German VCs saying: "Ich bin ein Berliner"

Amy King
11 June 2013

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For firms looking to set up shop in Germany, selecting the right city can prove challenging. Amy King argues the case for heading to Berlin

Clipperton Finance officially opened its Berlin office in late May. Having serviced a number of German clients for quite some time, it was time to make it official. With plans to grow the German office to four or five professionals in the next year, partners are poised to sift CVs in the coming months.

The financial advisory firm was founded in Paris in 2003, assisting French companies in international transactions and raising capital from Europe, Japan and China. The London office opened six years later. "But we understood that to be truly European, you have to be out in the field," explains Stéphane Valorge, the partner heading up the new office.

"The trickiest thing with Germany is that it is highly decentralised," says Valorge. "Whereas in France or the UK you might have 80% of business in Paris or London, it doesn't work that way in Germany." Deciding to open a German office is one thing, but pinpointing a particular location is quite another.

"Berlin is brimming with activity," explains Valorge. "The last few years saw a lot of VCs move to follow this activity. There are lots of creative people in Berlin, the cost of living is fairly low and it is pretty central, with Eastern Europe and Scandinavia nearby. So it made a lot of sense to be here, rather than Munich or Frankfurt." Indeed, the pull of the city's energy is strong, with Earlybird deciding to relocate its headquarters in the closing days of 2011.

Countrywide activity
In the early-stage segment, Berlin is raking in the deals. Over the past three years, the city and the surrounding area accounted for 36% of German activity by volume, according to unquote" data, with Bavaria accounting for 24% and North West Germany racking up 18%.

Compare that to the undeniable dominance of London in the UK and the German spread is far more even. However, unquote" data suggests Berlin may be growing into a hub: in the year ending January 2012, the area accounted for 37% of early-stage activity. The following year, its share of the pie grew by 5%.

But the buyout side paints a very different story; Berlin came last in the regional rankings. "From a banker's point of view today, I would say that the majority of business for late-stage rounds and M&A transactions may be outside of Berlin. Actually, my first mandates are not in the city! But that will not still be the case in a year or so. It is a matter of time," Valorge says.

What may be missing in Berlin is a high-profile exit, to really prove the local scene's credentials and lure others to the city and complete the ecosystem. In 2010, the city saw eBay buy Private Sale's Brands4Friends for $200m, though a big-dollar exit to rival the likes of Skype is noticeably absent in such a thriving environment. But make no mistake; the removal men will be driving towards Berlin when it comes.