Germany’s economy is the largest in Europe and fourth in the world, but its capital city Berlin is not the center of the nation’s economy. Unlike city-state Singapore or Jakarta, Berlin is home to few large companies while its GDP is lower than the national average.
That situation, however, is undergoing a change as startups are now beginning to come to Berlin and building a vibrant tech culture: the capital city is now the home base for 60% of German startups. As the city provides plenty of space and offer far lower rental rates in comparison to Frankfurt or Munich, it has become the choice destination for young entrepreneurs who wish to start their businesses in ways that also help to reinvigorate the economy of Berlin.
In view of this development, the Berlin government is encouraging startups to also look for wider opportunities in Southeast Asia. With a population of 640 million in 2017, the total GDP of Southeast Asia amounts to $2.8 trillion and is expected to grow at 5.2% until 2022. By 2025, its digital economy will increase by twofold to $200 billion with e-commerce expected to reach $88 billion. As such, the diverse and vibrant ASEAN countries are predicted to be the fourth largest single market in the world by 2030, which explains Berlin’s vision of looking eastward.
“Everyone thinks they should build up in or be close to Silicon Valley, but I think that’s an outdated idea. The new way of thinking is to think globally. In the next 20 years the world economy and innovations will be in Asia, so we are being part of this development as of now,” says Dr. Rainer Seider, Head of the Unit European and International Cooperation at Berlin’s Senate Department for Economics, Energy and Public Enterprises.
He is leading StartUp Asia Berlin (SUAB) program – a platform created by the Berlin government two years ago in accordance with Asia Pacific Week, with the aim to establish an ‘intercontinental startup ecosystem’, dubbed to be the first of its kind.
SUAB works both ways in connecting Berlin and Asian startup ecosystems: supporting Berlin-based companies to expand to Asia, as well as promoting Berlin as the gateway to the European market and helping startups to establish and strengthen partnerships in the region.
In 2017, total capital investment in German startups jumped by 88% from the previous year, reaching a record high of €4.3 billion ($5.2 billion) – almost €3 billion of which were put into Berlin-based startups, according to a study published by EY early this year – making it the top three largest capital cities in Europe in terms of startup investments. The capital city has become home to a growing mix of tech startup companies specializing in healthcare, finance, and mobility. E-commerce players dominated VC-funding deals in 2017, but its number has fallen by one-third since 2015. On the other hand, players in healthcare have doubled, and mobility quadrupled.
Consequently, the dynamics in the city have pulled big international companies back to Berlin with their innovative and startup activities. Giant tech company Siemens, for example, last November signed an agreement worth over €600 million to set up an innovation campus in Berlin; it has also shown a keen interest to collaborate with startups.
“Such a big decision underscores the fact that our innovative economy is largely influenced and defined by startups. I’m very optimistic that within 20 years Berlin will be at the top of Germany’s regional economy,” says Rainer.
Along the way, the Berlin government supports founders with venture capital funds under a 50-50 scheme in which the public co-invests with private investors through the Investment Bank of Berlin (Investitionsbank Berlin or IBB), allowing less investment risk and accountability sharing. Berlin has also allocated €2.8 million for SMEs internationalization program, which includes financing foreign trips to connect with other ecosystems.
A prime example is how SUAB focuses on building bridges with Berlin – from government agencies and corporations to ecosystem builders such as venture capitalists, startups, mentors, incubators and accelerators – so they can learn firsthand from their Asian counterparts the feasible opportunities and challenges at hand before tapping into the market.
In organizing SUAB this year, the government of Berlin works with enpact e.V., a non-profit organization which previously linked startup ecosystems in Europe with their counterparts in the Middle East and North Africa. Forbes Indonesia had the opportunity to join the delegation’s trip to Singapore and in Jakarta late October, where delegates observed and established connections with local stakeholders to bridge the gap between ecosystems and help each other to access wider markets. The one-week trip ended with a “The Good Times” startup summit on November 3 in Jakarta.
To facilitate partnerships, SUAB also partners with local hubs in Southeast Asia. For example, in Jakarta there is HI Indonesia, an ecosystem builder and accelerator consultancy to assist local startups who wish to collaborate with overseas, and working alongside German Accelerator Southeast Asia (GASEA, Singapore) which facilitate local and regional startups wishing to expand their reach to Germany and vice-versa.
“There are lots of opportunities in sectors related to fintech, logistics, integrated systems, and in talent exchange that can go both ways. The differences in our cultural perspectives can also build intercultural teams and deliver more valuable products,” states Matthias Treutwein, founder of enpact e.V who oversees the program.
Indeed, Germany excels in producing high-quality technology and manufacturing products to the point of improving life in Southeast Asia, thereby creating a strategic talent exchange and collaboration between German and Southeast Asian startups.
The SUAB delegation trip provided insights to the unique situation of each country, in terms of state influence, economy, and startups. Singapore’s strength as a regional investment hub is supported by government grants, which allow easier funding for startups. Meanwhile, Indonesia has huge explorable potential in the sectors of agriculture, tourism, and logistics, with the government continuously streamlining the bureaucracy.
Furthermore, the intercontinental ecosystems do not only connect in a business sense, but also boosts humanity. As Matthias sees it, “We need to work together to create a more sustainable world where there is fairer distribution of values instead of amassing things only for ourselves. The old idea of ‘winner takes all’ and beating competitors can no longer be the essence of doing business,” he says.