How does a strong labor market affect start-up activity in Germany? It's very direct, as the current KfW Start-up Monitor 2016 found in its representative survey on start-up activity in Germany.
Just like the DIHK Founder Report The 2016 KfW Start-up Monitor concludes that start-up activity in Germany declined significantly last year. The number of founders fell by 152,000, or 17 percent, to 763,000 compared to the previous year. The Start-up Monitor clearly attributes this decline to the strong labor market. The unemployment rate also fell by a further 0.4 percentage points, resulting in a disproportionately lower number of "emergency start-ups due to a lack of better alternatives," which fell by 28 percent to 207,000.
"The very good situation on the labor market is inhibiting start-up activity. The positive aspect is that there have never been so few emergency founders,"
said Dr. Jörg Zeuner, Chief Economist of KfW, on the occasion of the presentation of the KfW Start-up Monitor 2016.
Positive: Number of innovative start-ups is increasing
Another positive finding from the KfW Start-up Monitor is that the number of innovative start-ups has increased slightly by 6% to 95,000. What exactly constitutes an innovative start-up?
The director of KfW, Dr. Zeuner, says:
"Innovative start-ups are of great importance to our competitiveness because of their investments in research and development and their greater longevity. The number of start-ups has decreased in quantity, but structurally gained in quality."
One in five founders is a “digital” founder
The 2016 KfW Start-up Monitor also attempts to shed light on the significance of digital technologies for entrepreneurs. The result: Entrepreneurs who use digital technologies to create new markets or conquer established markets now account for a substantial portion of the start-up activity. One in five founders (21 %) is a "digital" founder, meaning their offerings are exclusively available through digital technologies.
The business models are diverse: Digital founders include app providers, operators of web portals, online retailers, software developers, and even web designers. The advantage of digitalization is evident in market access: While the founders are predominantly regionally focused (40% are national), 70% of "digital" founders target the national or international market directly.
Use of external capital increases slightly
Overall, founders (65%) used financial resources somewhat more frequently in 2015 (2014: 62%), with 23% relying on external sources such as banks, private investors, or family and friends (2014: 21%). External capital is usually in the microfinance range up to €25,000 (15% of founders). However, the proportion of founders using higher levels of external capital has increased in recent years, reaching a record high of 8% in 2015.
It is encouraging that in 2015 a quarter fewer founders had financing difficulties (from 20 to 15).
“Founders will always be more affected by financing difficulties than established entrepreneurs, as they usually have no entrepreneurial history and are often unable to provide collateral.
said Dr. Zeuner. He emphasized once again that KfW has a strong economic interest in ensuring that promising ideas do not fail due to lack of financing. He sees the development banks, not least of all, as having a duty to support start-up financing.
