Peter Thiel changes course with funding of two Berlin start-ups

PayPal co-founder Peter Thiel has made a rare foray into continental Europe, leading funding rounds in two Berlin start-ups, as Silicon Valley investors continue to be attracted by the region's technology scene.

Mr Thiel's Valar Ventures is leading an $18m funding round in EyeEm, a network for photographers, and a €10m investment in Number26, a banking app.

The move is an unexpected endorsement of Berlin's budding tech scene, as Mr Thiel has previously been scathing about the business environment in the city and continental Europe.

He told the Financial Times in September that he preferred to invest in London because people "just work harder . . . They just work less hard in Berlin." Europe, he said, was a "slacker with low expectations".

Mr Thiel, the first venture capitalist to back Facebook, has rarely invested outside the US. But in recent months he funded two London-based start-ups: TransferWise, a money transfer business, and Deepmind, an artificial intelligence group bought by Google for £400m last year.

EyeEm helps users of mobile phones sort through the photographs they take on the devices. "There is a new generation of photographers solely equipped with mobile phones, who are able to capture incredible images. But one of the biggest problems in photography is how do you find images that really interest you," said co-founder Florian Meissner.

The company will use the funding to extend its photography licensing platform from the US, where the business was launched, to Europe, Asia and South America, and to hire more staff. EyeEm has 13m users and launched a platform to license its community's work for commercial use last month.

Number26 is a mobile banking app which launched in Germany and Austria this year and has about 8,500 customers. It provides users with a MasterCard credit card and an account offered by German partner bank Wirecard. Spending through the app can be mapped according to categories such as "restaurants".

The start-up plans to spend the funding on recruitment and developing new features, such as a fraud detection system that maps where a card is used against geo-location data from the cardholder's phone.

Number26, which is free to users, makes money from a portion of the transaction fee charged to merchants, and earns interest on funds deposited with the partner bank.

Another VC fund co-founded by Mr Thiel, Founders Fund, invested in a Berlin-based social network for scientists, ResearchGate, in 2012.

Europe's technology start-ups have begin to attract US funds, which are large enough to step in to provide "growth" funding rounds of $10m or more - the types of multimillion-dollar cheques commonplace in the US but rare in Europe.

Figures from Go4Venture Advisers, an analyst group, and DFJ Esprit, the venture capital group, show that in 2010, European start-ups received $808m during growth funding rounds, either solely from US investors or through joint investments between US and European venture groups. By 2013, this figure had risen $1.9bn and is projected to rise to $3.5bn by the end of this year.

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