The German capital is still one step ahead when it comes to start-ups. In the first half of 2022, 313 start-ups were founded in Berlin, almost three times than in Munich (122 start-ups). But Berlin is also unrivaled in the DACH region when it comes to fintechs.

The portal findxable.com aggregates various international fintech rankings – and shows Berlin as the number one fintech hub (followed by Zurich and Hamburg). A number of important factors are included in the ranking, including the number of fintechs founded, the quality of the location for fintechs, but also incentives for start-ups and positive regulatory developments in the respective market.

We talk to Torben Rabe, Country Director Germany at Qonto, about how start-ups are received in Berlin and what advantages the capital also offers for inexperienced founders. We also asked him for his assessment of whether Berlin fintechs are currently being sold off to an international competitor. French fintech Qonto acquired Penta this summer.

What advantage do fintechs have in the capital? It can no longer be the free space and the low rents …

Berlin is a great place for fintechs looking to grow fast – and our own experience is a vivid example of this. We started with a very small team in the German market – first from the Paris office, then on site. In Berlin, we invested first and foremost in building our local ecosystem, networked with strong local partners, and held many events within a very short time – also mainly in Berlin. Because that’s the great advantage of the capital – all the ingredients you need for a successful start-up are within reach here.

Of course, this also includes talent. Berlin has huge potential in terms of skills. 30,000 students graduate in Berlin every year. The city’s educational, research and scientific institutions are closely interlinked with the start-up scene. In addition, more and more international talents are being attracted to the capital – because of the high quality of life, but also because of the more than 8,500 tech companies that are vying for the favor of the best talents in Berlin with ever better benefits.

What also makes Berlin special: The international environment is basically self-reinforcing here. The capital has long since become a place where even expats without German language skills can easily find a job.

After Brexit, Frankfurt and especially Berlin had hoped to attract more fintechs to the city? Has this hope for Berlin been confirmed?

Noisy EY Around 44 per cent of UK-based financial services companies have – or plan to – relocate their operations or staff to the EU. However, one must bear in mind that this development IS anything but complete. Some companies had already relocated their activities or their staff before the official Brexit. Others, however, have been thrown back in their planning due to the corona pandemic.

International fintechs come to Berlin and buy Berlin fintechs on a large scale – how do you perceive that?

We are currently seeing the beginning of concentration in certain areas.

However, such movements are quite normal in the market and for many scale-ups, acquisitions are often the next logical step – especially in strong growth phases. If you want to build a European champion that can attract the best talent and can keep up with the ecosystems in China or the USA in an international comparison, you have to – sooner or later – grow beyond your own national borders. Then it often makes sense to join forces with start-ups in other countries – because they have valuable local expertise, for example. At a certain point, together you are often stronger than alone.

Selling out of Berlin fintechs – why do these giants from France or overseas have nothing more to oppose?

In my opinion, this is a fallacy: It’s not as if Berlin’s fintechs have nothing left to oppose the “giants” – quite the opposite. The clout of many local start-ups is a real asset for scale-ups from other European countries. Berlin fintechs have valuable local know-how in the German market and a large pool of international talent. Scale-ups are often already at the point where they can operate beyond their own national borders – and have the appropriate financing behind them.

Mergers are also mutually beneficial. And only in this way will it ultimately be possible to create strong European brands that compete internationally. We have to get away from thinking only within our own national borders – and instead work flat out to create a common European start-up vision and jointly expand our great potential in Europe.

How do you perceive the Senate’s political commitment to start-ups, especially fintechs?

The whole of Germany has some catching up to do in this area – also in comparison with our European neighbors. In France, the government declared the expansion of start-ups a top priority years ago – and today Macron can look forward to one French unicorn after the other. Paris has developed accordingly. Berlin also has this potential.

Like the Parisian colleagues in France, the Berlin Senate is also guided by the direction of its federal government. If start-ups are given priority there and become a fixed part of the roadmap (as happened for the first time this year as part of the start-up strategy), this also gets Berlin politics moving. The fact that they have already recognized how important it is to expand Berlin as the main German location for fintechs can be seen, for example, in the cooperation with the Berlin finance initiative – the state government even stipulated the continuation of this partnership in the coalition agreement.

Berlin’s politicians are also doing a lot for start-ups in general – the EXIST start-up grant, the GründerBONUS or the digital bonus Berlin are worth mentioning.

What incentives could Berlin offer fintechs to prevent them from expanding overseas?

I believe that a lack of incentives is not a Berlin problem, but rather a challenge that Germany and Europe as a whole must face. We all have to work together to improve the conditions, especially for tech companies, so that they not only settle in Germany or Europe at the beginning, but also stay here in the long term. This certainly includes promoting attractive ESOP schemes and tech visas to attract the best talent to Europe.

But also, among other things, improved access to financing for further deepened start-ups (scale-ups) – in the form of venture capital or IPOs. This is the only way to prevent value creation from being developed because scale-ups will eventually migrate to the USA due to better financing conditions.

About Torben Rabe

Torben Rabe has been Country Director Germany since 2020 qonto, the European one in financial management for founders, the self-employed and SMEs. After positions with Oliver Wyman in business and digital strategies for banks, Lendico and Bird, Rabe is passionate about banking in connection with technology.