Berlin’s ‘creative boom’ finds backing from EU

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Although Germany's capital is short on big businesses, small enterprises are abundant, with creative industries in particular blossoming faster than in other cities. In Berlin, this creative boom is aided by a project which helps SMEs to deal with the bureaucratic procedure of obtaining EU regional funds. EURACTIV Germany reports.

Berlin attracts creative types from all over Europe. In no other city can one find abandoned factory lofts with so much space at such low rents. Languages from all over Europe can be heard in artists' studios, fashion studios, media lofts and workshops.

The result: cultural life in Berlin is vibrant. On an average day, Germany's capital offers 1,800 cultural events. This inspires artists and creative types, but also subjects them to the pressure of competition.

Some of the more innovative initiatives manage to become established as small or medium-sized enterprises (SMEs), creating jobs and enormous growth potential. Berlin's creative industry is made up of some 24,000 businesses. These include film, radio, television, fashion design, architecture, publishing, multimedia, game software, music, entertainment, arts, culture and advertising firms.

Lacking know-how and assets

"What these creative start-ups are mostly lacking is economic and commercial know-how," said Andreas Bißendorf, part-time managing director of the Kreativ Coaching Centre (KCC), founded two years ago. "A major handicap for creative companies, therefore, is acquiring assets," he added.

In his previous life, Bißendorf had been working with scientists. They too were not very well versed on the business side. Thus came the idea of creating the Technology Coaching Centre for technologically-oriented companies. The TCC, which often advises university start-ups, is now ten years old.

'We are the ERDF-project'

What sets the centre apart is that projects there are supported by the European Regional Development Fund (ERDF), an EU regional funding programme which aims to strengthen economic and social cohesion across the European Union.

"This means we have to meet all the requirements [that] the ERDF connects to support programmes. Thus, the TCC and KCC are the ones burdened with all the bureaucracy, and we have to transfer very little of this burden to the companies," Bißendorf explained.

In other words, the TCC/KCC functions as a sort of buffer between funding sources and companies, and can devote more of its time to actual coaching. "This makes our customers perceive our support as relatively non-bureaucratic."

The world in miniature

Entering the doors of 48 Köpenicker Straße in Berlin's Mitte district, one can find skyscrapers, mosques, stadiums, museums, shopping malls, factories and whole city landscapes contained within a square kilometre.

The scale models made here are bought by architects, designers, investors and artists who often pay the price of a new car for the privilege.

Meeting EURACTIV Germany in his workshop, the brains behind the operation, Ulrich Mangold, proudly presents a twelve-ton, five-axis milling machine, similar to the machines Audi uses to cut out aluminium bodywork. "It's extremely versatile and perfect for us. You can approach with material from the side and move all five axes simultaneously," he explained. The smallest milling head is 0.4 millimetres wide. The machine runs 15 hours a day and is thus used to capacity.

'Werk5' makes half of its total revenue abroad. It could therefore be located anywhere in the world. But in Berlin the two managing directors, Hauke Helmer and Mangold, can find low-price rents and highly-qualified staff. "We can do business only one kilometre away from the Alexanderplatz," said Mangold. "If you look at Paris or London, you can't take that for granted. You couldn't afford this anywhere else."

Sand, the Spree and creative ideas

"Berlin has enormous creative potential. Here, people are willing to work differently. The city is also internationally perceived this way," said Hauke Helmer, who argues that Berlin wasn't made this big by sand and the Spree River "but by creative ideas".

Despite the global crisis, Werk5 is working to capacity. The added value of the models it builds is beyond dispute – its products cannot be replaced by even the best computer animation. However, even with this continuing success more than twenty employees and seven trainees are no longer viable due to the global market situation.

As a result, Helmer and Mangold have arranged a second form of revenue for themselves. In the next three years, they plan to take big steps with the launch of 'Interactive Scape GmbH', a venture that will produce interactive tables designed to function as oversized touch screens, developed on the basis of LCD monitors.

Excellent feedback on interactive table

Feedback from established companies has so far been "tremendous," they claim. They use the intelligent piece of furniture – with its 58-inch HD interface – for interactive presentation of their products, for advertising and trade shows. Images and files can directly be sent over the interactive scape via Bluetooth, mobile phone or the Internet.

This innovation's growth potential is extremely promising. For the tedious process of funding they have once again turned to KCC, where they are very efficiently assisted by a consultant.

Other companies advised by the KCC include PublicScience, a public relations agency specialising in health and science communication. The founders, Stefanie Link and Kathleen Wallner, enhanced their profile with the help of a KCC coach and learned to reject contracts that do not precisely correspond to their target group.

