Hamburg is Germany’s second largest city and well known for being a logistics and engineering hub. It also has a burgeoning start-up scene and there is phenomenal growth amongst its unicorn companies. MCJ Lemagnen Associates speaks to Veronika Reichboth (VR), Director Start-up-Unit, Hamburg Invest.
MCJ: Hamburg is known for its easy access to the German and European Union markets, with its container port (the third largest in Europe), aviation facilities and great rail connectivity. What other specialisms can the city offer?
VR: We have a strong engineering heritage too, as well as a tradition in publishing and print media and TV/film production. These traditions continue today and have now become more digital. For example, the next media accelerator (nma), founded in 2015, is a fast growing company internationally, helping media outlets develop new business models. It is a major accelerator supporting startups in the media sector and it is has partners in the US, Europe and Israel. And we are building on the success of our commercial aviation market with the growth of new technologies including drones. Hamburg was one of the first cities to be officially welcomed in the Urban Air Mobility (UAM) initiative of the European Commission's Innovation Partnership for Smart Cities (EIP-SCC). One exciting drone startup is FlyNex. Also founded in 2015, FlyNex provides the leading cloud-based drone operation software for flight planning, execution and analysis.
MCJ: Hamburg has been a financial centre for centuries. Do you have much fintech activity now?
VR: Yes, although Frankfurt is often associated with the financial sector in Germany, Hamburg has a great tradition in banking too. The world’s second oldest bank was founded here, Berenberg Bank, and today we continue to have a thriving banking sector. Fintech is a huge growth area for us. We have a lot of private banks here, and in January this year Finhaven, a two-storey co-working space (1000m2, 100 workspaces), was opened for fintech startups. We currently have 45 fintech companies in Hamburg working in many different segments including data analytics, banking, payments, crowd funding, credit and factoring, insurance and comparison sites.
Online lender Kreditech is a very successful fintech company that was founded in Hamburg. Started in 2012, it now has 350+ employees and covers five country markets, serving over 700,000 customers. They have raised almost $500 million in funding since 2013.
MCJ: Tell usmore about the start-up scene in Hamburg and the role of your Startup-Unit.
VR: Hamburg has been a start-up hotspot with a lot happening for some time, and these start-ups are growing quickly and some have now become unicorns. Alongside Berlin, Hamburg is the most successful start-up location in Germany (source: KfW Gründungsmonitor 2018). There are some fantastic success stories, for instance, XING, a German language social networking system for professionals, similar to LinkedIn, was started here in 2003 and became a unicorn in 2015.
Online fashion retailer About You was founded in 2014 by entrepreneurs Sebastian Betz and Tarek Müller – the latter started entrepreneurial activities when he was 13 with his first official business registration at the age of 15. About You became a unicorn in August 2018, only four years after starting up.
We created the Hamburg Startup-Unit a year ago to encourage more start-ups in Hamburg. We’re aiming to promote the visibility of the city as an international startup hot spot. Our unit is a single entry point for companies starting up here. We are very well informed about the whole city and are constantly looking for new ways to support startups, including funding opportunities, running relevant events and providing the information that companies need to get going here.
MCJ: MCJ Lemagnen Associates recently published the report ‘Foreign Direct Investment and the Rise of the Unicorns’ about the international growth strategies of current and aspiring unicorns. Talent was a key challenge for companies aiming for fast growth around the world. What can Hamburg offer in terms of a skilled workforce?
VR: Hamburg has a large population of 1.8 million people, with an excellent quality of life. We have the coast, the river Elbe, plenty of green space and facilities, and a trendy reputation. Hamburg is one of the biggest cities in the European Union and it’s only an hour and forty minutes by train to the capital, Berlin. It’s easier to find staff here than in other places because of the lifestyle. In fact, in a 2018 survey by Monocle magazine, Hamburg was rated higher than Sydney and Barcelona as one of the top ten most liveable cities in the world.
Our workforce is highly educated and our technical know how is well established. Hamburg has a large student population of 100,000 and we have a total of 22 higher education institutions. We have two engineering-focused universities: the public Technical University of Hamburg and the private Northern Institute of Technology. There are 20 key research institutions here, including DESY, one of the world’s leading particle accelerator centres, three Max Planck institutes as well as life sciences, computing and marine research centres.
We know there is a shortage of software developers worldwide, however Hamburg is home to about 9,000 IT businesses so there is a big talent pool here. Hamburg is keen to attract knowledge- and technology-based startups. Leading digital companies already have their German HQs here, including Adobe, Dropbox, Facebook, Google, Hootsuite, Smaato, Snap and Twitch.
MCJ: Are there any specific support/funding programmes to help startups in Hamburg?
VR: Hamburg’s start-up ecosystem has experienced a boom – with large sums being invested. According to the auditing company Ernst & Young, Hamburg’s startup scene was invigorated in 2018 with venture capital to the tune of EUR548 million. International investments are playing an increasingly important role here, accounting for a third of this figure. Thanks to an increasing number of co-working spaces, accelerator programmes, start-up hubs and investors, Hamburg’s attractiveness has increased greatly in recent years.
We have applied the media accelerator concept to other areas too, with the next commerce accelerator (nca) and the next logistics accelerator (nla). Startups with commerce-related business models as well as those with strong technical skills can leverage their business here and benefit from a high expertise in related fields such as big data, blockchain or e-commerce. Similar programmes are offered in the field of fintech, health and social entrepreneurship. Another of our recent programmes is the Digital Hub Logistics. Our logistics programmes are embedded in the state-of-the-art ecosystem of one of the world’s leading logistics locations. For instance, with its Bizlab, Airbus provides start-ups and intrapreneurs with an opportunity to gain insights into the requirements and modes of operation of large aviation companies.
In addition, the city-owned investment bank IFB Hamburg offers its own support programmes. IFB’s InnoFounder scheme targets mainly entrepreneurs and startups with innovative digital business models. There is a personal grant of up to EUR75,000 for early-phase Hamburg-based start-ups. And IFB has other programmes such as InnoRampUp, which targets innovative young start-ups in Hamburg and provides grants of up to EUR150,000.
Foreign Direct Investment and the Rise of the Unicorns
This report is produced by MCJ Lemagnen Associates Ltd and is independent of any government or economic development agency.
©MCJ Lemagnen Associates Ltd 2019