Maija Palmer is the FT's technology correspondent
Even as London's technology hub begins to grow, a rival entrepreneurial cluster in Berlin is vying to draw in European talent.
Dozens of technology start-ups are springing up around Berlin's Mitte and neighbouring Kreutzberg district, an area that has been popular with artists and musicians since the 1970s when it was the home of Berlin's punk rock movement.
Close to where Iggy Pop and David Bowie would have played in their heyday, there are now companies such as SoundCloud, an online audio platform, Wooga, the world's third-largest social games developer, and 9flats, a European competitor to Airbnb, the online holiday room rental business. The St Oberholz café on Rosenthaler Strasse with its free WiFi and bad coffee has become the unofficial office for many of the most fledgling businesses.
Exact numbers are difficult to pin down but 60 companies are advertising for jobs on the Berlin Start-up Job website, giving some idea of the scale of the city's draw for tech heads.
Entrepreneurs are attracted by Berlin's cool, alternative vibe and the very low rents, which can be less than half the price of those in London. The cost of living, overall, is at least a third lower than London.
"It is the best start-up city in the world," says Alexander Ljung, the Swedish co-founder of SoundCloud, who moved to Berlin to build up the business in 2007. "It is cheaper than other cities but that is not the essence of it. There is a really high number of people in the creative field there. Berlin is like a start-up itself. It is moving fast, it is quite chaotic and no one quite knows where it is going but it is in the right direction."
"I moved to Berlin because it's so much easier for me to find decent online marketing guys, it's still much cheaper than anywhere else in Europe in terms of the cost of living," says Stephan Uhrenbacher, founder of 9flats. He says it is easy to get talented staff to move to Berlin.
"If you tell someone in London that I have this great European company based in Hamburg, they say 'I'll think about it.' if you say it's in Berlin, they say 'Yes sure - when's the next plane?'"
The area is drawing in investors. German investors and serial entrepreneurs, such as the Samwer brothers and Lukasz Gadowski, have set up incubators in the German capital. Christophe Maire, another serial entrepreneur, has set up Atlantic Ventures, and Earlybird Venture Partners, which originally operated from Hamburg and Munich, shifted its focus to Berlin earlier this year. International investors are coming in too. London-based Balderton Capital, one of Europe's leading technology venture capital investors, is increasing its focus on the city.
"Like San Francisco's South of Market neighbourhood in the '90s, Berlin is an exceptionally creative and inspirational city that is fostering some of the world's most exciting start-ups," said Roberto Bonanzinga, partner at Balderton.
More than 15 start-ups in Berlin have raised over €1-million in funding in the last year.
A number of Berlin start-ups have had successful exits, the latest of which was the €750-million sale of CityDeal, the online coupons company, to Groupon. Other exits include the sale of Brands4Friends, an online auction site selling brand goods, to Ebay for $200-million in December 2010, and the purchase of Gate5, which offers mapping and location-based services for mobiles, by Nokia for €250-million in 2006.