Startup Ecosystem: Dublin Has The Edge Over Berlin

 In Startup Thought Leaders

Two cities, which have emerged strong contenders in the race to be Europe’s post-Brexit tech hubs, are the Irish capital Dublin and the German capital Berlin. While both are good for startups, Dublin has the edge over Berlin.

Both the cities have their strengths and weaknesses, Dublin scores over Berlin for many reasons.

A few of them are Irish entrepreneurs’ global approach, the adequate local supply of qualified tech talent, strong support of accelerator and government’s ambitious plan to develop Ireland’s financial service sector with technological innovation.

However, the recent report by KPMG and CP Insights suggests that Germany topped funding to venture capitalist-backed companies in Q3’16 in Europe for the second consecutive year. It says that German government is making all effort to promote the Fin-Tech ecosystem in Berlin and Frankfurt to lure more investors.

Though this might reflect as if Berlin has better chances to outshine Dublin as a rising Fin-Tech leader in Europe, some experts feel otherwise. Dublin’s 40% young population is below 30 years old, and the English as language gives the Irish capital an edge over many other European competitors including Berlin. Building the relationship with larger firms and getting into their network may not be as easy in Germany as in English, and that comes as a challenge for natives in Berlin where German is the preferred language.

Startup Eco-system in Dublin:

Dublin’s startup eco-system is estimated to be valued at $2.8 billion. Various reports estimate the number of startups to be around 1400 to 1700 and existence of global tech firms from 300 to 400. The number of tech startups is estimated to be between 200 and 300. Estimates also put the total funding to startups in 2015 around ?522 million. Global tech giants are concentrated around Grand Canal Dock, popularly nicknamed as Silicon Docks in reference to Silicon Valley.

Besides foreign capital, Dublin can generate a tremendous investment resource locally due to high concentrations of millionaires in the city. Another estimate ranks Dublin 10th among European countries for having the most millionaires per capita. One in 40 is a millionaire in the city. In this small city, there are about 19 accelerators, 69 incubators, and 90 co-working spaces. Since 2012, 53 startups have made exits. Forbes in one of its latest edition says that Ireland is the number one place to do business.

The opening of the National Digital Research Centre, Mastercard and Accenture Innovation Labs in 2014 made it one of only four cities to have accelerators support of this scale. The other three cities are New York, London, and Honk Kong.

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Irish Fin-Tech start-ups have made their presence felt globally in almost all categories such as asset management, crowdfunding, peer-to-peer lending, transactions and payments, currency trading, financial advisory, mobile banking, security and privacy, risk and compliance, trading, etc. Some of these Fin-Tech firms are RiskSystem, XtremePush, Who’s In? (Publicis), Future Finance, FundCalcs, VideoBot, MoQom, ProSeeder Technologies, Way2Pay (Schoolspace), Waratek, TouchTech Payments, Fenergo, Antuar, Signatur, CurrencyFair, Barracuda FX, Legalshine, MyFutureNow just to name a few.

Startup Eco-system in Berlin:

As far as Berlin is concerned, some surveys such as a recent one by EY, suggests that Berlin has the potential to become Europe’s startup capital, however, the number of startups in Berlin is fewer than Dublin. Various reports indicate the number of Fin-Techs to be between 50 and 200. Compass, which provides a solution for automated management reports and benchmarks, estimates the total startups including Fin-Techs are 1800 to 3000. However, German Startup Monitor, a unique initiative by the German Startups Association, gives the statistics in 2016 as 1224 startups, 3043 founders and 14,513 employees working in all these firms. The startup ecosystem is robust too, with different estimates suggesting 12 to 20 incubators and accelerators and 40 to 70 co-working spaces in Berlin.

Berlin is less expensive than Dublin and its cosmopolitan culture, and scintillating nightlife draw tech talent from across the globe, but the city lacks the drive to nurture and support early startups. Coupled with the fact that, entrepreneurs in Berlin are reluctant to take a risk, and so they remain less innovative. Some entrepreneurs engaged in early startups feel that Berlin is noisier and more distracting a city than Dublin.

