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As the author states the tech sector does not directly employ Berlin's currently unemployed and has to import talent from outside (disclaimer: I'm such an impor

As the author states the tech sector does not directly employ Berlin's currently unemployed and has to import talent from outside (disclaimer: I'm such an imported talent into Berlin), it still creates demand for services and increases employment in other sectors as it grows, and gives an option for the city's youth to consider the tech sector for their future. However as the author states, the sustainability of the tech sector is very critical, but this not specific for Berlin. Even in the silicon valley there is a trend towards more sustainable growth models as the hundreds of SaaS startups here on HN would testify. Being a really open and relaxed city with a high quality of life, Berlin stands a good chance of attracting talent, allowing them to try out their ideas and hopefully create an IPO or two in the next ten years. I can't see why the author categorically dismisses that option.

junto 13y ago
My assumption is that the author doesn't believe much in trickle-down economics. His last statement is particularly telling: Let me finish with a question: what do you think who employs more people? A company like Facebook with a world- renown brand that is worth about $100 Billion on the stock market or a hundred companies that most people have never heard of which are each worth a billion people? The reality is that Germany's Mittelstand is full of SME's doing well for the themselves and employing lots of people. They have built themselves up using a very traditional model: 1. Idea 2. Borrow money from the bank 3. Employ people 4. Build products/services 5. Sell products/services 6. Profit 7. Re-invest and repeat from [3]. 8. After 20 years of repeating - sell company, take-over, child inherits Failure in this instance is often catastrophic to the founder. I also think that there are a number of SaaS startups that are simply SME's and use the label "start-up" in order to try and get target investment from the VC daisy chain. Their model is often aimed at short cutting and gambling without risk to themselves: 1. Idea 2. Borrow money from investors 3. Build products/services 4. Sell products/services 5. Repeat from [2] 6. After 10 years of repeating - fail, acqui-hire, sell (and integrate) or IPO Failure in this instance is often a learning experience to take into the next start-up venture. One notable point that the author doesn't mention is the German adversity to risk. The average Germans doesn't take massive risks. The start-up model holds massive risks to investors, but or course the returns for success are equally huge. Germans would prefer a guaranteed 1.5% return per year to a risky 1000%. That isn't likely to change in the near future.
- zeigor 13y ago
  You are right, I don't believe in the rhetoric of trickle-down economics, because it is just that: rhetoric. The US is a good case in point for that.
- oscargrouch 13y ago
  Isnt the second model what is producing bubbles? the profits goes to the financial sector, and (sometimes) to the founder.. Companies with broken business model, or with no business model at all get overvaluated while companies with more traditional models are worth nothing these days. (Compare the prices for Instagram, Facebook.. with big companies like Nokia or Blackberry) In times like this the best bet is to create private companies and not open it to the stock market at all like the old days.. The SV model may create instantaneous billionaires, but someone will have to pay for this wonderland(of a few) in the end.. and probably will be the government(aka the tax payers) my question is: isnt this model broken in the long term? will it survive? who wins? who lose?
rmk2 13y ago
The tech sector does absolutely nothing for the unemployed or to allay the wider social problems in Berlin. The last big wave to hit Berlin was the move of parliament from Bonn, with countless media companies settling in Berlin in its wake. However, these companies also attract people from outside, these are the now (in)famous "Schwaben" coming in. Berlin is hip, and young, educated people come from all over the place (and world) to be part of it. That, however, does very little for Hellersdorf, the Märkisches Viertel, Siemensstadt etc. etc. What all of this brings is a further social divide in the city and further gentrification á la Prenzlauer Berg and Mitte. So far, I fail to see how technology companies are going to be any different.
- VMG 13y ago
  Honest question, why should it be the responsibility of tech companies to solve social problems? They are in the business of solving tech problems.
  - rmk2 13y ago
    If you actually would like to stay in a place, perhaps it would be good if that place actually functioned? Berlin with its brilliant handling of its airport (delayed), public transport (broken), water supply (to be bought back) and famously brilliant decision making in all things concerning finance[1], pretty much doesn't. Berlin is the state with the second highest debt of all German states, just behind the notoriously broke Bremen. Another reason is Soziale Marktwirtschaft, which, actually thinks that exactly that is one of the functions of economic wealth[2]. [1]: http://www.spiegel.de/wirtschaft/soziales/bundeslaender-ranking-bremen-ist-deutschlands-groesster-schuldensuender-a-750126.html http://www.spiegel.de/wirtschaft/soziales/bundeslaender-rank... (2011 data) [2]: https://en.wikipedia.org/wiki/Social_market_economy https://en.wikipedia.org/wiki/Social_market_economy
    - Tichy 13y ago
      public transport isn't that broken, I get around quite well. The water supply things seems to be mainly a battle of ideologies, again my water supply works fine atm. Presumably the tech companies will at least pay taxes and alleviate the debt. I am no specialist on that subject, but I suspect it also comes from the unique history of Berlin, not (just) financial incompetence. Problem for a long time has been that Berlin is very big, yet has no big industries. Actually I often wonder what all the people here do for a living. I guess the main employer is the government now.
hef19898 13y ago
I asume that's due to his insight in the germany industry at general. I'm german and I don't see that neither. I try to explain that, at least a little bit. Germany, despite being technologically strong, is not very inovative. At least not in the sense of new, scaling products. One of the most famous examples is MP3. Also, Germans in general are quite risk averse. And if new companies are founded and are successfull, they tend to end up in the mittelstand model. While that indeed is one of the cornerstones of the german economy, these companies are most of the time too small for an interessting tech IPO. Yet another reason is the way the german industry is structured. We are very manufacturing driven, which extends all the way back to education. And manufacturing companies is what the german economy wants. So, if a start-up devlops a new way to manufacture, say, ball bearings there are basically two outcomes. They either find enough investors to built an own construction site and / or the necessary structures to outsource production and sell to the various industrial customers. That's expensive, especially compared to the archtypical SV start-up, that's risky which drives of most banks and goes against the common risk aversion and takes time and people. People, again, are hard to come by since most tech people (read: engineers of all colors, mathematicians, physisits,...) all want to work for one of the big names instead of a small, newly founded company. More on that and education later. The second outcome is that they either get bought by some existing company or the patent is liscensed or bought. In this case it doesn't really matter wether the product in question actually the light os day or not, the company simply doesn't IPO. Finally, what in my opinion makes it very unlikely that a company has a sucessfull tech IPO in germany anytime soon is people. There's education, focusing on producing people for the existing technologies and, even worse, companies. Some universities have programs for entrepreneurship, but these programs are small, young and mostly producing start-ups that end-up aquired. But it's at least a start. Another problem start-ups are facing on the people side is that most students in technical domains want to wrk for, say, BMW or Audi. Meaning these companies can pick the, at least in theory since there's always the chance of missed talent, the brightest people leaving the rest for the smaller players. And for a start-up to succseed you need the brightest (try to beat BMW here). Finally, failure and unemplyment carries a certain stigma in germany. So once you tried a start-up and failed in terms of future emplyment you are facing two major problems: - You failed, by definition that's your fault and we don't hire losers (slightly exagerated) - You have been your own boss for a while, which means you are unable to work under a boss. We can't need people like that. And finally, German engineering and technology tends to be over engineered. And the shows in all aspects, be it tech, processes, products, you name it. That's great for existing products since it usually produces quality (if this quality is actaully needed or not is completely different question). But that also makes things like a MVP very hard to built and almost impossible to sell in Germany. And why building something in a market you can't sell to. That's my take on why the author and I see a (major) tech IPO out of Berlin unlikely.

