As the current report “Next Generation – New Startups in Germany” According to the Startup Association and Startupdetector, 18 percent fewer startups were founded across Germany in 2022 than in the previous year. In the second half of 2022, the decline compared to the same period last year was particularly sharp at 33 percent. This makes it the weakest half year since data collection began in 2019. And December, with only 175 new startups, is the second-weakest month in this period.
The decline was particularly sharp in federal states with strong startup growth, such as Hamburg (-31 percent), Baden-Württemberg (-29 percent), and Berlin (-29 percent). In Bavaria, the decline was significantly more moderate at just -7 percent. As a result, more startups were born in Bavaria in 2022 than in any other federal state, with 544. In 2021, the situation was quite different: With 585 new Bavarian startups, the Free State ranked second behind Berlin with 702 (2022: 501).
Other federal states, such as Hesse (+2 percent) and Rhineland-Palatinate (+3 percent), were able to maintain or even increase the number of new startups. For example, the number of new startups in Mecklenburg-Western Pomerania grew by 33 percent to 20, and in Bremen by 44 percent to 26 new startups in 2022.
Munich benefits from its university-based ecosystem when it comes to start-ups
Overall, the five most populous cities dominate, accounting for 39 percent of all new businesses. However, there are significant differences in terms of population. With 14.5 new businesses per 100,000 inhabitants, Munich is ahead of Berlin (13.6) for the first time and far ahead of third-placed Hamburg (7.7). Munich, like the Free State as a whole, benefits from a moderate decline compared to Berlin. The number of new businesses in the state capital fell by only 9 percent to 215, while in Berlin it shrank by the aforementioned 29 percent. Munich benefits from its university-related ecosystem, according to the study authors – a model that also has a start-up-stimulating effect in locations such as Aachen, Heidelberg or Karlsruhe.
Looking at the industry as a whole, the current crisis is particularly evident in the 39 percent drop in e-commerce startups. However, the software sector, which has the highest number of startups (-26 percent), and the previously booming fintech sector (-28 percent) are also among the losers. Only the blockchain/crypto sector, which benefits from Web 3.0 (+65 percent), and environmental technologies (+14 percent) are recording significant growth.
Magdalena Oehl, deputy chairwoman of the Startup Association, explains:
"Even the startup ecosystem is not immune to the difficult economic situation. The decline in new startups could pose a problem for Germany's already sluggish innovative strength. This makes political action all the more important: This includes the announced improved regulations on employee participation and easier immigration for international tech talent – i.e., no language tests and more digital visas. The high startup dynamics around some universities demonstrate the importance of facilitating spin-offs from academia and professional startup centers at universities. If we set the right impulses now, I am confident that we will see significantly more innovative startups in the future."
