'Poor but sexy' Berlin woos start-ups to create jobs

Penniless and without major domestic industry to call its own, Berlin is nevertheless bursting with energy and setting its sights on start-ups to generate the jobs it so painfully needs. "The aim must be to become the number one place in Europe for start-ups," said Berlin's mayor Klaus Wowereit, who coined the city's slogan "Poor but sexy". But "there's still some work to do," he conceded. The German capital hopes these mini-companies that bet on innovation can become an economic engine, replenish the city-state's coffers and "bring jobs to the city". Consultancy firm McKinsey estimates they could generate as many as 100,000 jobs by 2020. That would be a welcome breath of fresh air for a region where more than one in 10 people are without a job, the highest unemployment rate in the country. One such start-up, Kiwi, has created nine jobs in less than two years. When she had her first child in 2005, Kiwi's founder Claudia Nagel was faced with the difficulty of rummaging for her keys when she arrived home with her arms full. So she came up with the idea of a remote-controlled electronic access badge that automatically opens doors from a distance. Employing just four people when it was launched at the start of 2012, Kiwi now has a workforce of 13. There are some 2,500 start-ups in Berlin, working primarily in the areas of Internet and IT, according to the fledgling sector's own industry federation. This could lead the way for the city to becoming Europe's Silicon Valley, a title that currently applies more to London, which ranks seventh worldwide in innovation, while Berlin ranks number 15 behind Paris or Moscow, according to McKinsey. "Berlin has many advantages. Above all, it draws lots of young international talent," says Claudia Nagel, whose colleagues include an American, a New Zealander and a Spaniard. There is also a "high concentration of start-ups", which can be a source of cross-pollination of talent. Moreover, the city enjoys a convenient geographical location, lots of space, but perhaps the biggest asset is its relatively low cost of living. Hence, a budding entrepreneur's start-up funds "will last twice as long in Berlin as in London," says Luis-Daniel Alegria, who set up a free social events app, Vamos, in 2012 with two friends using loans from his family. Without speaking a word of German, the 26-year-old Swede of Chilean origin is looking to raise one million euros ($1.3 million) and hire "three or four" people. Berlin's image as a trendy city with a bubbling student and arts scene is an ace in its hand for attracting entrepreneurial talent. But it can't dazzle with money, because the city doesn't have any. Mayor Wowereit hopes major companies on the look-out for fresh new ideas will take the entrepreneurs under their wing. This month, Microsoft will open up the top floor of its spanking brand new office on Berlin's chic Unter den Linden boulevard to start-ups. Telecoms giant Deutsche Telekom has its own incubator, called hub:raum, while media giant Axel Springer and mail order group Otto have invested in Project A, which takes its inspiration from Rocket Internet, the world's largest Internet incubator. Set up by the brothers Alexander, Marc and Oliver Samwer, Rocket Internet helped e-commerce group Zalando and web-dating site eDarling get started. "In these crisis times, start-ups and entrepreneurship are the only option," Marc Samwer told the technology conference TechCrunch Disrupt, which was held in Berlin in October in an old industrial hangar on the banks of the Spree river. The thorny question of financing remains the principal hurdle to Berlin's start-up ambitions, but another is the reluctance of students to become entrepreneurs. And the administrative difficulties can be daunting, even more so those who do not speak German. Jens Begemann, developer of Wooga games, says the biggest rub is trying to find follow-up investors to finance the growth phase. Germany's outgoing conservative government had tabled the idea of a stock exchange for start-ups. But whether it becomes more concrete will depend on the current negotiations between the Social Democrats and conservatives to form a new coalition government after the September general election.