Here’s what to expect from the ecosystem for the second half of 2018.
This city is booming and as I wrote about on Medium at the start of the year, “Berlin’s Got Talent” too. Venture Capital flooded into Germany at an 88% increase during 2017 over the previous year. Berlin captured 2/3rds of that haul according to Ernst & Young, and this momentum isn’t slowing.
It’s not a surprise with those figures that the city also known as ‘Silicon Allee’ entered 2018 cashed-up and ready for business. Now activity from the first six months of 2018 shows entrepreneurs and investors in Berlin have been busy.
With summer setting the stage for the second half of the year — the longer days, warm weather and sunshine also carries conference season and among them, inward business development initiatives designed to accelerate German market entry including Berlin Partner’s Start Alliance and the European Union’s Soft Landing Berlin. In fact this summer’s introduction to Berlin from Start Alliance and Soft Landing concurrently took place during the festival that has become the cornerstone of the Berlin ecosystem, ‘Tech Open Air’ so participating international startups could also attend and benefit from getting inspired while making Berlin business connections.
As we look forward to what the rest of 2018 will offer, there are a number of key themes and trends emerging from the startuppers hard work over the last six months. Let’s take a closer look at some opinionated projections we can expect from Berlin during the rest of 2018 in three parts:
I). Berlin Runs With Digitalization
- Delivery Hero
II). Brand Marketing Gains Importance
III). Initial Coin Offerings (ICOs) and Cryptocurrencies
- Entrepreneur First
- Crypto Startup School
- Berlin’s Traditional Venture Capital Meets ICOs
Berlin runs with Digitization:
Handelsblatt Global’s Editor in Chief, Andreas Kluth penned a fantastic piece titled “German ‘Digitalisierung’ versus American innovation”. He begins his analysis of the differences between the two by taking a closer look at language — how English speaking Americans vs German speakers talk about tech.
“Americans, or at least those in Silicon Valley, are forever reaching for newer, grander words to hint at possible destinations for our species: What started as simply ‘IT’ or ‘tech’ became ‘Virtual Reality’, ‘Cyberspace’, the ‘World Wide Web’, ‘Web 2.0’, the ‘New Economy’, the ‘Next Big Thing’. It is now branching out into Big Data, Artificial Intelligence, and the Internet of Things.”
— Andreas Kluth, Editor in Chief, Handelsbatt Global
Kluth believes that there’s a lot lost in translation during technology discussions between English speaking Americans and Germans. He believes the German focus on one single umbrella word ‘Digitalisierung’, which could be translated as either ‘digitization’ or ‘digitalization’, is equivalent to how Americans might talk generally about ‘tech’ or ‘innovation’. Executives, politicians, marketers and anybody in Germany who wants to sound visionary without being specific, uses this one single word that could mean any or all of its parts.
Germany has been known worldwide for decades for its engineering culture, and Kluth believes Germans generally tend to think of Digitalisierung as a hardware phenomenon because they look at things through an engineering lens. He explains “with their focus on hardware, many Germans are oblivious or resistant to the simpler changes hiding in plain sight.”
Many business leaders believe Germany’s economic backbone, the Mittelstand, is in danger of suffocating if it can’t keep up with the digital revolution. The Financial Times recently reported; “the fear in Germany is that many of these companies are ill prepared for the disruptive force of new technologies such as big data and artificial intelligence. Surveys suggest that the Mittelstand is becoming increasingly aware of both the potential and the pitfalls of digital disruption — but that smaller companies in particular are struggling to respond.”
With all the criticism, the German government is noticing the challenge and taking action. Ministers recently announced a new ‘digital hub initiative’ aimed at strengthening innovation in the industrial heartland. The plan is to connect Mittelstand companies, startups and research bodies in 12 locations across the country including key technology hubs like Berlin, Munich and Hamburg along with regional centers that are home to some of the country’s biggest names in engineering, industry, chemicals and logistics like Dortmund, Erlangen, Ludwigshafen and Stuttgart.
