I don't understand your points about wages being too low in Berlin. If low wages are a problem for a start-up, what is keeping it from offering high wages, even in Berlin?

On the other hand, I could imagine that start-ups would rather keep costs low, especially in the beginning. Then it would be a problem to be situated in a city like Zurich.

Investors may choose to invest with a company in a certain city, like Nashville or Berlin or Singapore, because wages are low. So if wages become a problem for the company, the investors stop being interested. There won't be money available to raise wages (for that, the investors will just go back to markets like NYC, Boston, or SF that they trust more).

So from birth, companies based in these areas are predicated on the idea that wages must be low -- that's what makes them attractive to investors -- and as a result they really are not recruiting good people.

The whole thing basically amplifies the casino effects in start-ups. You invest in Berlin/Nashville/Singapore start-ups because it's an insanely cheap scratch-off ticket that costs you mostly nothing, has very low chance of striking it big, but offers you entertainment, or bragging rights, or something else, as an investor.

Companies in these areas will not be in a position to raise their wages to a truly competitive level for very long periods of time (most won't live that long anyway). So by agreeing to work for them, you are simply resigning yourself to a permanent reduction in real wage (i.e. after accounting for cost of living). Not to mention, for international workers anyway, adding visa risk, tax complications, equity complications, etc.

For a very talented developer who can earn far enough about market salaries even in NYC or SF so as to live a comfortable life in those places, it would only make sense to bear all these risks and join a firm in Berlin if you were being paid a premium -- i.e. that your wage in Berlin was even higher above cost of living than what your ~ $180k salary would be in Brooklyn -- and you should not at all consider it if someone starts conning you with arguments like, "but it's so much cheaper in Berlin ... and you can drink beer in the park and watch Bayern or Dortmund play here twice a year, go to Berghain on the weekends, etc. etc." (unless, of course, your utility function responds more to beer and soccer than to money).

A lot of this is very true. Though it doesn't factor highly talented looking at quality of living beyond disposable income. The one thing I would say is a shared motivation for many of these types moving to Berlin is they are looking for more diverse environments provided by a city not yet choking on its housing costs, or cities that relegate them always to the bubble of the financially fortunate. Disposable income models don't capture this factor. I personally think a company that chose to pay well in Berlin would find a ton of highly qualified talent. Meh, I could obviously be totally wrong.

I'd love to see the tech landscape in Zürich grow but there are a few problems:

- Sponsoring non-EU immigrants has become extremely difficult in Swizterland.

- Google trounces the competition by a margin that is completely out of reach for European start-ups.

- Switzerland itself is a very small market. The cash-flow of your typical SaaS start-up is going to be mostly in € or $ with all the associated burdens and risks.

Also it's funny you mention Amsterdam since from what I've seen, wages are even lower than in Berlin, which is insane given the higher CoL.

Wages in Amsterdam are lower than London, but the Netherlands have a great deal for ex-pats: the so called "30% rule", which means that you only pay tax on the remaining 70% for the first 8 years there. So your take home pay can be really good (and it has other benefits like a good healthcare system, free education for the kids, etc).

Also, if you want to start a start-up low wages are actually a plus...

(Source: I started a startup there and have several employees on the 30% rule)

The Swiss tax system also cripples startups in Zürich

True, but they're working on that (I think?), and you can always put your HQ in Zug :D

Does that solve the taxation based on market cap thing?

Wages being low is a good thing, no? CoL is significantly lower too which is great.

In what way are lower wages good for the employees you're trying to attract? While some aspects of cost of living are low, others are not low at all. I guess if you're looking for nothing more than a temporary lifestyle involving enough money to go to concerts and eat at restaurants, the wage is fine for a younger person in Berlin. But it's a fantasy to believe you can effectively grow a company that way. You really do need to hire experienced people, often with families and expectations for a higher quality of living conditions, etc., who aren't particularly interested in the youth culture offerings of Berlin.

