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Berlin Cracks the Startup Code

Berlin Cracks the Startup Code
Photograph by Matthias Haker/Getty Images

On a rainy day in March 2011, Ciarán O’Leary and two colleagues crammed into a Berlin taxi and raced for the station to catch a train back to Hamburg. While snaking through the city streets, it hit him: Leaving Berlin was a bad idea. “We looked at each other and knew in that moment that we’d be crazy not to move here,” says O’Leary, a partner at the German venture capital firm Earlybird. “There was just so much happening—founders everywhere, in every bar, cafe, every corner.”

Two weeks later, Earlybird rented office space in a former dance studio in central Berlin and opened up shop. By late March of this year the VC firm had raised $100 million of what will eventually be a $200 million fund for investing in European Internet startups, primarily in German-speaking regions. The new fund signals that at least some of Germany’s traditionally risk-averse financiers realize their capital city has become a global tech hub, one which foreign money discovered years ago. According to data from Thomson Reuters, 103 Internet startups received global venture capital funding in Germany in 2011, more than in any country besides China and the U.S. Although the numbers are not broken down by city, Berlin is where most German startups congregate. “It’s one of my next stops, and I’m not the only one going,” says Yoni Cheifetz of Menlo Park (Calif.)-based Lightspeed Venture Partners. “Berlin is not overcrowded like the Valley, but it will be pretty competitive.” Alex Ljung, co-founder of Berlin audio-sharing startup SoundCloud, puts it this way: “If I were a VC, I’d be terrified not to be in Berlin.”