Meanwhile in Berlin, over the last decade the city has proven its expertise with ecommerce. Think Zalando and HelloFresh. But the ecosystem is diversifying and you’ll find just about any kind of startup trying to scale-up in Silicon Allee — including a wide variety of digital technology driven companies. Let’s take a closer look at two of them: Delivery Hero and Leapsome.
During the Tech Open Air festival, Delivery Hero, hosted a lunch called “How Tech Brings You The Food That You Love” at their Berlin Headquarters, and I attended to learn just how digital technology is supporting its global success.
Delivery Hero launched humbly in 2011 with four co-founders and secured its first major investment round six months later. Today the company has over 6,000 employees and operates as a global market leader in 40+ countries across Europe, Asia, Latin America and the Middle East plus it partners with more than 150,000 restaurants.
Delivery Hero reported it processed more than 130 million orders in the first six months of 2017 alone. It also IPO’d a year ago. Techcrunch reported at the time that its valuation topped $5 billion after the food delivery firm went public in a listing on the Frankfurt stock exchange.
As I sat in the Delivery Hero office, enjoying my delicious hot lunch that was order from a local restaurant, of course on the platform, executives explained that the longer it takes for someone to complete their online check-out, the higher the risk that they might abort the mission and decide to eat something else. So having efficient customer focused digital technology has always been a priority at Delivery Hero. Meanwhile their products and services are helping restaurants focus on what they love to do — cook yummy food — while Delivery Hero handles the tech that takes the orders.
Delivery Hero brings easy-to-use digital technology to the restaurant owners and this allows them to take more orders as quickly and efficiently as possible. As for this digital technology? Well for Delivery Hero it means adapting quickly to incorporate new innovations to their advantage. I think it’s safe to say they get big data. They’ve also already deployed machine learning in their South Korea operations and plan to roll it out in other geographies.
However, the boss urges caution to teams implementing machine learning because he says it can be very cultural. He shared the example that what works for them in South Korea may not work in another country with less in common with Korean purchasing patterns. In any case, the key takeaway is that digital processes are at the heart of Delivery Hero’s success — both customer and supplier side — and their open approach to the creation and/or adaptation to these new innovations will not change anytime soon.
While Silicon Valley might be famous for Objectives and Key Results (OKR) software thanks to John Doerr and his time with IBM and Google, Berlin-based Leapsome aims to lead the way for continuous learning from the heart of Europe by incorporating technical innovations into the process of employee feedback for the digitally driven workplace.
Launched just two years ago, Leapsome’s founders believe the modern workplace is fundamentally changing and their aiming to build the world’s best platform for continuous feedback and development. Co-founder Jenny von Podewils believes that the integration of digital innovations such as artificial intelligence and machine learning will change the way employees work. She says this change will have an impact on the overall workforce and she believes duties that are absorbed by machines will allow employees to concentrate on other activities. She thinks it also means we must all keep learning.
“What we’re seeing at the moment is that the half-life of knowledge is going crazy, and that we have to continue learning differently in working life.”
— Jenny von Podewils, co-founder of Leapsome
Thanks to digital advances, learning on the job is now a continuous process and she is aiming to make lifelong learning anchored in corporate culture with her software. Leapsome is an all-in-one platform for engagement surveys, continuous feedback between employees, 360 performance reviews, OKR tracking and 1:1 meetings. But beyond just trying to help other companies remain competitive in the fast moving digital world, the Leapsome founders have also built their software deploying the latest digital advances including artificial intelligence.
Brand Marketing Gains Importance:
As a result of digital technology, marketing managers are no longer functional heads of department that act as custodians of ad campaigns. Today marketing managers must be knowledgeable and experienced with a variety of skills plus possess business understanding and be able to navigate digital transformation. The top boss known as the Chief Marketing Officer, now wields influence that helps spur innovation, drive business growth and shape culture narrative unlike anything we’ve seen before. And brand marketing is one highly effective method that helps move organizations both inside and out.