junto 13y ago

My assumption is that the author doesn't believe much in trickle-down economics. His last statement is particularly telling: Let me finish with a question: what do you think who employs more people? A company like Facebook with a world- renown brand that is worth about $100 Billion on the stock market or a hundred companies that most people have never heard of which are each worth a billion people? The reality is that Germany's Mittelstand is full of SME's doing well for the themselves and employing lots of people. They have built themselves up using a very traditional model: 1. Idea 2. Borrow money from the bank 3. Employ people 4. Build products/services 5. Sell products/services 6. Profit 7. Re-invest and repeat from [3]. 8. After 20 years of repeating - sell company, take-over, child inherits Failure in this instance is often catastrophic to the founder. I also think that there are a number of SaaS startups that are simply SME's and use the label "start-up" in order to try and get target investment from the VC daisy chain. Their model is often aimed at short cutting and gambling without risk to themselves: 1. Idea 2. Borrow money from investors 3. Build products/services 4. Sell products/services 5. Repeat from [2] 6. After 10 years of repeating - fail, acqui-hire, sell (and integrate) or IPO Failure in this instance is often a learning experience to take into the next start-up venture. One notable point that the author doesn't mention is the German adversity to risk. The average Germans doesn't take massive risks. The start-up model holds massive risks to investors, but or course the returns for success are equally huge. Germans would prefer a guaranteed 1.5% return per year to a risky 1000%. That isn't likely to change in the near future.

zeigor 13y ago
You are right, I don't believe in the rhetoric of trickle-down economics, because it is just that: rhetoric. The US is a good case in point for that.
oscargrouch 13y ago
Isnt the second model what is producing bubbles? the profits goes to the financial sector, and (sometimes) to the founder.. Companies with broken business model, or with no business model at all get overvaluated while companies with more traditional models are worth nothing these days. (Compare the prices for Instagram, Facebook.. with big companies like Nokia or Blackberry) In times like this the best bet is to create private companies and not open it to the stock market at all like the old days.. The SV model may create instantaneous billionaires, but someone will have to pay for this wonderland(of a few) in the end.. and probably will be the government(aka the tax payers) my question is: isnt this model broken in the long term? will it survive? who wins? who lose?

