The Factory: Hot Air or a Wind of Change for Berlin?

By Conor Rushby |

Watching the Factory‘s shell get chipped and hacked at from the Silicon Allee office, it can sometimes seem like progress is moving backwards not forwards. Nevertheless, this building site has been on the receiving end of some pretty high profile attention recently in anticipation of it’s potential.

Indeed, there is a lot of noise around this site along the route of the former Berlin Wall in more ways than one, and those who are lucky enough to be in already are understandably excited (not least us). But will the Factory really mean for Berlin? Will it give the city’s startup scene the gravitas it is crying out for, or will it merely serve to highlight the divide between the haves and the have nots?

The Factory might sound a little more Google than Berlin. Any trip to Mortizplatz’s Betahaus, for instance, will reveal an endearingly shabby set of offices, while Berlin’s startups are housed in a wide range of buildings – be they period buildings tucked away in Kreuzberg yards, or imposing tower blocks in Friedrichshain.

The point is none of them have been purpose built for housing a range of companies, and startups at that. Hence the attractiveness of an all-purpose site including features like a deli, fitness centre and sauna, basketball court, art gallery and extensive conference and roof terrace space.

There’s more to the Factory than that though – just like there’s more to Google than slides and ball pits. On paper it represents a dynamic workplace – imagine a day-in, day-out Silicon Allee meet up, where ideas can bounce around, people can help each other out, and contacts can be made.

The Factory’s main building as it looks today

Fostering collaboration is great, but is there a risk of the companies which manage to secure themselves space in the Factory become a little cliquey? It doesn’t seem that likely; there is simply too much interaction between startups in Berlin.

But Jenny Jung, brand manager for the Factory, admitted it could be a danger: “I’m going to do everything in my power to prevent that – I’m hiring a community manager for this. We’ll also be having lots of events to include the rest of Berlin. It’s important people here feel part of the Factory, but there will be lots of interaction with the outside.”

The community manager’s remit will be fostering interaction between tenants, as well as with the rest of the city. For instance the Factory will be hosting a Christmas party in partnership with TOA and General Assembly. That’s a big overlap in networks, and events like this will do much to prevent a closed community.

Indeed, what the Factory is intended to do is create a hub – a tangible centre for the city’s startup scene that primarily benefits those inside, but also Berlin as a whole.

That’s pretty realistic in light of the agreement Google have just signed with the Factory, providing support worth €1 million over three years. Under the deal StartUp-Weekend and Google Developers will conduct workshops for developers and entrepreneurs, adding to the mix of creativity set to be bouncing around the place. Google employees will also be close to hand to give advice, on either an on-off basis for specific problems, or otherwise as part of their mentoring program.

These initiatives will be open to the startup scene as a whole, while in addition, the Factory will be decked out with a tech lab and equipped with Google hardware such as Android Tablets and Chrome Books. Developers will be able to pop in there when required, while a free software package of Google services for startups is also in the pipeline.

A Healthy Mix of Startups

The Google partnership gives the Factory the kudos of a big name, and internally, the policy will be to ensure a healthy mix of startups from across the spectrum – look at the different stages represented in the companies which are already signed up: 6Wunderkinder, SoundCloud, totalCommerce, Mozilla, toast, Views, and VERUS IO. Jenny is confident the larger company cultures which will be on show will be approachable and will foster collaboration.

Those moving in are excited by the prospects. Ramin G. Far, CEO of VERSUS IO, compared the Factory to a university – a way for companies to broaden their horizons: “Founders need the right people around them to make progress. The right people all have the same mindset, the engineers, the VCs, the founders, and so on. Berlin has the best ecosystem, it’s attracting the best people from everywhere – the Factory symbolises this – it’s the right idea at the right time.”

And the mixture of togetherness and independence, Ramin added, is spot on: “You’re still free, it’s no incubated venture, but nurtures that independent cast of mind.”

That’s a key point to be made. The Factory will be internally democratic – no one person is calling the shots, which will add to the collaborative atmosphere.

So far it looks like the hub has solid foundations to be a community success. Dario Galbiati Alborghetti of Views is optimistic. “I see the Factory as a showroom for everything Berlin has to offer, but I also think this concept is going to make Berlin the San Francisco of Europe.”

Demonstrating Staying Power

Other cities, though, are also competing for the mantle of Europe’s startup hotspot, and hubs are a common tool for reaching this end – by demonstrating staying power.