To understand why the current spurt of brand campaigns coming out of Berlin is notable, we must first take a step back and look at how marketing is rooted in culture.
This essential modern day management process evolved in the UK out of industrialization and the same could be said for the practice in the United States too. During the days when the ‘sun never set on the British empire’, business owners had a lot of goods to sell and developing marketing activities helped move all that stock.
In the US, new products like Coca-Cola developed this management process’ foundation. Did you know that Coca-Cola popularized the use of free trials (coupons) and branded free gifts such as Coke calendars? But during industrialization in Germany, the philosophy was a little more conservative. If you built something solid that could last — world of mouth would sell your goods or services because customers talked about and bought solid offerings.
Up until recently, most German B2B marketing still preferred listing features over benefits whereas in the US and UK — marketing focuses mostly on the benefits customers will enjoy. Marketing in the US and UK is also heavily driven by storytelling.
Meanwhile in Berlin, performance marketing (or paid efforts such as AdWords) has been the preferred driver of growth over the last few years, and at some startups, the main driver of growth. But that’s now changing and I think you can expect to slowly see more brand marketing and storytelling coming from Berlin startups, especially as they continue to scale. Here are some awesome new campaign examples.
Babbel invented the market for app-based language learning and is now the world’s top grossing language learning application. Its founders’ were inspired to launch in 2007 after traveling to Spain and wishing they could have better conversations with locals. Today the Berlin based startup aims to help everyone spark conversations in another language. The company’s two co-founders have bootstrapped from Day 1 and now employ more than 600 people globally.
To create the ‘Alien Abroad’ campaign, Babbel put themselves in their customer’s shoes and tapped into that universal feeling of isolation that travelers go through, regardless of their country of origin or background, when visiting a new location where they can’t speak the local language.
Managers working in the marketing department at Babbel tell me that ‘Alien Abroad’ was an internal concept — not from any agency — and that staff overwhelming feel it represents their values, vision and the entire team at Babbel. Employees strongly believe in this campaign’s message and how it has been delivered. And this unification behind their brand is not only helping Babbel work together as a team while they rapidly scale but its helping them grow their customer base too.
N26 is a Berlin-based fintech company offering mobile management of bank accounts via smartphones. Founders say they aim to revolutionize the traditional banking industry and how people spend, save and send money. N26 believes it has reinvented the checking account (also known as a current account). The account opening process can be completed via a video chat and according to company statistics, the process takes just eight minutes.
The bank currently has one million customers across the 17 eurozone countries where accounts are available. However, N26 isn’t complacent with one million customers, the challenger bank announced plans to launch in the UK and in the U.S. from mid-2018.
So while striving to become ‘the world’s mobile bank’, N26 recently decided it was time to launch a brand campaign because it not only saw the value raising its brand awareness for customer acquisition but also in bonding with its growing customer-base for retention. #NoBullshit was born.
Just like Babbel, marketing employees at N26 tell me their now famous (and maybe a bit infamous too!) #NoBullshit campaign was created in-house. I’ve seen how the creative process evolved, explained by the marketing team, and its true — this brand campaign concept really does belong to the team at N26.
Ultimately, staff felt their brand campaign’s key message needed follow the KISS principle (Keep It Simple Stupid) and not attack or insult anyone including other banks and their customers. While the hashtag was added to ‘No Bullshit’ to soften its blow, bold colors were chosen to match the message.
N26 marketing mangers say the campaign has been a huge success in Berlin. They’ve measured an increase in sign-ups and brand awareness since the it began. They also believe their TV commercials have helped legitimize the brand, something management felt was important for them to do as a startup and a challenger. The next step for N26? Marketing says its currently planning to scale #NoBullshit to Cologne, Hamburg and Frankfurt within Germany plus numerous international cities including Vienna, Rome and Paris.
