When Samsung NEXT announced that it would be setting up its European shop in the German capital city of Berlin, headlines focused instead on where it had chosen not to be. That NEXT, a $150 million tech fund, had decided against opening its first office in London prompted a lot of fingers to be pointed at Brexit, the imminent British exit from the European Union that has caused economic and business anxiety since its inciting referendum last summer.
But according to Felix Petersen, managing director of Samsung NEXT Europe, the choice to move into ‘Silicon Allee’ had far more to do with living costs than political chaos. Petersen, a native Berliner, himself admitted to the Times newspaper that London is “not really a fun place to live unless you are really rich.” And considering Samsung NEXT’s wishlist of tech sectors in which to invest, it’s no surprise that entrepreneurial overheads have played a key role.
NEXT, which raised its cash this January, is looking to put money into cutting-edge technology including, according to Petersen, virtual reality, artificial intelligence, IoT, mobility, cybersecurity and data analytics. These are all sectors in which Berlin-based startups have begun to excel, as the city’s tech scene moves from hype to high-valuations.
Despite this, Berlin is still hugely cheaper that London. Rents are 60% cheaper than in the British capital, and it is around 60-70% cheaper to buy property in the “poor but sexy” German city.
“Berlin, with its diverse and thriving startup scene, was an intentional decision, but it’s merely our first foothold in Europe as we’re rolling out our expansion plans over the next twelve months,” Petersen told Red Herring. Samsung NEXT will soon be looking to open offices in London and Paris, he adds, “and other locations with a strong concentration of great companies focused on our key verticals.”
Samsung NEXT provides investment, coworking and mentorship to entrepreneurs. It also lays on an Entrepreneur-in-Residence program, which lasts from six to 18 months, where startups can develop a product and move to the next stage of their development. Berlin is the fund’s sixth location. It has already set up offices in Gyeonggi-do, South Korea; New York City; San Francisco; Mountain View and Tel Aviv.
“For Samsung NEXT international expansion is all about thinking globally but operating locally,” says Petersen. “We are building a local team in Berlin who know the market, the systems and the people, and who will become part of the local startup ecosystem and help it thrive. Our plan in the next few years is to build local teams across the big European tech hubs, with London and Paris next on the list.”
Petersen and his team will be closely involved in Berlin’s growing tech events calendar, one of the highlights of which was this month’s Tech Open Air. Samsung NEXT featured on the judging panel for various pitch events related to B2B enterprise, hardware, future cities and finance. It will also soon announce its own events.
“Berlin is a great starting point for our European investments, as it is home to a powerful and fast-growing network in all of the different tech sectors we’re looking to invest in, particularly in the verticals of AR, VR, decentralisation and health tech,” says Petersen, whose own background includes having sold two startups, and a continuing stint as partner at Faber Ventures.
Many economists have predicted an exodus of tech and other companies from London, before Brexit comes into force in 2019. Several leading financial institutions, such as JPMorgan and HSBC have already announced plans to move to Germany, as Britain’s negotiations to leave the EU continue amid widespread confusion.
London has nevertheless attracted expansions by some of tech’s biggest players including Apple, Amazon, Slack and Snap. But Samsung clearly sees Berlin as a better bet when it comes to growing young, cutting-edge tech startups rather than established multinationals.