This is a guest post by Konstantin Zagaynov, Co-Founder at Videoly.co, a service that connects product video reviews to e-commerce shops.
When we started Videoly.co, we did not think twice about becoming international from Day 1. Yes, having a team spread in two locations could be challenging, but if you know your co-founders well and if you establish clear and transparent working processes, being present in several target markets multiplies the opportunities.
Berlin is one of the most active startup hubs in Europe. It feels like a big city and a village at the same time. Berlin has several technical universities and is a development center location for major Internet companies (Amazon, eBay, PayPal, Rocket Internet, HERE, Soundcloud). At the same time, it probably has the cheapest average cost of living among western European capitals. In Berlin, a calendar of startup-networking events has no holidays.
After I had moved from Helsinki to Berlin, I was often asked ”How is life and Berlin and how does doing business there differ from here?”. To provide a more holistic overview, I’ve asked several founders from Nordic and Baltic countries currently living in Berlin what the differences are between running a business in Germany and their home countries and what they would advise to early stage companies moving to Berlin.
Who is Berlin for?
Stefan Jørgensen, Danish CEO of Itembase, moved to Berlin in 2010. Today, Itembase has connected to over a hundred thousand of shops across the world providing purchase- and warranty- tracking solutions to consumers. When Stefan got an idea of his future company, he was choosing between Berlin and London. “Berlin is a place to be for anyone who wants to be active on the German market at some point in time. Otherwise, startups playing in the fields where the Germany is strong, like e.g. retail.”, – says Stefan.
Vesa Perälä, a Finnish founder of Inbot.io, a mobile-first customer relationships tool, agrees: “Berlin is known best for e-commerce but I would recommend it for any type of start-up.”
Martti Mela, CEO of lifelife.io, another startup backed by Videoly’s investor Reaktor Polte, has moved to Berlin already 5 years ago: “Berlin is good if you’re building a marketplace or if your business is music related. Also the hardware scene is very interesting here.”
Indeed, Germany in general provides almost a VIP access to the automotive and green energy industries. The vibrant tech music scene of the ‘90s has been a precursor to companies like Soundcloud and Ableton, which have started in Berlin.
However, innovation in some business domains can be hard in Germany. Take digital payments. The habit and preference to pay in cash is deeply ingrained into society, therefore skepticism towards digital payments in B2C could be a bottleneck when rolling out a service from early adopters to the majority.
Edita Lobaciute from Lithuania works as a Marketing manager at Berlin-Startup-Consulting. They help startups to get private or public funding. Edita says: “ There are certain needs that startups have at their early stage, such as: business network, mentors, capital, team and community of like-minded people – Berlin can offer all this and more.”
Matti Rönkkö, CEO of Nosto, personalization engine for e-commerce has moved to Berlin more than 5 years ago and since then worked for several internet companies here. Matti: “What makes Berlin special is that for international people there are opportunities in any area of competence: marketing, sales, HR, development.”
Finnish digital agency Futurice opened an office in Berlin in 2009. Since then, the office has grown to 35 employees. Olli Salonen, Senior Technical Lead at Futurice: “Berlin has a reputation for being a start-up city and for a good reason. A lot of buzz, people, and money revolve around start-ups, which means that finding traditional B2B business is more difficult. To succeed, you need to find a way to tap into that scene.”
Starting a company
This is where processes in Finland feel refreshingly easy in comparison with Germany. First, a notary’s signature is necessary in many formal business agreements. Prepare to reserve notary’s time and pay couple of thousands for notary when establishing a company, getting funded or buying an apartment.
“If to compare two countries, Finland offers the absolutely easiest and fastest options,” says Martti Mela. “The bureaucracy in Germany can feel overwhelming and everything happens in German. You might want to use a lawyer for the whole process. Germany offers a way to start a limited company with 1 EUR, but due to the notary fees the minimum capital should be 2k€.”
“It might look quite surprising that startup culture has been here for 10 years but it is still not easy to open a bank account or use a lawyer. If I would have visited that often notaries in the Nordics, they would roll a red carpet in front of me every time I would go there.” notes Matti Rönkkö.
If you want to open a subsidiary in Germany, there are several lightweight options. If you send 1-2 employees to Germany to study the market and do sales, then a “posted employee” registration is enough. However, if they spend more than 180 days in Germany per year, then they have to start paying wage tax and pension contributions there. If you get a fixed office space or start generating revenue from this market, you need to register a “permanent establishment”.
Berlin offers lots of possibilities for “starting low”. For example, the city has over 40 co-working spaces. The average price for a desk is 150€/month.
Remi Elias Mekki from Bergen, Norway, a founder of a new recruitment startup, currently in stealth mode, says “Berlin is great for early stage tech startups in search of beta users. Worrying about not finding enough beta users in Norway, we decided to look to Berlin, the European capital of beta users. We will therefore do a dual release, in both Berlin and my hometown of Bergen, Norway. I am looking forward to see the difference in traction”, – says Remi.
Berlin offers a lot of options in private investment. One can find here both international and pure German venture funding institutions. Other cities to look for VC funding in Germany are München, Hamburg, Cologne, Frankfurt and Stuttgart.
There are also great opportunities for public funding: Investitionsbank Berlin (IBB), GreenGarage, HTGF, in case your company has at least a registered subsidiary in Germany. New grants and subsidies pop up all the time, you need to keep an eye on these opportunities. Though applying to IBB subsidies can be an exhaustingly a lot of work, there are companies that help with the application, like Berlin-Startup-Consulting and Förderbar.
As Martti Mela puts it, “Berlin is a real startup hub and UK and US investors are starting to take the location seriously. Berlin has a history of copy-cats instead of innovation but this is changing. If you have an idea that is a clone of a US company, getting funded is easy.“
RedStone Digital is investment fund managed by Finnish entrepreneur Samuli Siren. Samuli has moved to Berlin long time ago, in 1994. It became apparent to him very quickly that he would going to stick to this place for his life. RedStone Digital manages several funds and invests between €50K and €2M.
The most important advice Samuli gives to startups conquering Germany is: “If you want to get German customers, you have to speak German”.
More on sales, hiring, and culture in Berlin can be found in Part 2 of this series, which will be published tomorrow.
This article and photos by Konstantin Zagaynov, Co-Founder of Videoly.co.
Videoly.co is a SaaS that connects product video reviews created by brands, bloggers and consumers to online shops’ product pages. For shops, this is a convenient way to connect unboxing, tutorial and product review videos across thousands of products in five minutes and to know how every particular video affects sales. Such reviews increase conversions and sales by 30% on average. For content reviewers, we provide a way for their content to be distributed across thousands of shops.