For these people, earning ~ 50k euros / year in Berlin is a way, way, way, way, way worse deal than earning ~ 200k dollars in San Francisco, despite SF's insane costs. You just simply cannot do anything with 50k euros/year in Berlin unless you have no outside obligations and are happy spending the money of minor lifestyle perks.

I'm surprised that any of this is even controversial. The same is true for start-ups almost anywhere else in continental Europe too. To a very limited extent there are some companies in Amsterdam that actually pay a "real" wage (i.e. you can support a family, enjoy life, and save for retirement), and some across Switzerland, but not many.

Thinking in terms of "yay, cost of living is low so I don't need much of a salary" is the classic immature analysis of a recent grad who looks at it more like a program for teaching English is southeast Asia than like they are actually working a job, building a career, etc.

I made 50k in a more expensive city, Paris. From that my partner and I were able to buy a flat, put our son into a catholic school, travel (squeezyjets €20 flights), dine out, and save a little. This would not be possible anywhere in the US including SF. Child rearing costs are punitively high in the US. Medical was less than 10% of my salary.

If my calculation is right the typical 2BR apartment in SF is $5000/month. Or $60000/year. That is almost 1/3 of $200k SF salary. Add childcare at another $12000/year. And medical.

It doesn't seem as far as lifestyle they are that far off. CoL plays a huge role. This is the typical American attitude at looking across the pond and not knowing how the other side lives but just assuming it's that bad.

You really do need to hire experienced people, often with families and expectations for a higher quality of living conditions, etc., who aren't particularly interested in the youth culture offerings of Berlin.

And yet these startups, everywhere, are able to do exactly that. They use equity as a carrot to lure experienced people from a sure thing all the time.

>> I made 50k in a more expensive city, Paris. From that my partner and I were able to buy a flat, put our son into a catholic school

Having a partner doubles your income. More, if French taxation works in any way similarly to the German system, then an official relationship puts you in a different taxation category. Having children moves you into yet another category where your net income noticeably improves. You're probably making an equivalent of 100K for a single person without realizing it.

>> And yet these startups, everywhere, are able to do exactly that. They use equity as a carrot to lure experienced people from a sure thing all the time.

Not really. Everywhere where I've been I've only seen kids writing code. Anybody who is senior has always been an independent contractor, and it's usually them who actually advance the work by leaps and bounds. But those, today you have them working for you, tomorrow they're elsewhere. And with the young and inexperienced, you won't accomplish much.

Also, experienced people with families usually ignore any talks about equity and start the initial offer analysis with a calculator in their hands. I'm yet to encounter a true senior specialist with family obligations that takes equity over hard currency.

> Having a partner doubles your income.

That's only true if the partner earns about the same as you do. Being married (or in an official relationship) lowers your tax burden if you're earning unevenly (you're basically taxed based on the average of your wages in a system with a progressive tax rate), but that's all. It doesn't magic any money into existing. If you're both earning the same, you savings are exactly 0.

What having a partner really helps with is sharing costs. You only need a single flat (but probably a larger one), a single household, maybe share a car, ...

I've contemplated your comment for a while now and I think there is no way for me to reply to it except to say that I truly do not believe you.

I'll add one caveat -- if you are saying that you and your partner both earned around 50k euros/year (combined household income of around 100k euros/year), then I would believe you, and it would not be surprising nor would it contradict anything I'm saying.

If instead you are claiming that you supported the kind of lifestyle you describe on a 50k euros/year salary, I simply do not believe it.

If you want to equivalently spend about 1/3 of a 50k salary on rent in Paris, that will be 1388 euros/month, or $1534 / month. It's ludicrous for you to claim that you can easily find a 2-bedroom apartment with clean accommodations and a reasonable commute distance from central Paris for $1534/month. So, very likely, you'll be spending more than 1/3 of your income on rent in metro Paris, if you earn 50k, so a greater fraction even than in SF. It's actually quite a lot more than 1/3 after you take into account taxes. (Also, re: medical, I've worked at large & small, young & old companies and only 1 out of the 4 has required me to pay any premium on medical insurance, and even then it was low. I know this is not always the case in America, but you definitely can find jobs that provide this if it matters to you.)

