I don't want to go to Berlin

Berlin is Germany's fintech capital. But some founders deliberately decide against the location. Jamal El Mallouki is one of them. Why is that?

The facts are so overwhelming that you can't really call it a battle. Berlin will remain the fintech capital of Germany in 2020. According to the authors of Comdirect's latest fintech study, Berlin still has a clear lead in terms of both the number of start-ups and the amount of venture capital spent. 300 of the 900 German fintechs are based in the capital, with 1.8 billion euros in venture capital flowing there in 2020 alone.

What was already evident in previous years remains the same in the coronavirus year 2020, even if a "but" has crept in. For the first time, Berlin is smaller than the three other major locations of Munich, Frankfurt and Hamburg combined. This shows that the lead is shrinking, albeit only minimally. Frankfurt, on the other hand, seems a little behind, occupying only 4th place in the Comdirect ranking.

However, Jamal El Mallouki has been proving for some time that it is easy to survive as a fintech in Frankfurt. When asked about the city, he echoes the German band Kraftklub, who sang: "I don't want to go to Berlin". In recent months, El Mallouki's fintech CrowdDesk has grown faster than few others, with the number of employees skyrocketing. This is partly due to the fact that the start-up changed its business model in 2015, but it is also partly due to Frankfurt.

Mainz simply didn't fit as a city

El Mallouki founded his first start-up in Mainz, only to realize that it wasn't going to work out as he had imagined. Via "LeihDeinerStadtGeld.de", he wanted to issue loans from the city to private investors, with a low interest rate - it all sounded like it had great potential. However, the great success failed to materialize, so the team changed its approach in 2015 and now offers a white-label solution for all types of crowdfunding.

LeihDeinerStadtGeld became CrowdDesk and it quickly became clear: Mainz, as a city, just doesn't fit. "Personally, I would have liked to stay in Mainz, many friends live there and my family anyway. But the city didn't offer enough." According to him, there was too little support in Mainz, the city was too unattractive for specialists in the financial sector and there was also a lack of venture capitalists, El Mallouki recalls. That was a shame, says the founder with the short curls and dark, round glasses. "It was a purely economic decision."

El Mallouki was faced with the big question: would he go to Berlin now? But in the end, the decision was made against the capital, precisely because CrowdDesk has a lot to do with banks and other financial institutions. Accordingly, the proximity to the major financial institutions is much closer in Frankfurt than in Berlin, for example, says El Mallouki. The environment in which CrowdDesk operates also played a role when it came to the question of employees. "Our topics require financially savvy, specialized employees, which would have been more difficult to find in Berlin than in Frankfurt," he says. This is not a problem in the metropolis on the Main: he received almost 3,000 applications last year.

Frankfurt offers several advantages for fintechs

In 2015, there were also all kinds of opportunities to exchange ideas. "Frankfurt Forward, business development in Frankfurt or CO Money: these are all reasons why we chose Frankfurt," says El Mallouki.

So is Frankfurt the better Berlin for specialized fintechs? Even El Mallouki doesn't see it quite so rosy. Even when CrowdDesk came to Frankfurt in 2015, there was a lack of venture capital and the exchange with venture capitalists was much slower than in Berlin. "There, people know each other and see each other, which is much less the case here in Frankfurt," he says. The start-up itself has suffered as a result. When El Mallouki and his team were looking for investors, the selection was rather "thin", recalls the CrowdDesk founder.

At least the absolute volume of investments in Frankfurt remained far behind the competition from Berlin in 2020. While €1.8 billion flowed to fintechs in the capital, the figure for Frankfurt fintechs was just €42 million.

El Mallouki would therefore like to see much more initiative from the city of Frankfurt, more space for start-ups and fintechs in particular, as well as support for start-up initiatives. This would also require more initiatives from the university environment. "The fintech focus is not yet sufficiently lived by the city," he says. So to Berlin after all? "No, I would never swap."