Forget Silicon Valley

While thousands of occupiers take to the Reichstag, capitalism is alive and kicking on Rosenthaler Platz.

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Photo by Craig Hull

While thousands of occupiers take to the Reichstag, capitalism is alive and kicking on Rosenthaler Platz.

Once upon a time, the future could be found on Sand Hill Road in Northern California, in the centre of Menlo Park, right where the street that ends at the Stanford Shopping Center crosses Interstate 280. The future made lots of people rich. Office rents on Sand Hill Road climbed higher than those in Manhattan or London’s West End. Silicon Valley, where a few dozen venture capital (VC) companies give millions of dollars to newly founded enterprises, is oversaturated.

But the future is shifting to an intersection 9000km away, not far from where the Berlin Wall once stood. Rosenthaler Platz: two tramlines, four lanes of traffic, a bakery chain, a hostel, a Dönerbude, a currywurst Imbiss, and in the southwest corner, the high windows of a café. At the beginning of the 20th century there was a beer hall here that Alfred Döblin used as a setting for his gritty novel Berlin Alexanderplatz. After the Wall fell, a Burger King moved into the space – the first in East Berlin.

Then came a gay bar. Not long after, Ansgar Oberholz took over and opened a café filled with power sockets and free internet. Soon, dozens of young people without much money – ‘digital bohemians’, as German media like to call them – could be found hanging out at Sankt Oberholz, poring over their laptops and clutching lukewarm lattes. Among them were two Swedes who would become the stars of Berlin’s burgeoning start-up scene.

In 2007, Alexander Ljung and Eric Wahlforss founded Soundcloud, an online music platform that today boasts some seven million users. They have over 70 employees and two big offices a couple of blocks away from Sankt Oberholz. They ride skateboards from one end of the office to the other.

Since 2005, an estimated 400 internet start-ups have been founded in Berlin, some 250 since 2009. And Berlin’s Gründerszene has edged into the sights of international investors. A London VC injected cash into Soundcloud.

In July, the new start-up Amen received a two million dollar shot in the arm from Twitter addict Ashton Kutcher and Madonna’s manager, Guy Oseary. Amen is a social network where users can post opinions and comment with “hell no” or “amen”. The site got a heavy dose of buzz when Kutcher’s wife Demi Moore claimed on Amen that, “After Sex is the Best State For Amening Ever.” Soundcloud has also invested in Amen.

In May Berlin social gaming developer Wooga score $24 million in second-round funding. In short, suddenly a lot of money is circulating in the city that is known for being sexy but poor.

Further down Torstraße, Ciáran O’Leary jogs across the worn-out parquet of a former dance school. O’Leary is waiting for the ‘arena’ to be delivered, a semi-circle of benches from which young entrepreneurs will be able to project their ideas of the future onto the wall, a future they want to build with money from O’Leary’s company, Earlybird, the first tech-focused VC to set up a Berlin office. Founded in Munich, the company moved here earlier this year because of the “spirit”, O’Leary says. “We could visit this spirit-flying business class once a month – or be part of it.” “We are looking for people who want to solve big problems,” O’Leary adds.

In other words, people who are capable of building up a company that is going to be worth millions. O’Leary believes these people are right here in the capital. Just a couple of days later, Earlybird and a VC from the US invested $10 million in mobile advertising platform Madvertise and $7 million in social betting site Crowdpark, two Berlin start-ups.

A hundred metres away from Rosenthaler Platz, Florian Meissner sits in his office and taps his smartphone. “I’ve got the whole world in here,” he says. Meissner worked as a photographer in New York until the day his camera was stolen. He started snapping pictures with his iPhone and began posting mobile phone photos on a blog.

Then he moved to Berlin because he fell in love, and on a poker night with his two buddies, Lorenz Aschoff and Ramzi Rizk, a programmer, the idea behind Eyeem was born. “This is so wicked, let’s do this” was the consensus, and Meissner and his two friends became entrepreneurs.

Now Meissner works in a Brunnenstraße office, where the walls are covered with large printouts of smartphone screenshots displaying the world, digital photos that the 5000 people who downloaded Meissner’s app in the past two months have taken with their phones. A freeway in Louisiana. A street corner in Antwerp. The anti-Pope demo in Berlin. Users can tag them, comment on them, like them.