When I lived in Paris in 2010, I lived near the Exelmans stop (close to Parc des Princes), which was a long-ass trek into the city center (and even longer for me going to Universite Paris 7 for work). It was a 1-bedroom apartment shared between me and a flat mate (I slept on a pull-out sofa). There was no dryer, only a washer, and the water closet was separate (across the whole apartment) from the bath/shower, and had no sink. We also had to flip a metal sheet up onto the top of the washing machine in order to have any counter space when cooking.

That apartment was 1300 euros/month (650 split between two roommates) and we were only given that price because the apartment owner said he found the two of us (graduate students) to be especially responsible and was hoping for good stewards to take care of it, so he offered a discount down from the 1500 euros/month he listed originally.

Thus, from my own experience, 1/3 of a 50k salary in Paris will if you're lucky get you a very cramped 1-bedroom with sub-par appliances and accommodations that is way outside the city center and requires onerous commute times.

This was in 2010, so I can't imagine how much prices have risen.

Absolutely no way will you be able to afford a 2-bedroom place on that budget unless you're way outside of Paris. And with the remaining ~ 30k euros not spent on rent, you will be very unlikely to afford private school and the rest of what you claim -- and I'm not even factoring in the much higher tax rates.

Even looking on lodgis right now, even all the way out in the 16eme where I lived before, I'm seeing rents of 2500 - 3100 euros/month for anything with 2 bedrooms. This is somewhere around $3000. Sure, yes, that's lower than in SF or New York, but just as I have been arguing, it's not lower by a large enough amount to justify the drastic reduction in wages.

Facing these prices, I'd be much, much better off earning in the high $100k range in SF/NY than I would be earning anything below 100k euros in Paris/Berlin/Amsterdam/etc.

But pretty much the only country in all of Europe where a visa worker can actually approach a 100k euro salary is Switzerland.

The reduced cost of living is not enough to justify the even-more reduced wage you're paid. It just does not make economic sense. If you have access to developed American job markets, you are better off in real wage terms than in almost any situation possible in Europe.

It's deeply unfortunate too. I absolutely loved life in Paris. I love spending more time at meals, less focus on consumerism, greater focus on closeness with friends, greater focus on culinary pleasure. I felt (and still feel) I would fit in well, be productive, and happy living in Paris. Except that for the wage I can earn there, I would struggle to get by, and it's absolutely not worth it to suffer the stress of that struggle. I wish it were differently, really. But it's just the wage reality.

A bit of feedback from someone who tried to make it in Germany with a 40K salary (in the south) and couldn't. It's just not doable. You need at least 60-70K to get started in medium towns, and around 80-90K for large expensive cities. Otherwise you either have to downgrade your standard of living to that common in third-world countries or accept it to live with a chronically empty bank account and most likely with a long-term debt as you're trying to pay back your initial accommodation expenses. Cheap is an illusion for a brochure.

You really need to check up on what 3rd world country life style is. I used to live in Munich on a 45k wage and while I wasn't living in a huge flat in a posh area, I made a comfortable living. Granted, that's been a while ago, but even now my cousin as a policeman in Munich is far far from anything even resembling 3rd world. And he's certainly not earning 60k.

Something like living in a flat infested with insects, walls not properly isolated making it pretty cold in winter with the heating set on maximum so you need to sleep in a sweater and a jacket, broken electrical wiring and the lights shutting down every now and again, a mixer that could not deliver a constant temperature water stream. Loud music, smoking, a construction place less than 100 meters away. Was my reality in Stuttgart. Couldn't find anything better. Or, more to the point, I could but that would necessitate a salary of 80-90K to be able to pay back whatever expenses such a rental would incur.

