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London or Berlin – Which is Best For Startups?

Is Berlin about to take London’s crown as Europe’s number 1 startup hub?

They are two of the most thriving startup scenes in Europe; international, cosmopolitan and playing by hipster rules.

That means parties, super-strong coffee, beards and craft beers; maybe even a Daschund or two. But don’t be fooled, it also means determined, ambitious founders with vision, rockstar developers, extreme growth hacking, and supercharged growth fuelled by Venture Capital firms, and plenty of them.

But which was chosen as the best city to launch a startup in 2015? Which is the most gender equal hub in Europe? Which is supported by a community of which more than half are foreigners? And where’s cheapest for lunch?

You may feel you know the answers to more than one of the above questions; but are the stereotypes really true? Is Berlin really the earthy, working class neighbourhood where you dance all night and hack all day? Is London its refined cousin, where you pay through the nose for an office and for your lunch, trying to figure out if the only guy in a suit is really a multi-millionaire angel investor?

Thanks to a new infographic produced by 99 Designs, the online marketplace which hosts contests for companies looking to connect with up and coming designers for their logos, banners, and web sites (who raised a huge $35m Series A round from Accel Partners back in 2011), Haggerston Times can unveil some of the key stats that help to explain why, whilst London is the current frontrunner, Berlin could carry all before it in 2016.

That’s right, according to Nesta’s European Digital City Index, London is the current number 1 for entrepreneurs, startups, techies and investors, thanks to its unique blend of mentoring, access to capital and markets, digital and non-digital infrastructure, and talent.

According to its minutely detailed composite indicators, London beats Amsterdam to the number 1 spot, whilst Berlin lies in 7th place, just behind Paris.

99 designs

99 Designs’ infographic (mostly accurately) compares and contrasts the London and Berlin startup scenes

Are the streets paved with gold?

This is hardly surprising when we consider that London, in 2015, attracted $2.89 billion of investment into its startups, whilst Berlin took in a “mere” $1.1 billion. But London is the more agile destination for starting up fast – a company can be created here in under 5 days, and for less than 22 euros. Berlin is speedy too, at 7 days, but costs are higher, to the tune of 700 euros. Ouch!

According to the source London’s ecosystem is worth more than Berlin’s, $48.3bn plays $30.2bn; both numbers seem a little high to us, (and are there really 275k startups in London, and 171k in Berlin…raises eyebrow)? Back on safer ground, London’s average Series A round of $7.5m compared to Berlin’s $6m seems reasonable.

Expect to pay higher corporate income tax in Berlin, 33% compared to 25% in the UK, and earn a little more as a software developer in London, but not by much; $63k versus $60k (but read on to discover why that $60k will go a whole lot further in Berlin).

Who will I be partying, sorry working alongside?

You may not have guessed but London has a higher percentage of foreigners working in its startups, 53% compared to 49% in Berlin, but Berlin is the most gender equal; 27% of its workforce are female, only 24% in London. Kudos to Berlin, but both cities could do with improving that balance.

More people work remotely in London (31%/26%), and founders are a little older (32.6/31.8) but there is little to choose between the two. One half of London’s customers are foreign, whilst 47% of Berlin’s are – Britain is an island, after all, it comes with the territory.

Where will I eat, drink and sleep (and how much will it cost)?

If London has perhaps just had the edge in our comparison so far, here’s where things get tasty. London is pricey. Berlin is, comparably, cheap as chips.

And that applies across the board – Internet connection is pricier in London (€30.16/€23.3), transport costs 2x more in London (€180/€79), likewise beer (€5.6/€3), lunch (€17/€8), and when it comes to rent? Game over. €2314 in London, €665 in Berlin. Those German company registration costs of €700 are starting to look pretty reasonable all of a sudden. Although it is worth mentioning that there is no minimum wage in Germany.

So there you have it. From a purely financial perspective, its Berlin hands down; and in most cases (with the exception of overall funding) the small competitive advantage London holds over its Teutonic rival hardly seems worth paying double the price for.

Last week we asked if London has gotten so expensive that entrepreneurs have no choice but to build companies with the wealthy in mind. The obvious downside of this is that a community that was once so altruistic and full of hope for a more equal future might become one that risks creating an even bigger gap between the haves and the have-nots.

Entrepreneurs in London can still do great things; democratise access to health services, transport, improve living standards, provide better educational tools; create the future. And there have been whispers that Berlin’s startup scene is more about image than substance, but for our money, if you’re bootstrapping, being Ein Berliner could soon mean being top dog. Or should that be hot dog?

 

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