The app is only the beginning for Eyeem, more than just a new toy for people bored of Facebook. Meissner has the kind of grand vision that VCs like Earlybird are looking for: he wants to build a platform for visual internet search. That’s the business part. In his vision of the future, phones recognize what people take photos of, where they are and if there’s anything else interesting nearby.

Eyeem recently entered its second round of financing, the ‘seed’ round. Stefan Glänzer, one of the first investors of London’s Last.fm, gave Eyeem enough money to rent an office and employ a team of seven. Before they were funded, the three poker pals developed their ideas on the sofa at home and presented them at Betahaus. The Kreuzberg co-working space regularly hosts start-up workshops, talks and competitions.

It’s been a year now since the Eyeem concept was introduced here for the first time to a crowd of young guys in t-shirts. One man in the crowd already had grey hair. “He found us ‘fresh’,” Meissner recalls. His name was Christophe Maire, and he gave them €25,000 to build their prototype.

“Mobile photography opens up a complete new way of communication,” says Maire, whom Meissner describes as “a really cool angel in Berlin”. Angels are those who invest in enterprises early on. Angels don’t give as much as VCs, about €100,000 on average. Maire is an entrepreneur himself. He shares his office with Soundcloud, in which he invested as well. “I like the moment of creation,” he says. “You have to like the insecurity of that moment.”

It seems Maire can’t get enough of that insecurity. He is one of the pioneers of Berlin’s start-up scene. A decade ago he founded Gate5, which developed navigation software for mobile phones. Six years later he had 70 employees and sold the company to Nokia for a rumoured $250 million. Today his start-up Txtr has set out to take over the worldwide digital reading market. In Germany they already claim to have the largest selection of Ebooks.

Maire believes in building businesses. “Entrepreneurs,” he says, “are heroes.” To him, Berlin is like a blank slate, a place that offers the freedom to create something: “That’s actually how it started in Silicon Valley.”

“The scene in the Valley is oversaturated,” says Travis Todd. He sits in Sankt Oberholz with a coffee, sporting messy surfer hair and a worn out t-shirt with the picture of a snake’s body forming the word ‘capitalism’. The snake is eating its own tail. Until not that long ago, Todd was in the Valley. He lasted four months there.

“There are just too many start-ups, and it’s too hard to get people’s attention. You really have to be the best of the best.” The most difficult part though, he says, is that there is not much room for experimentation because everything is so expensive. And all the good programmers work for the big companies. So Todd left Sand Hill Road and flew to Berlin, to the city that seems to fit his idea so much better than a freeway exit in the Californian woods.

His start-up is called Buddy Beers. The idea is simple: you can buy beers for your friends online. Todd tested it out at the now-closed expat bar Hairy Mary’s in Prenzlauer Berg. In January, he signed a contract with Carlsberg and can now use their bar network. Today, through Todd’s site, you can buy beers in over 100 bars in Germany, the US, the UK and Switzerland.

Buddy Beers is a prototype for social gifting services, the first of its kind and a prime example of how apps can be used as a marketing tool. A huge new field of opportunities. Todd gives a broad smile. And all because he got upset when he couldn’t buy his younger brother a beer on his 21st birthday because he was in Florida and Todd in Berlin.

Entrepreneurs like Todd and Meissner work 18-hour days, they say. Part of what drives them is the thought of building something with three people that millions are going to use.

“Now, things come true that could only be dreamt of a couple of years ago,” Maire says. And in Berlin, this can happen with only a couple of thousand euros.

Once a month Travis Todd invites entrepreneurs from Berlin’s start-up scene for breakfast at Sankt Oberholz. That’s something he took from his time in Silicon Valley, where entrepreneurs meet in delis to share and discuss their ideas.

“Germans can be rather paranoid about sharing ideas,” he says. “They are always afraid that someone’s going to steal their idea.”

In Silicon Valley, he learned that in order to create the best idea, you have to share it. They share in English now, because another feature of Berlin’s scene is that it’s increasingly international. Yet not everything’s in English. Todd gave the breakfast at Sankt Oberholz – and his recently launched networking blog – a name: ‘Silicon Allee’.