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Month: February 2019

Which city should Japanese startup have a presence in Germany: Dusseldorf, Munich, Berlin?

I’m writing this blog post on my last day in Berlin. I spent almost a week in Munich before coming here. A purpose of this article is to help other entrepreneurs, especially those who are based in Japan, identify the most suitable location in Germany as a first footprint into this country.

Now, I understand my view is pretty much biased and the answer may vary a lot depending on the nature of business. Having said that, I will summarize both pros and cons of each city as below.

Dusseldorf

Dusseldorf has been a preferred city in Germany to established Japanese companies for decades. It’s no wonder that one of the JETRO’s two offices is located here. According to the latest statistics, 1% of the entire city population is Japanese.

The city’s advantage is that there is a relatively large number of German employees who are currently being employed or used to be employed by Japanese company, and they do understand how Japanese companies work to some extent.

But here is the catch. It does not mean these Japanese friendly workers are startup friendly. In fact, it can be quite opposite meaning they might not have necessary mindset required by growing startup. They respect a protocol order. At the same time, they may lack flexibility and agility. Wearing multiple hats is something they do not like.

Also important to note is that a talent pool of IT/software workforce is somewhat limited. It’s true not only to Japanese companies but also to local companies based in Dusseldorf. Yes, there are a couple of R&D centers owned by foreign companies and they have huge presence . But once again, the people may not be exactly startup ready.

There is a direct flight between Dusseldorf and Japan. Another reason for established Japanese companies to choose this city as their base in Germany.

Munich

German people used to say “There are industries in Munich. There is none in Berlin.” What they are referring to is, of course, automotive industry like BMW and manufacturing industry like Siemens in Munich whereas Berlin is known as the place for consumer-facing services and tourism.

I was lucky to stop by and talk to the representatives at German Entrepreneurship, a Munich based organization that fosters a local startup ecosystem, and XPRENEURS, a local incubator operated under the greater UnternehmerTUM umbrella. Thanks to JETRO Dusseldorf office for coordinating these meetings.

From what I understand, Munich is definitely a suitable place for those who intend to provide product and service for automotive/manufacturing industry. Needless to say, there are OEMs, Tier 1 and Tier 2 suppliers. As the industry moves toward service oriented such as MaaS and becomes more software centric, the opportunity for IT related startups is also becoming significant.

As for local startup ecosystem, Flixbus is a well recognized unicorn disrupting a long distance mobility industry. There is also Lilium, a startup founded by the engineers from the Technical University of Munich. For IoT/AI startup, Konux comes to my mind. Given the existence of these high-tech startups, Munich is no more about old fashioned industry.

Last thing to notice is that there will be direct flight between Munich and Osaka, in addition to the existing flight from/to Tokyo. This indicates an increasing demand from either side of countries. One downside might be that this place might not be your 1st choice if you are B2C or not related with above industries.

Berlin

Everyone thinks Berlin is the place for IT talents and creators/artists. But after hearing from the people who know real insights, I learnt that a current talent pool is made up of foreign workers who migrated themselves to the city. What’s even more interesting is that Berlin based startups usually consist of lots of remote workers where a majority is often the people from Ukraine.

This fact leads to a little heads-up to Japanese startups thinking of Berlin as the place for hiring software engineers. Yes, there are such talents, but it may not be as large as you imagined. I also learnt that the people in Berlin excel at making UX/UI, directing a project and communicating in multiple languages. I think that’s partly due to the culture and diversity given by the city.

However, when it comes to coding and hands-on software development, you need to be aware of the above facts. If you are really keen on finding software developers with decent skill sets, you might want to look somewhere else like Ukraine and SE Asia. If there is absolute reason to work with German developers, then Berlin might be your choice.

Another point is that the talents in Berlin are slightly cheaper than those in other cities. That’s simply because a cost of living is cheaper here. People said that housing is becoming an issue as many foreign workers are moving into the city. Brexit is unfortunately one of the reasons.

A downside for Japanese companies is there is no direct flight between Berlin and Japan. The construction of new airport is in a middle of political debates which will take few more years to settle.

 

Photo: Taken at Viktualienmarkt in Munich