The Times covers Startup Europe Partnership

“There’s no disputing Silicon Valley’s status as the global capital of the technology industry but an almighty tussle is under way to be the leading European hub.

On measures including combined venture capital investment in its companies, London appeared to be edging ahead.

Research last year by Startup Europe Partnership, which is based in Berlin, found that the UK was the most prolific country in Europe in terms of the number of technology companies showing growth potential and total capital raised.

However, rival European cities have spotted an opportunity to steal a march after the Brexit vote. Berlin has been the most aggressive, perhaps because it believes that it has the most to gain.

German officials have even paid for a van, below, to drive around London landmarks emblazoned with the message, “Dear start-ups, keep calm and move to Berlin”.

Startup Europe Partnership, which links promising companies with larger businesses, published a blog this month claiming “London may well lose its status as the start-up capital of Europe” with Berlin “most likely to steal the crown of tech capital in Europe”.

Stefan Franzke, one of the people leading Berlin’s campaign, is in London this week, having postponed a visit to New York’s start-ups in favour of spreading the word about the German capital in an attempt to lure the best and brightest entrepreneurs.

“We changed our plans because we’ve had so many enquiries from the UK,” Dr Franzke, chief executive of Berlin Partner, a German government-financed agency, says. “In the first 48 hours [after the referendum], our telephone rings, rings, rings. People thought they were going to be forced to leave Britain in the next week, there was a bit of panic.”

Dr Franzke says that five London technology companies have decided to move to Berlin, and 40 more are considering it. They are typically young companies with between ten and 40 staff, which have just taken on investment and want to expand into foreign markets.

“The uncertainty about Brexit is the problem. Maybe after two years, it might be better to be in London but nobody knows how the British government will approach it.”

The main concern is continued access to a pool of skilled and young European labour, Dr Franzke says.

“These companies have international teams. I’ve just had an email from a young British games company. They have 15 employees from ten nations and they don’t know whether they will still have free movement of people.

“They don’t know if workers will still come to London. In Berlin, they will still come. They want to grow and in this uncertainty, Berlin is the right place to be.”

Berlin Partner has been running a marketing show in Soho this week with German music, food, art and entrepreneurs. Also of interest to British companies are the strikingly low costs in Berlin. Commercial property in a prime location can be less than a third of the cost of London and private rents are cheaper too.

“You need less than half the sum in Berlin than you do in London to set up a team and an office. It means you can invest more,” Dr Franzke says.

With fears over London’s ability to remain as a centre for selling financial services across the single market, he has also been fielding enquiries from international financial technology, or “fintech” companies, a strong sector for Britain. “Typically, finance companies from Asia or America, when they come to Europe, they do not consider an alternative to London. There is no thinking about another location. But now we are getting enquiries from fintech companies from China, Silicon Valley and New York. It was totally new for us and a surprise but it makes sense for them because of the concerns over [financial services] passporting.”

Berlin’s post-Brexit intentions are clear but Dr Franzke insists that the rivalry is a friendly one that should ultimately benefit both capitals.

“It is a battle between London and Berlin, and it’s a good battle, it will force both to do better things which is good for the whole of the European technology ecosystem.

“I don’t think there is only one hub in Europe, there is space for two great ones. We’ll still be battling in ten years’ time.”

The open-minded choice

Cornelia Yzer, Berlin’s senator for economics, technology and research, recently wrote to 100 London technology companies to warn that Brexit would “severely affect your operations in the UK”.

Ms Yzer talked up the attractions of Berlin as “an international open-minded city” with the “No 1” European start-up community.

Stefan Franzke, of Berlin Partner, says that the targets of this letter were more established businesses than those that have already agreed to relocate, many of them with more than 100 staff. These companies are in no rush to leave London just yet, Dr Franzke admits.

“We are having a lot of talks with established London-based companies. They are responsible for 100 to 500 staff so they don’t want to leave now. They have time to analyse what happens over the next one or two years.””

Retrieved from The Times on 24/10/2016