Inflation, interest rate hikes, and economic slowdown are also leaving their mark on the German founder scene – according to the current German Startup Monitor, the business climate is currently only just above the previous low point in the coronavirus year 2020. In addition to business conditions, the general assessment of the startup ecosystem has also deteriorated and stands at 58 percent positive ratings, ten percentage points below the previous year’s value. However, this negative assessment does not make founders lethargic: according to the DSM, the vast majority of startups remain on a growth trajectory, pursue ambitious goals, and face current challenges head-on. With a view to the transformation process in which the entire German economy is engaged, this is good news, as startups make an essential contribution here.
nnnnTimes of crisis as times of founding
nnnnThe issue of liquidity is back in focus and is currently a central challenge for around one-third of founders, compared to a quarter in the previous year. Only 15 percent of founders rate the investment willingness of VCs and business angels positively. In addition, many are adjusting their strategy: while last year 44 percent of startups preferred venture capital financing in their planning, this figure drops significantly to just over one-third.
nnnnThe average number of employees in German startups, however, remains stable at 19. While 15 percent of startups had to make layoffs within the past year, in the same period the vast majority of 56 percent were able to continue hiring and create an average of eight new positions. There is also no sign of frustration among founders – nine out of ten would start a startup again, and the vast majority would do so in Germany (83 percent). This bears out the general assessment that times of crisis are also times of founding.
nnnnFounder share stagnates, diverse founding teams leave their mark
nnnnAfter steady growth in the share of female founders in previous years, the value barely changes this year and stands at 21 percent. In difficult times, progress in the area of diversity seems to be stalling. In competition for scarcer resources, networks can play an important role, which threatens to raise barriers to entry for women. The diversity effect, however, is evident in companies: the share of female employees (44 percent) and managers (40 percent) in mixed founding teams is significantly higher than in purely male founding teams (29 percent and 14 percent respectively).
nnnnUniversities and research as innovation drivers
nnnnUniversities and research institutions are essential for many startups: with 49 percent, every second startup indicates having received support in this context at some point. The focus is on the provision of contacts and business know-how as well as support from individuals, such as professors. Universities and research institutions play a central role for the startup ecosystem, particularly with regard to competitiveness in innovative technologies. The top 3 founding universities include – alongside RWTH Aachen and WHU – also TU München. A total of 13 percent of the surveyed founders completed their degrees at these three universities.
nnnn“Irreplaceable innovation engine”
nnnnFranziska Teubert, Managing Director of Startup Association, comments on the results of the current German Startup Monitor:
nnnnnnnn“A look at the startup landscape in Germany shows that the current situation is also a burden for young growing companies – and at the same time it becomes clear: startups remain an irreplaceable innovation engine for our economy. They agilely adapt their growth strategies in the face of scarce resources – accordingly quickly, the political measures important to them should also be implemented. The federal government must advance startup issues with greater priority and shape the future financing law in the interests of German startups.”
And Florian Nöll, EMEA Startups, Scaleups & Venturing Leader, Partner at PwC Germany, adds:
nnnnnnnnn“The share of female founders in German startups is stagnating – that is bad news and should give us pause as to how we should continue to pursue parity as a goal even in more difficult phases. The good news: we see once again the clearly positive effects of promoting female founders: more diversity throughout the entire company. Especially in times of skilled labor shortage, the development potential of our economy must be unlocked through more female founders.”