And politicians everywhere have been keen to get a piece of the action, looking to bright young things to kick start sluggish economies. British Prime Minister David Cameron said in a 2010 speech: “Silicon Valley is the leading place in the world for hi-tech growth and innovation. But there’s no reason why it has to be so predominant. Question is: where will its challengers be? Bangalore? Hefei? Moscow? My argument today is that if we have the confidence to really go for it and the understanding of what it takes, London could be one of them.”

Keen not to fall behind with developments across the channel, Paris has similar plans to harness the tech phenomenon. Minister of the Digital Economy Fleur Pellerin announced in October her intention to build a hub for Paris, in contrast to the relatively spread out Silicon Sentier, named for the Sentier metro stop.

Hubs are also spreading in the German-speaking world, and it seems there is international consensus that it benefits everyone. Clusterhaus was started in Cologne before setting up shop in Vienna recently. Dirk van Quaquebeke, who has helped organise the move, told Silicon Alle that the key benefit is collaboration. “There is a thriving start-up scene, and I think the city [Vienna] has a lot going for it and there is a lot of regional exchange in Central Europe. I hope that Clusterhaus can contribute to this positive development.”

Clusterhaus’ format is an unrenovated space with little provided in the way of infrastructure, but plenty in the way of social interaction. That is early stage stuff, though; the Factory’s approach is to consolidate what is already here, as well as help startups, for instance with the Google partnership.

Slap Bang in the Middle

This is the setup they have at Central Working in Tech City – a term which can refer to the UK Government-sponsored investment organisation as well as the more general concentration of startups in East London around the Old Street roundabout. With three co-working spots – one in Soho, one in the Google Campus and one in Shoreditch – they are slap bang in the middle of things.

Founder James Layfield said. “It’s not really about co-working, it’s about supporting these businesses, finding out what they do, and then really helping them achieve that through partnering with other people who are members.”

They charge membership rather than letting desks. That means members can use any of Central Working’s branches for convenience. As well as Google, who were their founding partners at Google Campus, they also work with Barclays bank – so if members need assistance with their finances, help isn’t far away.

The aim of this, James says, is to build a wider ecosystem, charging relatively little for membership at £350 (€436) a month. By London standards that is cheap, especially when you consider rent prices in the area have increased 60 percent in the last 12 months.

So can the Factory replicate what is happening in London?

James added: “If you are in Berlin it’s really cheap compared to London, and there’s lots of space… I’m sure there will be an ecosystem there, but the thing that London has which is unique globally is that within a cycle ride you’ve got some of the top financial people in the world, some of the top creative people in the world, and top advertising people in the world. So you have got an infrastructure here that is quite unique, which is a 15 minute cycle ride away, whereas in Berlin you haven’t got that kind of infrastructure. The money isn’t in Berlin necessarily, the creative industry to a degree is in Berlin, but again, it’s not just there.”

‘A Pretty Clever Thing to Do’

While the wider UK as a whole doesn’t benefit much from this concentration, it is excellent for startups. The Factory’s Google deal has shown that Berlin is capable of replicating this hop-on-a-bike approach, but London benefits considerably from the proximity of the country’s financial district, and world-class creative industries.

London also has an edge in the political arena according to James. “From a Government perspective it has taken a very little amount of effort to make a significant difference, all they’ve done is say let’s designate that area Tech City – tick. And, place a team of people who will help draw companies to the UK – tick. It’s not like they’ve spent billions doing it; it’s a pretty clever thing to do. We are very supportive of what they’re doing, we will encourage anyone who wants to come and look at Tech City to come and look at it, and our door is always open for the Government.”

How often do you hear such lofty praise for the German Government from startup people in Berlin? Not often – but there are signs that things are changing. The city state of Berlin has launched a new marketing campaign aimed at attracting startup people, and even Germany’s old school president, President Joachim Gauck, has gotten involved. He and the Mayor of Berlin, Klaus Wowereit, visited the Factory to see for themselves what the fuss was all about. That visit was followed up by interest from rbb’s Abendschau show and the country’s top selling newspaper, Bild.

By garnering such widespread mainstream media coverage, the Factory is doing something that other startup-related projects haven’t been able to, for the main part. And Berlin’s scene will need such attention if it wants to compete with the likes of London.

It does have plenty of perks as well – it’s comparatively cheap, offers a great lifestyle and is geographically and politically at the centre of Europe. Time will tell for Berlin, but in London it is chasing an established hub of creativity and commerce.

Jenny perhaps nailed it while pointing at the Factory building site: “That’s the state Berlin is in now. When it’s done everyone can see Berlin is at least happening. The sheer density of companies will be proof enough.”

Disclaimer: Silicon Allee, along with other early-stage startups which have been invested in by JMES, moved into the first phase of the Factory earlier this year.