From B2B to deeptech: An inside look at Munich's rise as a global startup hub
n Munich, a city where tradition mixes with modernity, a vibrant startup ecosystem is becoming increasingly attractive for entrepreneurs. Two locals with extensive knowledge on the city’s startup scene spoke to us to tell us more.
Beyond being associated with Oktoberfest and a rich culture and history, Munich is emerging as a significant tech hub and innovation ecosystem on the global stage.
For the first time ever, Munich was deemed one of the world’s top startup ecosystems by ranking in 30th place in this year’s Global Startup Ecosystem Report.
With the most powerful economy in Germany, Munich is home to notable corporates and prominent universities and research institutions. At the same time, its startup ecosystem is valued at $4.5 billion, according to 2018 statistics by Startup Genome.
The failure culture here isn’t quite what you'd wish it were as an entrepreneur.
One of the city’s biggest startup success stories is long distance bus company, Flixbus, which has reached global scale and recently entered the US market. Meanwhile, Lilium, which builds air taxis, is often noted as one of Munich’s most exciting startups to watch.
We spoke to two locals who are well-known in Munich’s startup ecosystem to find out the essentials you need to know, including the city’s strongest assets but also the areas where it can improve.
How has the startup scene changed in recent years?
Florian: In the past, the goal was to work for a corporate, but this is slowly changing as more and more people want to be entrepreneurs. Corporates are meanwhile opening up to new ways of thinking. So there’s a positive trend on both sides. Another difference is that there’s more money in the ecosystem now. In spite of Munich moving really fast at the moment, it still has lots of potential. It helps that Germany has become more visible internationally when it comes to startups.
Andy: When I came to Munich over three decades ago, there was no real ecosystem set up and it didn’t have a robust investment market. Since we launched the LMU Entrepreneurship Center in 2006, I’ve seen a huge increase in interest in startups, particularly among young people. At the same time, there’s been significant interest and increase in venture capital and angel investor groups. The government has also been a notable player.
Where does your passion for Munich's startup ecosystem come from?
Florian: After living in many other countries, I decided to return to my hometown, Munich, 2.5 years ago. As an entrepreneur myself, I love working with startups. About ten years ago, when I started doing corporate development for large media companies here, I began working with entrepreneurs and saw how differently they tackle problems. That’s why I think if you manage to build a company, it's probably the most rewarding and purposeful thing you can do in today's economy.
Andy: I've been an entrepreneur for 35 years. When I moved to Munich in 1983 and started my first company, I had a very hard time. Only my second company was successful and after I sold it, I had the chance to do something good in the world by setting up the LMU Entrepreneurship Center and then everything went on from there. It became my impetus to help others to avoid the long learning time that I experienced.
What are Munich’s biggest strengths?
Florian: One of its main strengths is that there are a lot of small, medium and large companies here. There are loads of corporate clients in Munich, possibly more than there are in Berlin. We’re also in a really good economic situation.
Another strength, although this depends on how you look at it, has to do with opportunity costs. Starting a business might mean that you have to give up a well-paid job. But even if you fail with your startup, I think the opportunity costs and risks are actually low because there are so many job opportunities here.
Further strengths include the city’s talent. Munich is attracting a lot of big tech players like Google, Microsoft, Huawei and Intel. Entrepreneurship support is also available from prominent universities such as the Technical University of Munich (TUM) and the Ludwig Maximilian University of Munich (LMU).
Building a company is the most rewarding and purposeful thing you can do in today's economy.
Andy: Founders looking to start up in Munich should definitely take advantage of its B2B nature. Another thing that stands out is its venture capital. There are a lot of families who are investing and corporates as well. Munich really covers the entire breadth of the investment ecosystem.
In addition to its high quality of life, another advantage is that while everyone speaks German, they also love speaking English. This is a huge difference compared to, say, Paris, where people love speaking French.
And its biggest challenges?
Florian: High cost of living, lack of office space… we started WERK1 to help with that challenge. Another hurdle is that wages are so high. As well, the failure culture here isn’t quite what you'd wish it were as an entrepreneur. People in Germany and especially Munich tend to see the glass half empty rather than full.
Andy: There's a big demand for talent. People aren't cheap. Still, in terms of salaries, Munich is certainly more reasonable than Silicon Valley.
Why launch a business in Munich and not any other city in Germany or worldwide?
Florian: Firstly, its corporate landscape. Secondly, the city’s highly skilled workforce and a high level of professionalization. Thirdly, the quality of living. It’s safe and it’s just the right size. It’s probably not as hip and lively in some areas, but if you want to spend your free time in the nearby mountains or the lakes, it's just awesome.
While I fully support Munich’s ecosystem, I'd like us to look at Europe’s ecosystem as a whole. I think the real challenge that lies ahead of us is competition between Europe and China or Europe and the US. We need to create a common vision and the answer doesn’t necessarily mean we have to be bigger, faster or more profitable.
Andy: I've never been a fan of comparing. It's more about making Germany work as a startup nation. It depends on your company. If you have an e-commerce company, for instance, you might be better off in Berlin. But if you have a B2B company and you're doing deeptech, you're better off in Munich.
Looking to the future, I think Munich’s B2B aspect will only get stronger and stronger. What with all the current interest corporates have in working with startups, I think we’ll see a rise in companies that are focused on corporate partnerships.
[ Read also: Startup Guide x SAP Next-Gen: Going further together ]
As well, I'd like to think that the nature of the student population in Munich will broaden in the years to come. There aren’t many design students, for example, who are interested in business. But in order to build a great company, you need various skill sets. You need technical people, designers and so forth – not just business people.
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