Berlins new techno beat. why international tech startups should move to berlin. | Hacker News Reader

Berlins new techno beat. why international tech startups should move to berlin.

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46 pointsmdariani42 comments

The nice thing for europeans is that if you're part of the eurozone, you can live and work wherever you like. A business doesn't have to be domiciled in the same location as its headquarters or employees. In the US, many businesses are domiciled in Deleware with no employees in that state.

But I think the question for Hacker News, or at least for the Hackers who are interested in doing startups outside the USA is-- what's the international Delaware?

What's the place to domicile your business, with reasonable laws and taxes?

Some possibilities I can think of: Hong Kong, Singapore, Cyprus and some of the UK islands like the Isle of Mann might be good.

I love Berlin. It is a happening city, and I'm very happy to spend time there. It has a very nice mix of cutting edge modernism and the former east german sections which are still relatively inexpensive. And I just like germans.

I think startups can group employees wherever makes sense for their workforce. If its all EU people then berlin might be ideal. But the business doesn't have to be a german business. (Or does it?)

Edit to add: Obviously I'm writing this from the perspective of a self-started or bootstrapped business. This perspective isn't likely to be appropriate for people who plan to take outside investment.

Is saving a few % of taxes that important for an IT company?

Choosing the best state based on tax considerations oftentimes reduces tax bill by at least 5% of your net profits. Now, lets say you are making 2M per year. 5% = 100K, which is more than enough to hire another programmer!

I would rather start up in a nice city andy worry about taxes once I'm making 2M a year in profits than risking to live somewhere less enjoyable without knowing if I will ever have to pay taxes anyway.

I agree with the mentality to some extent, but taxes actually matter when you try to bootstrap without a steady income backing you

I'm bootstrapping in NYC, for which there are a multitude of taxes and other costs:

- Rent is insane, of course :)

- LLC Newspaper Publication requirement (why this exists is beyond me)

- Large sales taxes (although ST 121.3 ensures you are tax exempt on hardware)

You don't have to choose between a nice place and low taxes. high taxes and regulations can give you cities like detroit and chicago while low taxes and regulation can give you cities like hong kong, monaco, panama city, etc.

In fact, the point of my comment is that the business could be located in a low tax jurisdiction, resulting in more funds flowing to the bottom line, while the owners and employees could be located somewhere they like, even a high tax jurisdiction if they wanted.

It's apparently important for big corporations, but since a complex tax minimization scheme comes with huge setup and running costs, it's not really important for startups that are bootstrapping or seeking funding. I'd even say that a tax-optimized exotic setup would rather limit your funding opportunities.

A high tax jurisdiction will charge, often, %40 of profits at the corporate level and then another %40 at the personal level. So, for every $100k you bring in, corporate taxes reduce it to $60k and personal income taxes reduce it to $36k.

A low tax jurisdiction would might charge %10 corporate taxes and %10 personal taxes, meaning that for $100k in income you're left with $81k.

I think more than doubling your net income is worth consideration, especially if it means the difference between being able to afford to continue your startup, or having to go and "get a real job".

Not to forget: Instant(!!!) green card for anyone earning more than 65000 Euros/year.

The only issue I still have is the "awful German language" ;-)

http://www.crossmyt.com/hc/linghebr/awfgrmlg.html

(Mark Twain's 1880 book A Tramp Abroad.)

Do you have a link to the green card program? Is it EU wide or germany specific?

Indeed. I only see information about a €500,000 investment and creation of at least five jobs as a way to get residency.

http://www.bamf.de/DE/Migration/Arbeiten/arbeiten-node.html

In the middle of the page, "Hochqualifizierte (§19 AufenthG)": Highly qualified people like scientists, technical specialists with a wage of at least 66.000 € can immediately get a work permit.

Unfortunately that portion of the site hasn't been translated to English yet. Use Google Translate or call the BAMF for help.

An EU-wide effort called Blue Card is also on the (legislative) way.

The possibility that getsat mentions in a sibling comment to this one is described at the bottom of the page under "Selbständige (§ 21 AufenthG)". This possibility actually refers to founders of a company, the one described above is for employees. It's not 500 k€ though, but 250 k€. Still a lot of money. :(

In a city like Berlin you'll have no troubles getting around with English.

Can you please elaborate on the 65000 Euro "green card"? I have been looking for a way to move to Berlin for many years, and have never come across this.

I would be delighted if this is the way!

Yes, it is actually this simple: Find someone willing to hire you for 66000 Euro or more yearly salary (65 above was wrong) and you will get a working permit without much problems. The "only" problem is to find a job paying this salary.

I thought it was Lond.. no Helsi.. I mean Amst... Oh, never mind.