Influencing from Berlin:
Berlin’s brand marketing isn’t just about campaigns — they’ve got martech startups too.
This just in — Freachly, an influencer platform born in Germany and based in Berlin, has announced Series A funding led by Holtzbrinck Ventures GmbH and it includes Silicon Valley’s Partech plus previous Angels. At the time of writing this, the amount of money raised remains undisclosed but has been stated to be seven figures.
As Sujan Patel, co-founder Web Profits wrote for Entrepreneur Magazine “if you want to build a successful business, you need to focus on building relationships with three key audiences: your customers, influencers and your competitors.”
Why Influencers? Because while having a relationship directly with your customers is important, it’s not the only way to get through to them. Sometimes a third party can be a valuable partner in building relationships with your customers.
Influencer marketing also isn’t just for industry giants backed by super stars. An article published by the University of Pennsylvania’s Wharton Business School titled “A New Marketing Royalty: Why Digital Influencers Are on the Rise” found that influencer marketing is popular because companies of any size can benefit from it.
The article’s author, Aprajita Jain, is Google’s Brand Marketing Evangelist. She sites a poll conducted by Tomoson that found 59% of marketers are planning to increase their influencer marketing budgets year-over-year. The poll additionally found influencer marketing was the most cost-effective and fastest-growing online customer acquisition channel, outpacing organic search, paid search and email marketing.
Every industry has its movers and shakers, the ones who are pushing the envelope and moving the needle. Aligning your brand with these influencers can result in major benefits.
Look at the use of influencers as a rising digital marketing trend this way: while the term ‘influencer’ might be a popular buzzword spun-out of the development of marketing on relatively new social media, the use of them by brands actually isn’t new. Social Media essentially digitized the use of influencers. Ever heard of Wedgwood? Chances are you know this famous English tableware company that was established by Josiah Wedgwood on May 1st, 1759.
Flashback to 1765. Industrialization was getting underway in the British Empire and young Josiah knew he needed a major customer for his pottery to stand-out above the wide variety of pieces on offer at the market. Josiah figured if he could sell his new earthenware china to the British Queen married to King George III, Germany’s Charlotte of Mecklenbuerg-Strelitz, everyone in the Empire and maybe even the rest of the world would want his tableware too.
Josiah’s ambitious strategy worked. Queen Charlotte loved his earthenware and not only bought it but gave him permission to call his new line ‘Queen’s Ware’. It then became an instant top seller across Europe.
Centuries later, during the early days of my journalism career, I met the Duchess of York, Sarah Ferguson while she was on a spokesperson tour for Wedgwood. She was booked for a chat-style interview on set with my presenters for the morning television news show I produced. I remember the newsroom had a promo out for her appearance days in advance and our ratings that day also showed a strong numbers. It’s not every day people get to have breakfast tea via live television with a member of the British Royal Family. Literally centuries later, Wedgwood hasn’t forgotten how much influencers that suit their brand provide an excellent marketing opportunity that helps grow their business.
Now, who is Freachly you ask? It’s an influencer platform that launched in Berlin last year and has five co-founders. It’s unique selling point is that it’s using a localization strategy. Unlike other existing influencer platforms, Freachly matches influencers with local and regional businesses.
Freachly specifically targets restaurants, bars, clothing stores and event organizers who want to win by using marketing collaborations that leverage social media in their city or region. In order to do this, Freachly negotiates the compensation, organizes personal meetings and ultimately evaluates the success of campaigns.
When Freachly signed its Series A round a few days ago, it had 1,800 collaborations a month with 5,000 registered influencers. The marketing startup currently employs 30 people in Berlin and has outlooked international expansion beginning with London from autumn 2018.
From influencer platforms to content infrastructure marketing campaigns can be run from, you can expect to see Berlin’s young tech companies soon in a city near you. Another example is Contentful, a cloud-based content management platform that has recently had a funding round to help fuel international expansion. Contentful is different because it can provide some of the same functions as popular brands like WordPress and Medium but it’s aimed at a different user.