Fashion labels, instructional videos, movie credits

Another company which benefited from KCC's expertise is 'Konk', a name synonymous with Berlin's fashion avant-garde. Konk is owned by Ettina Berrios-Negron, who only heard of the KCC by chance (as most people do), applied and is now advised on organisation, personnel management and communication, to create space for her own creativity. She is one of the 90% of KCC customers who would recommend their advice.

Another example is 'Sofatutor': a small company where several tutors produce educational videos. The team, led by founders Stephan Bayer and Andreas Spading, utilises Web 2.0 technology. Anyone who is knowledgeable in a given field can produce videos on the platform and become an online tutor.

A KCC consultant provides them with help on finding financial solutions and forces them "to ask the right questions and make important decisions in time". The first step towards KCC cannot be taken quickly enough by any start-up, said Bayer.

Consultants – experience, support, fees

The KCC has a staff of two dozen freelance consultants at its disposal. The coaches advise the young creative companies on business plans and bank loans, or help companies which have grown rapidly and need consolidating or have to launch a major marketing offensive. "We provide companies with coaches on a daily basis for all commercial issues, forcing them to ask the right questions and find the right answers," said Bißendorf.

Who are the KCC consultants? They have to demonstrate business know-how and creative business training or practical experience and some understanding of finance. They have to have worked in a leading position in a small or medium-sized company for at least three years, because "there, the world works a little differently than in a corporation," the KCC leaders told EURACTIV Germany.

The consultants' fees – between 700 and 1,000 euros per day – are initially paid by the KCC. The beginning is free for the business, then the company takes a share in the costs via a stage model.

For example, companies no older than three years get the first two coaching days for free in order to get to know each other. From the third to the eighth day they contribute 175 euros per day. Later, the contribution increases up to 520 euros.

'Ingenious design' for grant applications

In 2009, 358 consultant days were assigned. There were 120 requests from companies, 74 of which were supported with the coaches.

Funding requests – especially from Brussels – and bureaucracy are usually inseparable.

"Here, we have found an ingenious solution, as we ourselves are part of the ERDF-funded project," said Bißendorf. This means "we have to meet all requirements for ERDF funding," so the TCC or KCC is burdened with all the bureaucracy and has to transfer very little of it to the companies.

Are there any downsides to this success story? "From time to time there is always some small problem but I can definitely not complain. If you work with the ERDF, you need to write a lot of reports. This is part of it and legitimate," said the KCC boss.

Retroactive requirements are annoying

What annoys him most, though, are retroactive requirements from the ERDF. For example, when the EU suddenly requests that certain documents be kept for longer than previously intended: at this point, old documents may already have been destroyed.

Occasionally, the powers that be in Brussels will decide at the end of a six-year funding period that something is missing which should have been in force since the beginning of a project. This can mean that many things are retroactively requested, a fact that causes annoyance to project leaders.

However, Bißendorf recognises that "if we didn't have these ERDF means in Berlin, we wouldn't have the funding. Therefore, one cannot complain".

How high is the funding? "Roughly speaking, everything that we spend. In 2010, we are planning with an expenditure of 350,000 euro. This covers the costs of coaching personnel, public relations and everything in between, from computers to paper."

Of the 350,000 euros, 50% – 175,000 euros – comes from the ERDF, 125,000 from the Investment Bank Berlin (IBB) and 50,000 euros are taken in via the cost-sharing of coached companies.

A drop in the ocean?

Overall, this may seem like a drop in the ocean. In Berlin 24,000 companies fall into the category of creative industries.

However, only 74 of these many companies are funded by the KCC, which ably demonstrates how very picky the body is with its funds.

In addition – as a clear unique selling point – an in-house creative service must be a feature of a KCC-eligible company. Thus, 7,000 media agencies are already excluded. And of course, the company must have its registered seat in Berlin – no matter whether the founders are German or foreign.

Regional policy, or cohesion policy, for the 2007-2013 period accounts for approximately a third (35.7%) of the total EU budget.  A full list of EU regions and their respective funding eligibility is available here.

One of its main instruments is the European Regional Development Fund, which aims to strengthen economic and social cohesion in the EU by correcting regional imbalances through direct aids to SMEs; investments in infrastructure; and support for R&D, local and inter-regional public initiatives.

Cohesion policy for the 2007-2013 period accounts for one third of the total EU budget. A full list of EU regions, and which forms of funding they are eligible for, is available here.

 

As featured in regular news stories on EURACTIV’s Regional Policy section, the debate on how the post-2013 regional (or cohesion) policy should evolve is currently intensifying in Brussels and beyond.

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This project has been funded with support from the European Commission. This publication [communication] reflects the views only of the author, and the Commission cannot be held responsible for any use which may be made of the information contained therein.

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