There's only one thing remotely comparable to Silicon Valley in Europe and that's Ireland. It's where the laws are right for tech. companies and Facebook, Google, Amazon, Microsoft, Intel, IBM, and possibly even Twitter got together and are attracting a ton of engineers, which are creating a ton of start-ups, networking events, and even quite a bit of VC.

I think the main trigger for big corporations to set up their European subsidies in Ireland were the significant tax breaks offered.

Now that Ireland is getting bailed out with EU money, it'll be interesting to see if they can maintain the low tax rates.

Compared to Silicon Valley (or even the US east coast) Germany as is low-cost country. Developers earn only half the US salary - and can live well with it ("free" (well, tax paid) healthcare, schools, universities,...)

And since a few years, finally a decent immigration policy!

Healthcare isn't actually paid through taxes. We have mandatory insurance and you have to pay a certain percentage of your income so it's pretty cheap if you don't earn that much. Once you earn more you can switch to fixed monthly amounts and if you can't afford it at all the government pays.

Probably better/cheaper than in the US (for most people) but far from perfect.

AFAIK, Google does not do "smart" stuff in Ireland, they have a datacenter there but the software tricks are done in Zürich. According to their job offers anyway. I also visited an HP factory in Ireland, it makes printer cartridges but does not innovate much. Also worked for them in a phone call center. Again, not really startupy. It seems clear to me that thay all came in Ireland to evade taxes.

Moreover, the atmosphere is not exactly right for startups. The weather sucks. The food is dismal. And when I was there it was expensive as hell, and the bubble hasn't finished exploding yet.

glaring omissions from the article what are the personal and corp tax rates? (high!) and how easy is it to hire and fire employees (hard I hear).

No one doubts the nightlife and leafy suburbs of germany are nice

And how easy is it to register a company?

Setting up an UG (sort of like a private partnership) has become relatively easy (couple days) and cheap (couple hundred bucks), while a GmbH (LLC) or an AG (corporation) is still a lot more complex and costly (min. 25K EUR capital brought in for a GmbH).

Personal tax rates are higher, at the same time you get better (and cheaper) healthcare.

Corporate tax rates are indeed higher in Germany. At the same time, there are lots of funding opportunities for startups from communal, national and EU business development programs, that can be seen as sort of a tax break.

Hiring is probably harder, since programmers are generally less interested in startups and prefer safe corporate jobs (outside of Berlin). Wages are significantly lower in Berlin than in West German cities. Firing is much harder than in the U.S.

The healthcare is not included in the cost of personal taxes.

Private healthcare here is much better, and about the same cost. It's a red herring.

Of course it's a separate payment, I was thinking in terms of total cost per employee.

firing employees is in germany not really difficult, especially not for startups. every employee must serve a 3-6 months test period until he gets a professional contract. during the test period you will see, if the employee is performing well or not and you can fire the person easily the next day, if you want.

and hiring people in germany is much easier than in the valley or in new york, where you have huge competition from the big ones like google, facebook etc...

Great! I'm looking to move to Berlin next year, I'm glad I have prospects.

I'm moving there in approximately 30 hours. Urk.

Nice, start networking for me!

berlin?? everyone is leaving berlin. It's the worst place to do business in. it has been mismanaged for decades now. crime rate is high. public schools are a disaster. if you are 20 something you might find the dirt and parties hip, but as soon as you have a family it's the worst place you could think of (unless you have a lot of money). for a tech company better cities are munich and hamburg if you really want to relocate your business into a country with high taxation and burdening regulations...have fun.

Hamburg and Munich are among the most expensive places in Europe. Living costs in Berlin are probably half (you can rent a place for under 200 EUR if you wnat). There is also a much better startup and developer scene. So if you are into the whole startup thing, Berlin is pretty great.

And the crime rate, schools, ... compared to the US? Really? ;)

When you're doing a startup, chances are that a huge part of your team will be 20-somethings who love the Berlin dirt and parties.

so tylee78: where did you get the information that everybody is leaving berlin? what kind of people you are talking about? it seems you haven't read the article. berlin is booming. every week two new startups are launching. berlin has two airports from where you can get to every other destination on this planet. berlin has several good universities and huge amount of young talented people. even academics from the best universities in germany (whu, ebs, hhl, mannheim etc.) and even from the U.S. (e.g. Research Gate - forunder moved from harvard to berlin) are moving to this city, because it is a perfect environment to create a new company on a low level of costs.

berlin isn't more dirty than hamburg or munich. berlin is just a huge city, where some parts are of course dirty, but it is the same for munich, hamburg, new york and san francisco too. berlin is the place to be in europe, if you want to setup a tech startup. if you care more about other things, you really shouldn't start a tech startup.

I actually returned from a week in Berlin just a few days ago, and I was specifically there to investigate whether it would be a good place to base my startup.

Just to be clear, I very much WANTED the city to live up to it's hype but it has one major problem that, for me, was a deal-breaker: attitude.

