The KfW Founding Monitor is an annual representative survey of entrepreneurial activity in Germany. The current edition records a decline in startups in Germany in 2022. This development was influenced by a reduced economic stimulus compared to the previous year and a robust labor market characterized by skills shortages.
There were positive developments in 2022 regarding the motivation for self-employment: the number of founders who see self-employment as the best employment alternative for themselves almost doubled to 95,000 (+86 percent). The fact that these so-called opportunity startups grew so significantly despite the favorable labor market situation could also be related to an increased interest in career reorientation among many people during the coronavirus pandemic. The share of startups launched by employees increased again in 2022 and reached 73 percent, the highest level ever. Unemployment before starting a business is becoming increasingly rare (6 percent).
Share of female entrepreneurship declining
The number of startups founded by women fell again in 2022 after increases in the two previous years, reaching 205,000 (-20 percent). The number of male founders remained relatively unchanged (345,000; -1 percent). Female founders thus accounted for 37 percent of all startups in 2022, slightly below the long-term average. It appears that increases in the share of female founders have so far only been short-term fluctuations around the long-term average. A sustained increase in the share of female founders, on the other hand, is a challenge that requires persistence and must start early: for example, by breaking down gender stereotypes or by conveying business knowledge early on.
Another result of the KfW Founding Monitor: in 2022, founding activity was largely self-financed by the founders. Two-thirds (65 percent) of all new business formations used exclusively capital from the founders themselves. External capital was mobilized by 18 percent of founders.
With regard to the sustainability of new business formations, the KfW Founding Monitor shows that approximately 30 percent of founders discontinue their business within three fiscal years. After five years, just under 60 percent are still active. The reasons for discontinuation can be varied. By far the largest proportion of founders (32 percent) discontinue within the first five years for personal reasons, without direct economic pressure – for example, due to family stress, stress, illness, or dissatisfaction with the income earned. 24 percent of startups close within five years due to lack of profitability.
Focus on employment begins early – a change in thinking is necessary
Fritzi Köhler-Geib, Chief Economist at KfW, summarizes the key findings of the KfW Founding Monitor:
“In the tension between skills shortages and corona fatigue, founding activity in Germany is declining. The development of the labor market traditionally has a strong influence on entrepreneurial activity in this country. This is because Germany places a strong focus on employment. It appears that corona fatigue has reinforced the desire for career reorientation and thus for starting a business, but it remains to be seen whether this will continue. In any case, the focus on employment begins early, for example in career guidance for students. This urgently requires a change in mindset – in spite of, or perhaps precisely because of, the skills shortage.”
