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Why Hamburg is the birthplace of many successful startups

If one thinks of the tech industry in Germany, Berlin usually comes to mind first. This is the city of Zalando, Rocket Internet and N26. Many German startup success stories come from Hamburg, a city that almost nobody seems to have on screen in terms of tech.

With Innogames, Gamigo, Big Point and Good Game Studios, four of the ten largest video game developers in Germany can be found in the Hanseatic city. Xing, the largest German social network, was founded here, as was the Unicorn About You of the Otto Group.

Added to this are the largest taxi app in Europe, Mytaxi, the largest lending platform in Germany Kreditech and the emerging provider of mobility software Wunder Mobility. Even Google and Facebook have their German representation in Hamburg and not in Berlin.

Hamburg is strong in logistics, trade and real estate

This is also reflected in the statistics. According to the “German Startup Monitor 2018” of the consulting firm KPMG, about seven percent of all German startups come from the Hanseatic city, more startups exist only in North Rhine Westphalia about 19 percent and Berlin about 16 percent.

With three out of four startups already earning profits, Hamburg is likely to be a leader in terms of profitability. Most participations of the Berlin startup blacksmiths Rocket Internet like Home24, Delivery Hero or Hellofresh are still in the red. The music platform Soundcloud burns even ten years after its founding still money.

Hanna Marie Asmussen, one of three founders of the Hamburg HR startup Localyze, knows the Hamburg startup scene. The eight person team started last year and offers an automated solution for onboarding non-EU citizens at German companies.

“There are many successful startups in Hamburg, especially in areas such as logistics, commerce, real estate and human resources, where the local economy is traditionally strong,” Asmussen told Business Insider. But there are also many startups in the area of new technologies such as artificial intelligence or big data. But most of them fly under the radar of the public, because they are aimed at business customers.

Hamburg Economic Development mentions examples of Egret and Floatility (electric scooters), Nüwiel (trailer systems), Cargonexx (logistics), Synergeticon (aviation) and Birdiematch (logistics).

4,000 employees work in the Hamburg games industry

A special role for the Hamburg ecosystem is played by the many local game developers and publishers who are sponsored by the city with the initiative Gamecity, Hamburg. With over 2,000 players, it is the largest regional network of the games industry in Germany. A total of 4,000 employees work in the video game industry in Hamburg.

“With the network Gamecity, Hamburg, the city has clearly positioned itself as a location for video game development,” said Hendrik Klindworth, founder and CEO of the largest German game studio Innogames. “That was a positive signal for us at the time. Unfortunately, the support has since diminished. It would be good for the industry if that changes again.”

The entire cluster and innogames profited greatly from the networking of the Hamburg game developers. Regardless of the gamecity, there would also be regular conferences and meet-ups for all technology companies. “It helps, because the technologies we use in the background are often the same,” says Klindworth in an interview with Business Insider.

How important the exchange is in the local tech and startup industry is also underlined by Asmussen from Localyze. The founding network in Hamburg is smaller than in Berlin, but it also run more often on the way. “The exchange of experiences is getting stronger as there are more and more new players in the city, like Hamburg Startups, the three Next Accelerator programs and more and more events and Meetups. Companies like Google and Xing also hold regular events for the tech industry, “says Asmussen.

International orientation also attracted Facebook to the Elbe

Unlike Berlin, Hamburg is no metropolis of international renown. Nevertheless, the city is highly attractive to many foreign talents, the managers of Localyze, Innogames and Mytaxi agree. For the last two, the official company language is English.

“We have no problems hiring international talent in Hamburg, 40 percent of our local workforce comes from abroad,” says Johannes Mewes, Product Manager at Mytaxi, in an interview with Business Insider. When polls under Mytaxi employees cut Hamburg in terms of attractiveness not worse than for example Berlin.

Innogames boss Klindworth agrees. On the one hand Hamburg as a city with a high quality of life is attractive for specialists from Germany and abroad. On the other hand, there are many successful tech companies, so it would be easier to recruit talent. “If one job does not work out, it will not be difficult to find another employer,” says Klindworth.

