Berlin to Challenge London or Tel Aviv as No. 1 IT Location

German Chancellor Angela Merkel’s government is making efforts to help Berlin take on London and Tel Aviv as the region’s top information technology location, said Economy Minister Philipp Roesler.

The German capital’s attraction for young people, low housing and commercial rents and a “critical mass of creative potential” are among the city’s assets, Roesler, 40, said yesterday in an interview in Berlin.

“Berlin has a good name in the IT startup scene and plays in the same league as London and Tel Aviv,” said Roesler, who is also vice chancellor. “There’s no reason for our companies to hide. Our goal should be for Berlin to become Europe’s No. 1 IT location.”

Berlin is already home to electronic commerce companies including Zalando GmbH, the online clothing retailer, and SoundCloud Ltd., an audio-sharing service that’s working with Twitter Inc. on ways to improve the experience of hearing sounds within Twitter feeds. A proliferation of such companies has earned Berlin’s central district the moniker of Silicon Alley, the New York Times reported in September 2011.

Germany still lacks some of the “pioneering spirit” and financing infrastructures that competing locations possess, said Roesler, who visited California’s Silicon Valley in May. German savings banks and cooperative banks aren’t geared to financing IT start-ups, whereas company executives in the U.S. are allowed to “fail once or twice before making it big the third time,” he said.

Company ‘Ecosystem’

Germany, which relies on traditional manufacturing industries such as car and machinery making, risks falling behind in 21st century technologies as links between and within hard- and software production are severed, said Roesler. What’s needed is an “ecosystem” that fosters the emergence of major players and guides the business activities of smaller start-up companies, he said.

“Take for example the booming smartphone market. In Germany, not a single phone is being built anymore,” the minister said. “But many other business areas depend on them. It’s therefore important to maintain value chains.”

Still, cooperation models that help European countries catch up with the U.S. such as Airbus planes and Galileo satellites can’t be copied for the IT industry, Roesler said. It’s up to markets and outstanding business leaders to build European Internet giants, and not the job of politicians, he said.

“In IT, it’s not about promoting a particular technology, rather, we must create the conditions for optimal growth for high-tech companies,” Roesler said. “We want German startups to have success in Germany and strengthen the community here, not necessarily that they go to the U.S.”

To contact the reporters on this story: Arne Delfs in Berlin at adelfs@bloomberg.net; Rainer Buergin in Berlin at rbuergin1@bloomberg.net

To contact the editor responsible for this story: James Hertling at jhertling@bloomberg.net

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