While there has been an explosion of connected devices that people use to interact with apps and the internet including phones, computers and even cars, Contentful aims to become the go-to platform to manage how all the information from brands is delivered via a set of APIs.
Upon signing Series C funding for $28 million (USD) in December 2017, CEO and co-founder Sascha Konietzke described his platform to TechCrunch as “a ‘headless’ CMS, not unlike Stripe’s relationship to payments: there is no front end for ingesting and formatting content, or design end for producing the final look of that content for the reader. Instead, there are a set of APIs that developers of the media product in question can use to control both of those aspects more flexibly.”
The VC that led Contentful’s Series C round is Cambridge, Massachusetts based General Catalyst. They’re known for making some very smart investments on other quiet but powerful backend aggregators and services providers including Stripe and Kayak that offer essential B2B2C tools.
At the time of Series C investment, Contentful reported that it had 130,000 developers using its platform with ‘thousands’ of paying customers and many more customers signed-up to its freemium plan. Customers use the platform to distribute branded content and they include a diverse mix from Uber, Samsung and Spotify to even WeWork.
Berlin’s Traditional Venture Capital Meets ICOs:
Landing at Schönefeld Airport, travelers waiting for the U-Bahn are greeted on the train platform by a billboard advertisement from the German Spy Museum. The Berlin based museum reminds visitors that during the Cold War the city was the capital of spies. So perhaps its not a huge surprise that local tech talent considers, and excels at creating, decentralized technologies.
As I wrote about in “Entrepreneur First: We’ll Pay You To Launch A Startup”, the London based company builder announced it was entering the market this year because its management team believes the type of founder Berlin attracts is different from London. With Berlin evolving into a hub of cryptocurrency and other decentralized technologies, EF decided to come tap into the city’s edgy subculture.
But its not just international accelerators and company builders coming to Berlin. The Silicon Allee headquartered German Technology Entrepreneurship Center (GTEC), a startup campus on a mission to drive digitization in Germany and Europe, recently announced a partnership with the Frankfurt School of Finance and Management plus the Frankfurt School Blockchain Center to educate the next generation of entrepreneurs and corporate executives through a new ‘Crypto Startup School’.
Even Berlin’s most prominent venture capitalists have taken notice and they’re talking about it too.
HV Holtzbrinck Ventures is one of Germany’s largest venture capital investors. They were launched by the successful German publisher Holtzbrinck Publishing Group about 20 years ago. In 2010 it became an independent venture fund fully owned by the General Partners. HV Holtzbrinck Ventures has over €1 billion euros under management and it’s invested in over 160 startups including Zalando, HelloFresh and Flixbus. It’s also currently investing in its seventh and largest fund to date at €306 million.
Holtzbrinck Ventures Investment Partner, Jan Miczaika, participated in a panel discussion focusing on Berlin’s investment landscape held during Tech Open Air. During this panel, the city’s top VC’s were quizzed about trends for the months ahead and Jan explained that ICOs were not only on HV’s watch list but that his fund viewed ICOs as a potential opportunity.
Jan shared that HV is in the process of investigating the feasibility of changes to their terms for their next upcoming fund, in two to three years time, to be able to possibly invest in them going forward. When one of Germany’s most established and successful venture funds, the backer of six German unicorns among many others, says its considering updating terms to provide for ICOs — you get the impression that this is a theme that will likely be on the radar in Berlin for the coming months.
Please note: I am not a lawyer or financial advisor. Nothing in this article constitutes legal or financial advice. I also have not receive any payment for this post.
Medium lists me as a ‘Top Writer’: Entrepreneurship, Startup & Technology.
Follow me on Medium and Twitter @CambridgeTricia
Visit me at www.ShowMeMyCustomers.com
Cambridge MBA | Marketing Consultant | Speaker | Author | Ghostwriter