What challenges do German startups face? What matters to founders? How is the business climate in the industry? The Startup Association answers these and other questions once a year with a large-scale study. For the DSM 2024, 1,828 startups were surveyed.
The 12th edition of the DSM shows: The challenging economic situation is also affecting young companies. While the number of employees has risen steadily in recent years, the value is falling this year from 18.9 to 16.7. The share of female startup founders has also declined, from 20.7 percent to 18.8 percent. At the same time, more than half of startups (50.7 percent) rate the current financing situation as negative.
Profitability becomes the main goal
These challenges have led to a strategic shift. Profitability is now the main goal for 73.8 percent of founders; in 2021, only 58.1 percent agreed. Many are also betting on the future technology of artificial intelligence. At 22 percent, more than one in five startups sees the technology as the core of their own product.
“The motto today is more than ever: solve real problems and increase productivity. German startups have internalized this and flipped the switch: profitability, growth, AI, spin-offs, and deep tech – these focal points are shaping and changing the startup ecosystem,”
says Verena Pausder, chair of the Startup Association.
Despite numerous challenges, the overall assessment is improving. Of those surveyed for the DSM, 61 percent view the ecosystem as generally positive. In 2023, it was only 57.7 percent. Furthermore, 58 percent of founders expect the economic situation to improve in the coming months. By the end of 2025, even 80 percent expect a positive development.
Universities & established companies: collaboration still needs work
Startups play an important role as translators of research into practice. More than half of startups (55.1 percent) collaborated with universities or research institutions during the founding process or received support there. Last year, the value was 49.2 percent. Founders view proximity to universities positively at 80.5 percent – a new record. 11.4 percent of startups are classified as deep tech companies that bring new research-based technologies to market.
In addition to support from academia, startups also depend on cooperation with established companies. This works well as long as they serve as customers. The share of B2B in total revenue of German startups continues to rise from 70.4 percent in 2023 to 74.7 percent.
Established companies are also relevant as partners in research and development as well as distribution structures. According to the DSM, 61.9 percent of startups are active with projects here; in 2020, the share was still 71.8 percent. So there are issues with collaboration between startups and established industry. Only 37.5 percent of startups rate the cooperation opportunities with established companies positively, and that is less than in the previous year (40.5 percent).
Pausder adds:
“Compared to other business locations, with our broad middle market and strong industry, we have a huge asset that we are using too little. Collaboration with startups, investments by corporates, or acquisitions are among the most important ways for companies to be innovative – but unfortunately, not all companies in Germany have recognized that yet.”
Demand for capital growing
74.1 percent of startups want to raise external capital in the coming year. In the DSM 2023, 69.5 percent said so. The amounts requested are also increasing. Last year, 58.7 percent still needed capital of 500,000 euros or more; in 2024, it is 69.9 percent.
However, only just under one-third (29.8 percent) rate access to capital and investments positively, and that is less than in previous years (2022: 37.2 percent; 2023: 33 percent). According to the DSM, there is a great need to catch up in startup financing, and the situation is becoming more acute in the current economic climate.
The full DSM 2024 is available here to read.