Environment for Startup Support

Around 80% global tech businesses have established their European base in Dublin. No another city in Europe has such a high concentration of big tech firms. The list is endless. In Grand Canal Dock area companies like Google, Facebook, Accenture, Airbnb, TripAdvisor, Indeed, Squarespace, Logentries, etc. have established their bases and in City Centre East area, tech leaders such as Twitter, HubSpot, Dogpatch Labs, ZOO Digital, Intercom, Pointy and Wholeschool are present. The City Centre South is home to, Linkedin, Dropbox, Groupon, Yelp, Nitro, Blue Light Software, Arekibo and Zendesk.

What’s important is that these companies are not in Dublin only to market their product but the majority of them have opened their research and development base making Dublin a home to more than 3000 financial and 10,000 technology workers. Along with global economic significance, large employment opportunities are some of the advantages of the presence of corporate headquarters in the city. Dublin outshines Berlin at this front.

The absence of tech giants and the corporate houses cause lack of mentorship for early startups in Berlin. The presence of large enterprises also provides opportunities for exposure to global competition and exchange of cutting-age innovation and ideas.

The German economy is manufacturing-centered and new-age technology is catching up gradually with the new generation and more than the startup culture is all about accepting failure and Berlin traditionally is known for perfection and getting it right the first time. This ideology is anti-startups and most of the mentors end up advising excellence on day zero. The most successful startups have pivoted their business models and build on each failure; this is a huge plus for Dublin, which has new age companies like Google and apple.

Governments’ support and regulations in Dublin

Unlike the government in other countries of the European Union, the Irish government has taken a lot of measures to help Irish enterprises to start, grow, innovate and make a global presence. ?Enterprise Ireland’ is one such initiative under which government plays every role – from initial handholding to taking an Irish enterprise to the world markets.

Along with government initiatives, global collaborations such as Dogpatch Labs’ collaboration with Google Tech Hub has been crucial for evolving Fin-Tech eco-system in Dublin. Under this tie-up in August 2015, Dogpatch Labs’ members can access to Google Tech Hub co-working space anywhere in the world.

Dublin has also taken the lead in holding local tech events and conferences to invite bright minds from various countries to encourage innovation. The city will also host an international technology conference, Dublin Tech Summit, next year in February. Besides these, other government measures such as keeping corporate tax lowest in Dublin as compared to any other cities in Europe attracts a lot of multinationals.

In last year’s European Digital City Index, which covered all capital cities in the 28 member countries of European Union, Dublin ranked 8th in both startup and scale-up category, Berlin stood 7th in startup category but slipped to one point behind from Dublin in the scale-up category.

However, it was significant to note that Dublin scored high for entrepreneurial culture (3rd out of 35), ?mentoring and managerial assistance (3rd out of 35) and market (9th out of 35). Dublin’s digital infrastructure earned criticism for low ranking (27th out of 35). In fact, all emerging startup hubs in the world, be it Silicon Valley in the US, Beijing in China and Bangalore in India is struggling with infrastructural woes. Any company finds better scaling up conditions in Dublin because of multiple reasons. Labour laws are not so cumbersome that hiring and firing pose any challenge for startups. A startup can shrink and grow depending on its suitability and requirement.

The progressive tax regime of Ireland – under which the standard rate of corporation tax is among the lowest in the world at 12.5% – is the biggest draw for many small and big startups.

Governments’ support and regulations in Berlin

The Federal Financial Supervisory Authority of Germany, which is the financial regulatory authority in the country supervising about 2700 banks, 800 financial services institutions and over 700 insurance undertakings, is not as forthcoming in creating an environment in favour of FinTech development as financial regulatory authorities in Ireland or UK.

Reports say that lengthy application process and complex rules discourage venture capitalists from making big investments. Even FinTech startups feel too much control and supervision which sometimes prove conservative for their growth.

In the stiff regulatory regime, startups like FinLeap, are helping FinTechs understand financial norms. Banks too have come out with investment funds to encourage FinTechs. Some local FinTechs have partnered with big FinTech companies so that they can get mentoring support.

The German government is fully aware of the stiff regulatory process, therefore, the German Finance Ministry has launched FinCamp, which is basically a series of programmes with a purpose to provide a platform for FinTech startups, regulators and other stakeholders to come together and have a dialogue.

The first such get-together was held on April 2016 which was attended by 150 German FinTech startups, banks, an association of financial institutions, members of Finance Ministry, German private banking industry association (Bundesverband Deutscher Banken) and Federal Finance Supervisory Authority.

Jappreet Sethi

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