It is true that there are lots of good, reasonably priced restaurants, interesting bars, good public transport, cycle-friendly roads and reasonable rents (although not as cheap as some are suggesting).

It is also true, however, that many Berliners have a HUGE attitude problem and a completely illogical resentment of foreigners. I would say that the majority of my interactions with Berliners were positive but I also regularly experienced a snide, superior, strangely bullying attitude in service situations.

Now, you don't go to any big city looking for happy faces and warm hugs and you can shrug such incidents off, but it does wear you down over time. To give you an idea of the extent of what I'm talking about, I find much bigger cities such as New York, London and even Frankfurt, Munich or Hamburg to be far more friendly - yes, even New York is less rude!

The passive-aggressive attitude towards foreigners is a red flag for anyone hoping to run a business because that is absolutely going to crop up again and again in the form of local government red tape and an extra scoop of bullshit from landlords, suppliers etc.

More worrying is the aggressive-aggressive attitude - several times in the course of just one week, I witnessed open hostility towards foreigners, including locals interrupting guided tours to self-righteously tell the tourists - people who had travelled across the world to learn about Berlin, spend lots of money, create jobs etc - that they were not welcome. I have travelled constantly for over two decades and I have never seen that happen elsewhere, not even to obnoxious bus-loads of German tourists.

Fascinated, I discussed this with locals and was amazed to find that, even among people who would identify themselves as left-leaning and anti-racist, there is a general sense that foreigners are bad for Berlin, that they are responsible for the commercialisation of the re-unified city. Bizarrely, they don't see the connection between this attitude, this tendency to scapegoat foreigners for all unwelcome changes, and the slow-building antipathy of their grandparents towards the Jews in the 1920s and 1930s.

I am not suggesting that startup founders are going to be marched off to death camps, but you should certainly visit the city and, before investing serious time and money, think seriously about the realities of living in a city where you are not welcome - no amount of buzz or hype can compensate for that feeling once you are actually based somewhere.

Cities that I rate highly would be Singapore, Dublin, London and Santiago. Amsterdam and Paris are beautiful but not business-friendly. Australia could be good, great lifestyle, but they have lousy Internet infrastructure and ignorant government. Several American cities - SF, NY and even smaller scenes such as LA and Austin - could be wonderful, especially in terms of funding, and the lifestyle is good, actual Americans are very friendly/positive, but the current immigration laws are insane and do not take into consideration the jobs and wealth you will create. I don't expect that to change until the US disentangles itself from its various wars and is finally forced to face up to its growing economic problems, but that won't happen for at least another decade.

foreigners are not welcome in berlin? your investigation about berlin seems to lack many relevant aspects and isn't objective at all. do you care more about the people who complain about tourists than all the other really relevant points that are meaningful for a tech startup (young talented people, universities, cheap rent, infrastructure etc.)? berlin is THE city in germany where most foreigners live. i think this speaks for itself. you have talked to leftists who always in general don't like change in their environment and who would always prefer to live in the past than in the future. Come back to berlin again and talk to people from the districts in zehlendorf, steglitz, charlottenberg, mitte, etc.! i bet you will get the opposite answer there, especially if you mention that you would like to come here to setup a company that will create wealth for the berliner society & environment.

BTW: in nearly every other place on this planet locals who live at tourist places complain about them, e.g.: mallorca, thailand (phuket), italy...

It seems to gloss over this ..

If I form a startup in the USA and it goes belly up once assets are sold off to pay creditors I am free..however in the EU if startup goes belly up you are still on the hook as far as the difference between what is owed creditors and what the assets sold for..or am I wrong on this point?

You are wrong. A corporation in Germany/EU offers the same protection as a US corporation.

In the US it costs maybe a couple hundred bucks and a week or so to set up an LLC and an S-corp(http://en.wikipedia.org/wiki/S_corporation). How much would this cost and how long would it take in the EU?

The minimum share capital of a GmbH in Germany is 25,000 EUR. Registering should not take much longer.

25,000 EUR is a fair bit of money, especially considering the avg. YC investment is < $20k, IIRC. Also, correct me if I'm wrong, but it looks like a GmbH operates almost nothing like an S-corp.

It depends on the type of business entity that you choose (Rechtsform). If you incorporate as an Einzelunternehmen (single person company) or GbR (multiple person company, Gesellschaft bürgerlichen Rechts), you're fully liable. If on the other hand you open up a GmbH (limited liability company, Gesellschaft mit beschränkter Haftung) or AG (joint-stock company, Aktiengesellschaft), you're not on the hook if the company becomes insolvent.

The catch is that if you incorporate as an Einzelunternehmen or GbR, it's much easier to get credit from banks or other stuff because you're fully liable.

EU law allows you to incorporate in a different EU country with a type of business entity common there, but it's usually more convenient to incorporate in the country where you're residing.

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