The offices of fin-tech company Zeitgold* look like those of any typical Silicon Valley startup: There’s an open floor plan, a ping-pong table near the kitchen and Friday afternoon beers for employees. The CEO (of course) brings his dog to work.
But Zeitgold isn’t based in Palo Alto or San Francisco’s SoMa district. The company operates from a building on a quiet street in Berlin, Germany, a new hotbed of startup innovation that is drawing more and more investment from global venture capitalists—and slowly growing companies of real scale.
According to consulting firm EY, investments in German startups—the clear majority of which are headquartered in Berlin—soared 88% in 2017 compared to the prior year. Some of the companies snagging that cash included HelloFresh, a Blue Apron-type company that sells pre-made meal kits, and food-delivery company Delivery Hero. Both companies recently listed on the Frankfurt Stock Exchange.
Also last year, Berlin online tours-and-activities company GetYourGuide*, which now counts 450 employees, raised $75 million in Series D funding. It is one of many Berlin tech companies based in the old—but now ultra-hip—eastern part of the city. GetYourGuide is headquartered in a former shoe factory that is not far from the huge, Socialist-era Ernst Thalmann bronze monument, which honors a former head of the German Communist Party. It is now a protected landmark.
“You don’t see that in Silicon Valley,” says Itzik Parnafes, a Battery general partner from Tel Aviv who has invested for Battery in Berlin companies including GetYourGuide and Zeitgold. He first became active in Berlin about five years ago and says many U.S. investors still don’t appreciate the depth of the tech renaissance there, which is creating many companies with the potential to become real global brands.
Berlin has become a high-tech center partly because it’s always been a draw for creative types and disruptors, says Stefan Jeschonnek, the CEO of Zeitgold, a company focused on providing AI-powered accounting and financial technology to small- and medium-sized businesses. He co-founded Zeitgold in 2015 after successfully scaling another startup, online-payments company SumUp. He caught the entrepreneurial bug earlier while earning a business degree from Stanford.
After the fall of the Berlin Wall and the end of the Cold War, more writers, artists and free thinkers were drawn to the city, partly for the low cost of living.
Now, rents have edged up and office space can be hard to find. So can engineers, data scientists and UX designers: Johannes Reck, the CEO of GetYourGuide, says 90% of his company’s employees are not German. (The company has 14 other offices, mainly focused on sales, though the vast majority of employees work in Berlin.) Many employees from other parts of Europe are willing to relocate to Berlin, Reck and Jeschonnek say, and companies have become experts at securing visas for foreign workers.
Indeed, established international executives are now taking jobs at Berlin tech companies. Longtime eBay marketing executive Filippo Bonsanti, for example, joined Berlin-based online-travel company GoEuro* as VP of marketing last year. Other executives from large companies including Microsoft and Spotify also joined recently. GoEuro, which lets consumers search and book European travel by train, bus or flight from one place, now logs 20 million online visitors a month.
The rise of Berlin as a startup center is part of a broader move into European tech by U.S. venture capitalists, and a reflection of the increasing globalization of business. Zeitgold, for instance, has about 50 employees in Berlin but also 20 or so in Tel Aviv, where the company is tapping into a vein of AI-engineering talent. One of Zeitgold’s founders and CTO, Kobi Eldar, was previously a program manager in the elite Israel Defense Force Unit 8200, which focuses on cyber intelligence. Berlin startups have also benefitted from the recent growth of more homegrown, European venture firms.
“The first wave of Berlin-based startups was all about e-commerce and copycats,” says Jeschonnek. “But now, we are seeing true technology companies being built here.” And clearly more are being built every day.
*Denotes a Battery portfolio company. For a full list of all investments and exits, please click here. The information provided is solely intended for the use of corporate CEOs and founders and is not intended to be used in the investment decision making process and does not constitute an offer to sell or a solicitation to buy any security of the funds managed by Battery Ventures. An offering may only be made by means of a final offering memorandum in those jurisdictions where permitted by law and only to investors meeting eligibility requirements. No assumption should be made that the investments identified above were or will be profitable. It should also not be assumed that recommendations made in the future will be profitable or equal the performance of the companies identified above. The information contained in this document is current as of the date of this report. Certain information in this article has been obtained from third party sources and although believed to be reliable, has not been independently verified as to its accuracy, and its completeness cannot be guaranteed. Battery Venture has no obligation to update, modify or amend this document or to otherwise notify a reader in the event that any matter stated herein, or any opinion, projection, forecast or estimate set forth herein, changes or subsequently becomes inaccurate.