It’s still some way away from becoming the Silicon Valley of Europe; nevertheless Berlin has all the ingredients to achieve that status. The city is able to attract talent from countries all over the world. However, it has yet to establish itself on a firm basis.

Interview with Gabriel Matuschka, who works with Partech International, a leading international venture capital firm, and specialises in the Berlin start-up ecosystem.

L'Atelier: Berlin is increasingly being talked about as a major start-up hub.  Do you agree?

Gabriel Matuschka: I think that at the moment Berlin is more of a promising breeding ground than a real start-up hub.  But it does have the capacity for creating an ecosystem of people who are able to set up brilliant companies. There are structural reasons for this. It’s often said that innovation happens when people from all around the world find themselves in the same place. This is what happened in the US, where a large number of start-ups were founded by people born outside the country. We’re still far from being a German Silicon Valley.  But Berlin has the potential. It’s cheap to live here, it’s a nice place to live, it’s a vibrant city, and – perhaps also very important – it has strong links with art.  Berlin is an easy meeting point for people from all walks of life; it’s easy to share ideas here. But if we take a look at the last two years we realise that European investors haven’t invested very much in startups. …probably because they haven’t found very many that they thought were sufficiently promising. It’ll take another ten years before we see a strong platform – not just emerging, but firmly established.

L'Atelier: So how does a German entrepreneur go about attracting financing?

Gabriel Matuschka: First of all, there are quite a lot of Business Angels, people who are able to invest around 10,000 euro. If you’re a company with a viable project it’s not that difficult to raise the startup funds. But it begins to get more difficult when the company needs to find greater resources. Germany lacks traditional investment funds. Apart from home-based financiers and incubators or early stage investors like Holtzbrink Ventures, there are also international companies such as EarlyBird and Wellington Partners. That’s what you might call the ‘normal’ venture capital circuit. Then, it’s true, there’s the ‘copycat’ ecosystem, Rocket Internet for example. They set out to raise between 2 and 5 million euro in six months, and they manage it! Because they have a reputation for moving very fast and they follow a proven approach. We could also take the example of Payleven, a Square clone, which obtained American investment funds from venture capital providers such as NEA. It’s easy to criticise this strategy. But the speed at which they move is unheard of.  HelloFresh, for instance, launched in January and is already up and running in five countries  - UK, France, the Netherlands, Germany, Austria. But this way of working is completely outside the normal ecosystem.

L'Atelier: So what about the startups which are part of the “normal” ecosystem? What do they do to continue growing?

Gabriel Matuschka: Well, the top-quality startups often go outside Germany to look for new funding – to the UK or the US, for example. Investors over there are increasingly interested in a market which is less competitive than their home markets and which is spawning good-looking startups.

L'Atelier: So are German investors interested primarily in home-grown companies or do they really look around to see what’s happening on the scene in general?

Gabriel Matuschka: They don’t just focus on German companies, that’s for sure. The problem facing any investor who wants to make a major investment is finding companies that have the capacity to go international within a short space of time, wherever they’re based. That’s why entrepreneurs ought to be thinking global rather than focusing on the local market, or at the very least they should be targeting a Europe-wide need. Berlin still has a long way to go in this respect.