rmk2 13y ago

The tech sector does absolutely nothing for the unemployed or to allay the wider social problems in Berlin. The last big wave to hit Berlin was the move of parliament from Bonn, with countless media companies settling in Berlin in its wake. However, these companies also attract people from outside, these are the now (in)famous "Schwaben" coming in. Berlin is hip, and young, educated people come from all over the place (and world) to be part of it. That, however, does very little for Hellersdorf, the Märkisches Viertel, Siemensstadt etc. etc. What all of this brings is a further social divide in the city and further gentrification á la Prenzlauer Berg and Mitte. So far, I fail to see how technology companies are going to be any different.

VMG 13y ago
Honest question, why should it be the responsibility of tech companies to solve social problems? They are in the business of solving tech problems.
- rmk2 13y ago
  If you actually would like to stay in a place, perhaps it would be good if that place actually functioned? Berlin with its brilliant handling of its airport (delayed), public transport (broken), water supply (to be bought back) and famously brilliant decision making in all things concerning finance[1], pretty much doesn't. Berlin is the state with the second highest debt of all German states, just behind the notoriously broke Bremen. Another reason is Soziale Marktwirtschaft, which, actually thinks that exactly that is one of the functions of economic wealth[2]. [1]: http://www.spiegel.de/wirtschaft/soziales/bundeslaender-ranking-bremen-ist-deutschlands-groesster-schuldensuender-a-750126.html http://www.spiegel.de/wirtschaft/soziales/bundeslaender-rank... (2011 data) [2]: https://en.wikipedia.org/wiki/Social_market_economy https://en.wikipedia.org/wiki/Social_market_economy
  - Tichy 13y ago
    public transport isn't that broken, I get around quite well. The water supply things seems to be mainly a battle of ideologies, again my water supply works fine atm. Presumably the tech companies will at least pay taxes and alleviate the debt. I am no specialist on that subject, but I suspect it also comes from the unique history of Berlin, not (just) financial incompetence. Problem for a long time has been that Berlin is very big, yet has no big industries. Actually I often wonder what all the people here do for a living. I guess the main employer is the government now.

hef19898 13y ago

I asume that's due to his insight in the germany industry at general. I'm german and I don't see that neither. I try to explain that, at least a little bit. Germany, despite being technologically strong, is not very inovative. At least not in the sense of new, scaling products. One of the most famous examples is MP3. Also, Germans in general are quite risk averse. And if new companies are founded and are successfull, they tend to end up in the mittelstand model. While that indeed is one of the cornerstones of the german economy, these companies are most of the time too small for an interessting tech IPO. Yet another reason is the way the german industry is structured. We are very manufacturing driven, which extends all the way back to education. And manufacturing companies is what the german economy wants. So, if a start-up devlops a new way to manufacture, say, ball bearings there are basically two outcomes. They either find enough investors to built an own construction site and / or the necessary structures to outsource production and sell to the various industrial customers. That's expensive, especially compared to the archtypical SV start-up, that's risky which drives of most banks and goes against the common risk aversion and takes time and people. People, again, are hard to come by since most tech people (read: engineers of all colors, mathematicians, physisits,...) all want to work for one of the big names instead of a small, newly founded company. More on that and education later. The second outcome is that they either get bought by some existing company or the patent is liscensed or bought. In this case it doesn't really matter wether the product in question actually the light os day or not, the company simply doesn't IPO. Finally, what in my opinion makes it very unlikely that a company has a sucessfull tech IPO in germany anytime soon is people. There's education, focusing on producing people for the existing technologies and, even worse, companies. Some universities have programs for entrepreneurship, but these programs are small, young and mostly producing start-ups that end-up aquired. But it's at least a start. Another problem start-ups are facing on the people side is that most students in technical domains want to wrk for, say, BMW or Audi. Meaning these companies can pick the, at least in theory since there's always the chance of missed talent, the brightest people leaving the rest for the smaller players. And for a start-up to succseed you need the brightest (try to beat BMW here). Finally, failure and unemplyment carries a certain stigma in germany. So once you tried a start-up and failed in terms of future emplyment you are facing two major problems: - You failed, by definition that's your fault and we don't hire losers (slightly exagerated) - You have been your own boss for a while, which means you are unable to work under a boss. We can't need people like that. And finally, German engineering and technology tends to be over engineered. And the shows in all aspects, be it tech, processes, products, you name it. That's great for existing products since it usually produces quality (if this quality is actaully needed or not is completely different question). But that also makes things like a MVP very hard to built and almost impossible to sell in Germany. And why building something in a market you can't sell to. That's my take on why the author and I see a (major) tech IPO out of Berlin unlikely.