Moritz Philip Recke - Hamburg's Entrepreneurial Ecosystem And The Next Media Initiative

In 2008 the software/games industry generated combined revenues of EUR 1.16 billion in total (Hamburg Kreativ Gesellschaft 2012). Since the game sector in particular was responsible for the enormous growth in employees from 2009 to 2013, newer revenue data would be interesting to analyse.

Unfortunately, no recent data source with combined turnovers could be found.

According to Hamburg Chamber of Commerce (2015b), Hamburg is the largest and most important location for the advertising industry in Germany. In terms of employment, the advertising sector is second only to the software/games industry within the creative industries in Hamburg.

With around 13,000 employees in 2013, it clearly outpaces Munich (10,524), Berlin (9,217) and Cologne (8,259), the other three “media cities” in Germany. The reported revenues of EUR 2.6 billion in 2013 are the region’s second largest after the press industry (in creative industries).

The German Werben & Verkaufen magazine (2015) reports eight out of the top ten creative agencies in Germany as having offices in Hamburg in its creative ranking 2015, underlining the industries qualitative performance in Hamburg (see table 10).

The magazine transparently evaluates important creative awards such as Cannes Lions, Clio Awards, ADC Deutschland (ADC nails), New York Festival and calculates a creative score for the annual ranking of German advertising agencies.

Among the 15 largest owner operated advertising agencies in Germany, 8 have their headquarter in Hamburg and an additional 2 have major offices within the city (see table 11), serving as an additional indicator for Hamburg as Germany’s number one location for the advertising industry.

Despite falling numbers of employees due to the digital transformation and increasing shift from print to digital media within the press sector, Hamburg remains the leading city for the press market in Germany, according to Hamburg Chamber of Commerce (2015b). With just under 10,000 employees in 2013, the sector beats all other “media city” locations in Germany - Berlin (9,158), Munich (8,909) and Cologne (5,548). With reported revenues of EUR 3.9 billion in 2013 it not only dominates the region as the strongest creative industry sector but outpaces Berlin (EUR 3.0 billion), Cologne (EUR 2.1 billion) and Munich (EUR 2.0 billion) with a turnover of EUR 396,000 per employee.

Historic publishers such as Axel Springer, Gerd Bucerius, John Jahr and Richard Gruner are at the heart of Hamburg’s prominent image as a “media city”. Despite recent shifts by large publishers such as Axel Springer SE towards Berlin (Manager Magazin 2003), many major press outlets are still based in Hamburg. Newspaper and magazine publishers such as DER SPIEGEL, DIE ZEIT, Gruner + Jahr, Bauer Media Group, Funke Mediengruppe, Hubert Burda Media, Jahreszeiten Verlag, Mediengruppe Klamt and many others are at the core of Hamburg’s press industry.

Among the 12 largest German media corporations (four of which are TV outlets (ARD, ZDF, RTL Group and ProSiebenSat.1 Media) and one is Bertelsmann, owning both RTL Group and Gruner + Jahr), 2 have their headquarter in Hamburg and all of them operate major offices in Hamburg (see table 12).

Since the technology-driven creative industry evidently is a major facilitator of Hamburg’s economic development, many of the Hamburg based startups focus on business models close to the media and digital industry as is evident by taking a closer look at the venture capital investments and startup activities in Hamburg.

With around EUR 300 million of venture capital investments in 2015, Hamburg is the 5th strongest VC location in Europe and 2nd in Germany (Ernst & Young 2016). Interestingly, the average deal size in Hamburg is EUR 10.57 million and about the same as in Berlin with EUR 10.46 million, while Munich has a much smaller average deal size of EUR 3.89 million (see table 13).

This could indicate that Hamburg is about as prospering in terms of VC funding as Berlin, just at another level of deal volume. In fact, the growth of Germany’s entrepreneurial ecosystems outpaced other European regions in terms of VC investments for years and is driven particularly by Berlin, Hamburg and Munich (Ernst & Young 2015).

Among the top 5 startups in terms of funding in Germany, 2 are based in Hamburg. Gaming company Bigpoint, founded in 2002, received a total funding of USD 461 million and FinTech company Kreditech, founded in 2012, received total funding of USD 355 million as of September 2015 (see table 14).

Most of these investments are growth or later stage investments, usually done by investors from the UK, the U.S. and Asia. The largest investors according to Ernst & Young (2015) data are Kite Ventures, Phenomen Ventures, DN Capital, Insight Venture Partners, Blumberg Capital, Kreos Capital and Luxor Capital. Financing instruments used are both equity and venture dept. German later stage investments were done through venture capital firms such as Earlybird, Lakestar, Holtzbrinck Ventures and Rocket Internet among others. Prominent investment banks such as Goldman Sachs are also active in Germany. All of these international investment activities indicate the growing attractiveness of Germany’s entrepreneurial ecosystems (Ernst & Young 2015).

Looking at investments done in Hamburg specifically over the last years, the number of investors active regionally still is much smaller than in Berlin. Ernst & Young (2015) lists 36 key investors in Hamburg opposed to 110 in Berlin. This number might not be that indicative though, since it is unclear wether this data really indicates venture capital investment activity in Hamburg or is only linked to investors being stationed in Hamburg. The actual number of active investors might be very different and probably much higher since both national and international investors who invest in Hamburg based startups are not included in the list.

In any case, the data shows that Hamburg’s entrepreneurial ecosystem is both thriving and attractive to both national and international investors, underlined by the biggest European VC funding in Q2 2016 - a USD 46 million series C round investment in Hamburg based startup Finanzcheck (KPMG & CB Insights 2016).

Among so called “unicorn” startups, companies with a valuation of over USD 1 billion, one is from Hamburg, four are from Berlin according to Ernst & Young (2015) data for 2015. Among four additional startups on their way to achieve this valuation, one company is from Hamburg while all others are from Berlin (see table 15). Rocket Internet could be excluded from this list since it actually is an incubator - investing in various startups and therefore not necessarily qualifying as an high-growth startup itself - making XING one of four “unicorn” startups in all of Germany.