I know of course that even by German standards it's a luxury. Many working people (non-IT) can only afford a room.

Sometimes I think the government really needs to step in and cap the rental prices to 1/3 of the average salary in the area. Otherwise that inflation never ends.

Plus the total amount of taxes (Income, VAT, GEZ/ARD) a person has to pay on a wage higher than the average in Germany, and inability to legally keep multiple citizenship, make the location even less appealing than CH and UK in a long run.

no one is stopping you from offering your employees higher wages

Living is also not as pricey tho

It doesn't balance out at all. If you care about being a very successful start-up, then you are implicitly competing for international talent, whether you like it or not. The same people choosing to work in SV are the people you should be trying to convince to work in Berlin.

Saying they get ~ 50k euros/year but don't worry, the cost of living is low is a universal non-starter. That's just simply not competitive. The cost of living is not so low that a person can reduce their salary to around 1/3 of what they could make in New York or SF and expect to have the same quality of life.

You're basically handcuffing one arm behind your back by basing yourself in Berlin (or many other places) because now your pool of applicants is limited to only those people who have some ulterior reason to be interested in living in Berlin and are willing to make a Faustian bargain regarding huge reduction in their wage (even relative to cost of living).

american and german salaries are fundamentally not comparable if you look at the bare numbers. German salaries already include pension and healthcare for example, for which the employer pays 50% of the total, which goes on top of the salary. That alone makes a 50k EUR salary more similar to a 75k USD salary (not taking into account the exchange rate, which adds another 10% as of today). There's also at least 4 weeks of paid holidays and unlimited paid sick-leave. Rent difference can easily account for something like 1k to 2k per month. Rent is still comparatively cheap even in the most expensive and central parts of Berlin. Having 15 minutes of travel to the office instead of hours can also change the equation massively, at least if you're looking at your quality of life. The crucial number is how much money is left in your bank account after all your expenses are paid for - and that can vary massively depending on your personal lifestyle. The salary before taxes and other costs is a fairly uninteresting figure.

In 3 out of the 4 jobs I've had in America, I have paid zero premium for health insurance (100% paid by employer), and had either 4 or 5 weeks of vacation (not including between 9 and 12 company holidays too).

Even with the exchange rate, my base salary was more than triple the $50k euros amount, and I have < 4 years of experience. I am a specialist in my area which makes my case a bit harder to compare, but still, the offer of provided healthcare and 4 weeks vacation doesn't make foreign jobs more attractive to me. I've had that in almost every American job I've had and also was paid a wage that was high enough to comfortably exceed local cost of living. In fact, I generally find that when an employer has to start nervously listing side perks like medical coverage or vacation as apologetic offerings to excuse an obviously poor salary relative to cost of living, it's a huge red flag that they know they are not equipped to recruit exceptional people.

In all my comments I am already talking about how much money you have left after general cost of living expenses. Even though such costs are lower in Berlin than in many major US cities, the salaries in Berlin are even lower at a disproportional level. Unless you adopt a more ascetic lifestyle, your lower salary in Berlin will not stretch as far despite the lower costs. The costs, while lower, aren't low enough.

You forget a very big factor: only US citizens can move to SV or NY without many hoops.

If you are from EU, you can go to Berlin with no fuss, if you can get a job. Maybe your US counterpart can go to SV, but you need a visa rain dance, which make sense only if you are a star that some company want to pay a fortune to bring there.

Maybe Google and Facebook take the 0.001 % of the top developers. But, top 1% is not bad either.

Also, there is a lot of talent in Eastern Europe. For them, there are hoops and work visas for both EU and US, but, US hoops are much more difficult to pass.

Not to mention that Berlin has a great nigthlife. SF? Only complaints about the male/female ratio and nerd-dominated culture.

So, while SV is certainly the center of the industry, 100K in Berlin can give a much better life than 200K in SV, especially for people with EU citizenship.