Comparing the Startup Ecosystems of Berlin and Silicon Valley

The startup scene in Berlin and Silicon Valley differs significantly in several aspects, including the types of startups, government policies, funding models, and cultural attitudes towards risk and change. This article highlights the contrasting features of these two thriving startup ecosystems.

GreenTech Startups in Berlin

Berlin, a city often overshadowed by its tech-savvy cousin, Silicon Valley, has its unique strengths. Even companies that do not heavily rely on technology are often referred to as green tech startups. This distinction is a reflection of Berlin's commitment to sustainability and innovation. The German government’s Energiewende (energy transition) policy aims to transform the energy supply into 45% renewables by 2020, up from the current peak of 35%. Part of this initiative involves fostering a blend of additional renewable energy sources and increased energy efficiency.

One notable example of a creative blend of information technology (infotech) and green technology is Cloud and Heat Technologies. This company deploys cloud data centers in a manner that harnesses the waste heat for domestic hot water and space heating, rather than dissipating it with chillers. Despite the significant greentech hype that peaked in the US in 2008, very few greentech companies receive much attention in Silicon Valley.

Government Support and Funding Models

Government support for startups differs substantially between the two regions. In Silicon Valley, seed money from government sources is generally preferred over private funding because the government does not take equity. However, obtaining these funds requires knowing someone at the funding agency, as this information is often not widely circulated and is typically accessed through internal networks.

In contrast, Germany has numerous public and joint public-private initiatives that support early-stage startups. For instance, the EXIST program is specifically designed to fund technology startups that have originated from universities. Startups can receive up to approximately 600,000 euros over two years, upon fulfilling the requirement to raise 60,000 euros in private capital. Within this program, each startup team is hosted by a university, which also manages and controls the funds.

The German government views technology startups as high-value job creation engines and believes they should be supported from public funds. However, startups receiving government funding must report their plans and progress, which limits the idea of "stealth mode" in startups.

Another difference is the need for startups to work closely within the bureaucratic confines of the hosting university, which can pose challenges regarding intellectual property rights (IPR) and technology licensing agreements.

Cultural Attitudes and Market Definition

Berlin, despite being a part of Europe, exhibits a different attitude towards risk compared to the general European mindset. Since German reunification in 1990, the city has undergone enormous changes, demonstrating that change can be positive. The infrastructure of Berlin reflects this attitude, with a constant state of construction and an abundance of new street art.

However, the broader risk-averse culture in Europe poses a significant challenge for startups. Many Europeans are content with the current status quo and feel little urgency to innovate. In Berlin, startups need to invest more effort upfront in defining their target market, and investors require a clearer understanding of the market.

In Silicon Valley, there is often less emphasis on detailed market definition, and startups can operate more in "stealth mode" without the same level of scrutiny.

Conclusion

The startup ecosystems in Berlin and Silicon Valley offer unique advantages and challenges. While Silicon Valley is renowned for its technological innovation and venture capital support, Berlin is thriving in the green tech sector, backed by government policies and a unique cultural attitude towards change.

Understanding these differences can help entrepreneurs and investors navigate the specific hurdles and opportunities in each region.

Keywords: startup ecosystem, Berlin, Silicon Valley