The international orientation has also been one of the main reasons for Facebook, his German headquarters to Hamburg to lay, a spokeswoman told Business Insider. With Gruner + Jahr, the Bauer Media Group and Spiegel-Verlag, as well as many of the major creative and media agencies, Hamburg is also one of the most important media locations in Germany.

“This is very important to us because agencies are among our most important partners. Because close customer relationships are also important to us, it is also the proximity to many large German companies, such as the Hamburg Otto Group, that made Hamburg so interesting for us as a location,” states Facebook.

However, according to Asmussen, Hamburg is much less international than the capital. “In Berlin you can get along with English in everyday life, because the city is very multicultural. This is more difficult in local Hamburg, which is why we support our employees in learning German,” says the founder.

Innogames offers its own extra-occupational study courses

Also important for Hamburg founders are the funding initiatives and cooperations with the city. According to figures from the consulting firm PwC, 27 percent of all startups in Hamburg surveyed received funding from the city, including Innogames and Mytaxi. Hamburg has created three major support programs for startups.

The Innofunder program supports startups in the pre-startup and startup phase with a maximum amount of 75,000 euros. InnoRampUp promotes in particular technology based innovative startups with grants of up to 150,000 euros. As an early stage investor, the Innovation Starter Fund Hamburg offers startup companies in the startup and growth phase venture capital in the form of open equity investments. Up to € 600,000 will be financed for each round of financing, with the highest investment amounting to € 1 million.

In addition, there are important cooperations with the local universities. Mytaxi works closely with universities throughout Germany, for example in the form of lectures. In Hamburg, among other things, the company cooperates with the Hochschule Wedel, where many Mytaxi developers have studied computer science.

Innogames even offers an extra-occupational study program with its Inno-Bachelor and Inno-Master program. For this purpose, the Games-Schmiede cooperates with the Hamburg University of Applied Sciences, the University of Applied Sciences Wedel and the Hochschule Fresenius. Together with the city of Hamburg, the company also organizes the Games Compass, with which Innogames intends to bring together the German tech industry with the gaming scene.

In Hamburg, there is a lack of venture capital

When it comes to financing through venture capital, however, the city is somewhat in fourth place in Germany. According to the survey “Startup companies in the Hamburg area” of the consulting firm PwC, around 27 percent of new startups in Berlin are financed with venture capital. Followed by the Rhine Ruhr metropolitan region 16 percent and Munich around 13 percent. In Hamburg it is just eleven percent.

Accordingly, 74 percent of all startups in Hamburg founded on self-financing, loans from banks or other providers use 60 percent. This experience has also made Asmussen of Localyze. Hamburg is a rich city, but so far more is invested in real estate than in riskier investments such as startups. “In order to meet business angels and venture capital funds, we often travel to Berlin, in this point, Hamburg still needs to expand,” said the CEO.

Mewes of Mytaxi also sees pent-up demand for venture capital. In the early days, the mobility startup took on the classic start-up grant from the city, after which venture capitalists such as T-Ventures and Daimler were on board. “Would we have grown even more strongly with VC structures like those in Silicon Valley? Certainly, but that’s another topic,” explains Mewes.

Hanseatic liability also important for startups

What makes Hamburg so successful as a location? What is the decisive difference to founder capital Berlin? There are more startups in Berlin, but the company attractiveness in Hamburg is higher, explains Mewes from Mytaxi. This is also shown by the loyalty of the employees. “In the capital, employees at startups alternate on average every two years the employer, in Hamburg they stay on average four to five,” says Mewes.

“In Berlin is much talked about, Hamburg is in the startup area a little more reliable and serious way,” says Innogames founder Klindworth. “Compared to Berlin, Hamburg is rather reserved. It’s more about commitment and sustainable business than about the fastest possible growth, “explains Asmussen of Localyze. The strength of the Hamburg startups is to combine the know-how of the old economy with digital approaches.

Published inStartups
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