Inflation, interest rate reversal and economic downturn are also leaving their mark on the German startup scene – according to the current German Startup Monitor The business climate is currently only slightly above the previous low point of the coronavirus year 2020. In addition to the business situation, the general assessment of the startup ecosystem has also deteriorated, falling ten percentage points below the previous year's figure at 58 percent. However, this negative assessment is not causing founders to become lethargic: According to the DSM, the vast majority of startups remain on a growth trajectory, pursuing ambitious goals, and facing current challenges. Given the transformation process the entire German economy is undergoing, this is good news, as startups are making an essential contribution.
Times of crisis as times of founding
The issue of liquidity is once again gaining greater focus and is currently a key challenge for around a third, compared to a quarter last year. Only 15 percent of founders rate the willingness of VCs and business angels to invest positively. Furthermore, many are adjusting their strategies: While 44 percent of startups preferred venture capital financing in their planning last year, this figure has dropped significantly to just over a third.
The average number of employees in German startups, however, remains stable at 19. While 15 percent of startups had to make layoffs within the last year, the vast majority (56 percent) were able to continue hiring during the same period, creating an average of eight new positions. No frustration can be detected among the founders either – nine out of ten would start a startup again, and the vast majority of them would do so in Germany (83 percent). This confirms the general perception that times of crisis are also times for founding new companies.
Share of female founders stagnates, diverse founding teams leave their mark
After steady growth in the proportion of female founders in previous years, the figure has barely changed this year, standing at 21 percent. Especially in difficult times, progress in diversity seems to be lagging behind. In the competition for scarcer resources, networks can play an important role, threatening to increase barriers to entry for women. The diversity effect, however, is evident in companies: The proportion of female employees (44 percent) and managers (40 percent) is significantly higher in mixed founding teams than in all-male founding teams (29 percent and 14 percent, respectively).
Universities and research as drivers of innovation
Universities and research institutions are fundamental for many startups: 49 percent of every second startup report having received support in this context. The focus is on providing contacts and business know-how, as well as support from individuals such as professors. Universities and research institutions play a central role in the startup ecosystem, especially with regard to competitiveness in innovative technologies. Among the top three startup universities are – alongside RWTH Aachen and the WHU – also the Technical University of MunichA total of 13 percent of the founders surveyed graduated from the three universities.
“Irreplaceable engine of innovation”
Franziska Teubert, Managing Director of the Startup Association, comments on the results of the current German Startup Monitor:
"A look at the startup landscape in Germany shows that the current situation is also a burden for young growth companies. At the same time, it's clear that startups remain an irreplaceable engine of innovation for our economy. They adapt their growth strategies with agility in the face of scarce resources – and the political measures important to them should be implemented accordingly quickly. The federal government must prioritize startup issues and shape the Future Financing Act in the interests of German startups."
And Florian Nöll, EMEA Startups, Scaleups & Venturing Leader, Partner at PwC Germany, adds:
"The proportion of female founders in German startups is stagnating – that's bad news and should give us pause for thought about how we should pursue parity as a goal even in more difficult times. The good news: We are once again seeing the clearly positive effects of supporting female founders: more diversity throughout the company. Especially in times of skilled labor shortages, the development potential of our economy must be unlocked by more female founders."
