Cologne versus Berlin – is having hype for your city’s startups overrated?

Betahaus Köln
Betahaus Köln

Cologne

Cologne has the Dome, the Rhine and yes, it even has a startup scene; what it doesn’t have is hype. While the industry in Berlin enjoys massive media coverage all over the world, Cologne has yet to make its mark internationally as a startup hub. Yet things seem to be a-movin’ and a-shakin’ in the southern city…

For the last edition of Startup Safary (next stop: Berlin), we took a peek inside three successful companies and a newly established incubator in Cologne. Although much smaller than Berlin, the startup industry and network have been growing steadily in the last few years – from basically zero to an active, thriving community, bringing forth companies such as AdCloud, ParStream and Fotocommunity and the six-month old incubator Startplatz.

Cologne – gateway to the “good old German economy”

Matthias Gräf

Startplatz CEO and co-founder Matthias Gräf (above) gives a hint of what could set Cologne apart: “It’s not as hyped as Berlin, meaning that we have realistic business cases, solid startups and not very many overhyped valuations. Startups here have access to the so-called good old German economy”.

Home to many large corporate companies such as Deutsche Telekom, Electronic Arts and Deutsche Post, the city invested heavily in the establishment of media and technology companies in the early 1980s to counter the economic crisis in the engineering and chemistry industries.

But, Gräf adds, in terms of attracting international investors, Cologne can learn a lot from Berlin. In an effort to enable closer connections between founders, IT specialists and techies, Startplatz hosts a large and regular variety of networking events, workshops and lectures.

Access to funds – does it matter if you’re outside Berlin?

Betahaus KölnTalking shop at a coworking space in Cologne (credit: Henning Stein / eveosblog.de)

“If startups have a good idea, they will get funding, no matter where they are based,” investor Thomas Grota says. “If the mountain won’t come to Muhammad, Muhammad must go to the mountain. For me, the main difference between Cologne and Berlin is that Berlin receives a lot of funding from funds based outside Berlin, while North Rhine-Westphalia startups can get funding from regional VC funds.”

And “if I had to put my best bet on the next hot spot in Germany to bring forth founders, it would be Karlsruhe,” he adds – many of Germany’s most talented IT specialists and graduates hail from the prestigious Karlsruhe Institute of Technology, which has sprouted a small but very active group of founders in Baden-Württemberg in southern Germany. 

Thomas GrotaGrota (right), currently Investment Director at Deutsche Telekom’s Venture Capital arm T-Venture, has been following and supporting the German startup ecosystem’s development closely. Asked to describe his view on the widely lamented lack of VC funding in Germany, he remarks that VC funds are diminishing in general, with only a few big players dominating funding rounds. In other words, there is no shortage of capital in Germany but rather a shortage in the variety of investors and funds managing those investments.

“What Berlin brought to the table – having an ‘ecosystem’ started to get interesting.”

Oliver Thylmann According to Oliver Thylmann (right), the co-founder of Ligatus, DMT Holding, Ormigo and AdCloud, Cologne is an ideal base for B2B startups in terms of geographical location. With several airports and larger cities in the surrounding area, Cologne is only four hours away from all the major European metropolises.

Thylmann acknowledges Berlin paved the way for Cologne in certain aspects – and Cologne still has to catch up in others:

“What Berlin brought to the table is that having an ‘ecosystem’ started to get interesting. What we now have is the Cologne IT Summit and a mayor who is talking about how important places like Startplatz, Betahaus Cologne (pictured at top of article) and Clusterhaus are for the city.

“Until now, people didn’t know each other. The startup, angel and investor community didn’t connect so much. I think the media coverage and everything else will come – but the biggest thing that is still missing is a Sankt Oberholz, a central spot where investors can come and have a coffee, knowing they will meet someone.”

He cites Facebook social app startup Hike to highlight how disconnected the Cologne/Bonn community used to be. When Hike received funding from Lars Hinrichs’ product oriented, pre-seed investment company HackFwd in May 2012, they were completely anonymous in the startup scene.

Other startups in the region that have received funding include the Spotify-like music service Simfy (€10m from Dumont Venture, Earlybird and the NRW Bank), web TV social media network Sevenload (€38m in total from Burda Digital Ventures and T-Venture) and discount platform Coupies, which closed a seven-digit investment round at the beginning of 2012.

The city has also seen a flurry of non-funding activity lately. Due to a surge in coworking spaces – with five spaces popping up in the centre of town within the last two years – and a steady but gradual increase in startups, the supply of affordable, flexible office space is higher than the demand. And so, unlike its counterpart in Berlin, the prominent Betahaus Cologne has not been fully booked since its opening and was forced to file for provisional insolvency last month.

All in all, it is fair to say that Cologne is laying grounds for a small but healthy scene. It might not become competition for Berlin in terms of attracting international capital and teams – but it does have the potential for breeding profitable tech companies with more down-to-earth models, and for working closer with the old industry giants.

Image credit:
Cologne central: flickr user spacejulien

Betahaus Köln: flickr user eveos
Matthias Gräf via Twitter @mathiasgraef
Oliver Thylmann via Twitter @othylmann

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