Mannheim takes creative route to fostering start-up ecosystem

Mannheim is a Tier 2 university city in south-west Germany that has a history of innovation and industry. Examples of this balance of industry and culture within its boundaries include the developments of the world’s first motor car by Karl Benz in the 1880s and the pioneering New Objectivity art movement in the 1920s.

Having resolved to develop the creative and cultural industries in the city some 15 years ago, the local authority also recognised that a start-up ecosystem would be key to diversify the economy and boost quality of life.  

“[Our strategy] was to build up a start-up sector and to increase the number of companies within our city, as we tried to actively diversify our industry, and to be more resilient for the next time the economy [undergoes difficulties],” says Peter Kurz, who has been mayor of Mannheim since 2007.

Urban regeneration

Today, Mannheim has about 33,000 square metres of space available for entrepreneurs across nine separate start-up hubs. In line with urban development elsewhere, it established much of its start-up ecosystem in a formerly run-down and underutilised district of the city with a proliferation of vacant buildings.

“The culture and creative industries play a very important role when it comes to urban development, and that’s been recognised by the city for at least 15 years,” says Dr Matthias Rauch, head of cultural urban development at the city of Mannheim government.

The centrally located Jungbusch district next to the harbour now boasts a budding creative scene with hubs such as Musikpark, one of the only exclusively music-focused start-up centres in Germany. This approach has borne fruit as Mannheim gained the status as a Unesco City of Music in 2015, with successful artists among its alumni including Alice Merton, an internationally renowned country singer who studied at the city’s Popakademie.

Beyond music, Mannheim's creative industries are supported by the ‘C-hub’, a start-up incubator founded in 2015 that focuses upon all creative industries apart from music, and Textilerei, an incubator based around the fashion and textiles industry. New businesses can find support in Mannheim through the publicly funded Kreatech, which offers up to €20,000 for creative and tech start-ups, and coverage of the first year of employee wages provided there is proof of their employment.

Higher learning

Many start-up ecosystems form around leading universities and think tanks worldwide, and Mannheim is no exception. The University of Mannheim, whose business school was ranked as the best in Germany by the Financial Times in 2018, has been central to the drive to foster innovation in both the city’s hubs and beyond.

“We have identified more than 400 successful start-up companies that were founded by former Mannheim students and a lot of then have profited from our courses teaching entrepreneurship,” says Michael Woywode, professor for SME research and entrepreneurship at the University of Mannheim. 

A successful start-up founded by former Mannheim students is Stocard, a mobile wallet app that stores multiple loyalty cards and coupons, which has grown to 45 million customers and has a presence across Europe, North America and Australia. Stocard’s co-founder, Bjoern Goss, found Mannheim and its surrounding Rhine-Neckar region an attractive place to start a company due to its prestigious universities and impressive talent pool, from which he says it is slightly easier to attract quality workers compared with saturated start-up hubs such as London and Berlin.

“Mannheim and the [surrounding] region has been trying to catch up with other major hubs in Germany, and could reach its full potential in the future through collaboration between the cities,” says Mr Goss. Indeed, Mannheim and its surrounding region has responded in kind to attempts to find synergies between universities in other German cities such as Heidelberg, Karlsruhe and Ludwigshafen.

“Initiatives in Mannheim and the surrounding region to drive local connectedness by pooling local resources and building closer relationships between neighbouring cities is gaining some traction,” says Berlin-based Marc Penzel, founder and chief operating officer at Startup Genome, an innovation policy advisory firm focused on start-up ecosystem development. “However, to some extent German cities often take too siloed an approach,” he adds.

Funding needs

Despite a fairly active community of wealthy individuals that invest in start-ups in Germany – so-called angel investors – a limitation of the Rhine-Neckar region is its relative lack of venture capital (VC) funding in the locality compared with the likes of Berlin, Munich and Hamburg. Germany as a whole lagged behind its European peers in the first half of 2019, with its start-ups raising €2.47bn, compared with €5.3bn in the UK and €2.79bn in France, according to research from EY.

Start-ups with good ideas and potential can easily secure funding from globally minded VC firms in Germany, but Mr Penzel says: “It is essential to close the early-stage funding gap for ecosystems, as it can limit the chances of start-ups succeeding in the future.

“Mannheim and the Rhine-Neckar region have gained traction, but the area is not capturing the major part of the value creation in the tech ecosystem. Going forward, it should help foster entrepreneurs and start-ups through boosting resources, mentorship and early-stage funding.”