In the world of startups, the rule of thumb is that American startups raise twice as much capital in each round of financing as European ones. For many years, European policy makers believed there was not much one could do about this discrepancy. After all, capital follows ideas, the thinking went. If there were only more gifted entrepreneurs in Berlin, London or Paris, more funding would be available.
But does this conventional wisdom really hold true? This was one of the questions we attempted to answer in the past seven months. To do so, a team of consultants conducted an in-depth case study on Berlin’s startup ecosystem (jointly published by McKinsey & Company and the Senate of Berlin in October 2013) which included more than 100 structured interviews with entrepreneurs, venture capitalists (VCs), corporations, policy makers and academics from all around the world. We attempted to understand what really constitutes a vibrant startup ecosystem – and what role capital availability plays in such a system. This new study constitutes a follow-up of ‘Berlin 2020 – Fostering Competitiveness and Innovation’, our 2010 report on Berlin outlining strategic approaches to regional development for Germany’s capital.