Landing in Berlin from Asia featuring Kristin Eckert of Scaler8
There’s no easy way around it — adapting a business to a new market takes time, expertise, and flexibility. Moving to Germany (at large) and Berlin (specifically) can likewise be daunting as language barriers, challenges with bureaucracy, and cultural differences can intimidate those who are not ready or do not have the right helping hand.
One fantastic ‘helping hand’ is an accelerator. Thankfully for startups and scale ups looking to enter the German market, there are numerous private and public firms available to help companies bridge the gap. Their goal is to strengthen economic and cultural ties with the Asian region and therefore provide valuable help with market research, language barriers, and navigating not only basic German bureaucracy but also highly specific industry knowledge in Germany and various Asian countries.
I sat down with Kristin Eckert of Scaler8, a market exploration and market access program by German Entrepreneurship in Asia, to discuss how she works to assist Asian companies in entering the German market. Below is an editorialized version of our conversation.
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Heather: Thank you for taking the time to speak with me about this expansive topic Kristin.
Kristin: It’s my pleasure!
Heather: Let’s start with a relatively easy question — why do it? What are the factors that founders consider when they want to expand their business abroad?
Kristin: The answer is always growth. More specifically, the key question is ‘can I find clients here?’. Other prerequisites, like talent or capital, are all secondary to that central question. It goes without saying that before expanding to a different continent, the most obvious step is to expand within the region first — other Asian countries and Australia — purely for proximity.
But maybe those countries are not the best fit for their product. Sometimes the solutions they offer are more suited to Western countries. A great example is Health Tech, where the aging populations and very sophisticated healthcare systems in the West are more relevant. In general, deep tech solutions find an attractive market in Europe, specifically Germany, with a strong understanding of such technology and a large customer base to build their reputation in the new market.
The last thing I would mention is that familiarity is always a factor in where you decide to expand to. It’s one of the benefits of a diverse founding team and company in general. If a founder has experience or ties to a certain startup ecosystem, that will certainly weigh in on the decision.
Heather: Let’s talk about Germany as a whole and then Berlin specifically. When companies look to expand towards Europe, why would they choose to enter through Germany and then why would they choose Berlin?
Kristin: There are many attractive points to entering Germany. There isn’t just one vibrant market in Germany. In France, it’s a more centralized ecosystem around Paris, for instance.
In Germany, there are business centers in Hamburg, Berlin, Frankfurt and Munich to name a few. Frankfurt is a financial powerhouse, not only of Germany but of Europe. Hamburg is known for logistics as a port city. Berlin has a huge startup scene that focuses a lot on e-commerce and healthcare. Another factor is the spread of English in the startup and corporate world in Germany, especially in Berlin where the German language disappears more and more.
However, that is just the tip of the iceberg for reasons why companies look to Germany. We think of Germany as a lighthouse market: it has advanced regulation, a stable economy, and if a company can enter the market in Germany, they are often well-established to expand to the rest of Europe.
For example, Germany is the first EU country to allow a doctor to prescribe an app to a patient through DiGA (Medizinprodukte-App ist die Digitale Gesundheitsanwendung). DiGAs can be reimbursed through the public health system and it works because they know who is paying and it is a more reliable income. And other economies are following.
There are many trends like this right now in Germany that stem from the KHZG (Krankenhauszukunftsgesetz or ‘Future Hospital Act’) of October 2020, the Hospital Future Act that aims to digitize German hospitals and we are seeing lots of international companies in Health Tech looking to capitalize on that movement.
Heather: So, if you’re an entrepreneur or the lead of a company. Your business is aligned with the market here in Germany and you have customers here or a connection here. From that point, how long does it realistically take to break into the market?
Kristin: I would say it takes around 6-12 months – from understanding the market trends and dynamics, your potential customers and how you need to localize your product to the market and customer needs – in order to land an actual (pilot) customer and to have a real presence. But it depends on the company’s product and business model, its fit to the market and the industry. It also depends on their resources. Can they afford to expand comfortably? That’s not just the basic costs but also can they spare someone from their executive team to oversee it? You really need someone from the C suite doing the pitching and negotiations with potential clients.
Heather: It sounds like the amount of work needs to really be factored into the decision. Just wanting to be international is not enough. You need to know that the market here is a good fit for your business.
Kristin: That’s exactly right. The good news is that Germany is an interesting market for international startups. Germany is not only home to the heavyweights like Siemens and BMW but also full of what we call “Hidden Champion” or ‘Mittelstand’ companies — medium sized companies that are usually family run and family owned. These companies are very often niche-oriented and therefore make for very interesting partnerships for external startups who don’t know the lay of the land here in Germany and need a foot in the door. 90% of businesses in Germany are medium-sized.
Heather: That’s really a big difference between Germany/Europe and the American market. Which makes me wonder what other advantages might there be to expanding in Europe rather than the States. While Europe is certainly wealthy and has plenty of customers waiting, the US is large, operates under one language and (more or less) one central government. Consumer culture is also larger there and disposable spending seems to also be quite a bit higher.
Kristin: That’s certainly true. And if you have the capabilities to expand to the USA, you certainly should. Europe and the US are two large markets to enter, which usually isn’t possible to tackle at the same time with limited resources of startups. However, depending on the industry in question, you might work on preliminary approval in parallel, such as FDA and CE mark in the healthcare sector to pave the way for future expansion.
Heather: Excellent, well thank you for your time and valuable insights!
Kristin: Certainly, my pleasure!