison, the number was 486 for all of Germany (2015: only 417).

BUSINESS ANGELS AND INCUBATORS ARE SUPPORTING START-UPS

The number of funding rounds is the benchmark for the growth of new companies. These rounds are used to negotiate seed capital and further financing. And the more there are, the more positive the overall picture. In Berlin, start-ups, particularly from the digital economy, are booming: service providers for finance, information and communication. But, nothing is possible without seed capital. Many so-called business angels – private investors who have themselves been successful entrepreneurs – support founders with both money and knowledge. Incubators also provide support beyond financial resources. They offer low-cost office space, help with marketing questions and enable the exchange of experience with other founding teams. Rocket Internet, the most famous incubator, is a Berlin original. Without the involvement of this listed investment company, there would be no such thing as the online retailer, Zalando.

DIGITAL ECONOMY BRINGS SKILLED WORKERS TO THE CAPITAL

In 2016, about EUR 1.1 billion of venture capital flowed into Berlin start-ups in different industries. The food delivery service, HelloFresh, secured EUR 85 million. The online music service, Soundcloud, and the digital travel planner, Goeuro, were able to expand their businesses with EUR 70 million each. The expansion rate of these young companies also provides more employment in the capital. As early as 2015, half a percent of all jobs came from companies that had received venture capital during the year. Nationwide, the share was only 0.04 percent. More than 17,000 jobs now exist thanks to start-ups. And the trend is growing.

More and more young professionals are moving to Berlin – a reason for the sustained population growth – and the ever-increasing need for housing. The real estate company, Aengevelt, has recently calculated that by 2030, an additional 248,400 residential units will have to be built to accommodate all existing and new Berliners. Berlin is unlikely to reach this level. In recent years, only around 5,500 apartments have been completed each year, far short of the more than 17,700 needed on average per year. As a result of this deficit, landlords should expect the rental market to remain buoyant in the long term – especially if they own smaller apartments for young or older singles.

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