An outcry from the start-up scene

Germany is not as innovative as it could or even should be. Strengthening start-ups would bring a decisive boost. At least that’s what some of the most important heads of the German start-up scene think and have expressed their demands in a fire letter to the government.

The economy is generally in a difficult position in Germany. The reputation of entrepreneurs is not particularly high. Failure is considered a personal deathblow and founders are at best viewed with interest from afar, but otherwise smiled at. Now 15 important voices from the German start-up scene have spoken.

Germany is not a founding country

Germany is not a country of founders, but rather a country of employees with a fully comprehensive mentality and all-round care provided by the state. It is clear that only innovations will ensure that Germany does not lose touch with countries like China and the USA, but also with South Korea or Japan, at least when it comes to business and technology.

Poor framework conditions for innovations

However, the framework conditions in our country are not ideal. And it’s not just me saying that, it’s also proven by a large number of statistics, be it with regard to innovations, the degree of digitization or singular things like internet speed.

However, all these factors play a serious role with regard to the digital transformation of the economy. And as far as innovations are concerned, they also come from large medium-sized companies and corporations.

However, when it comes to speed, both in brainstorming and in implementation, it is the founders and their young companies who set the pace. In order for this to work, however, the framework conditions are important. And there is a lot wrong here.

Start-ups: The problems have been known for a long time

This was only confirmed again by the 10th German Start-up Monitor, which I wrote about last week. As in previous years, this will show the most urgent problems that are not being addressed: too much bureaucracy, too little support in recruiting foreign specialists and too few incentives for investments.

Added to this is the currently weak design of opportunities for employee participation, with negative tax consequences in particular, which in some cases lead to tax obligations even though employees do not generate any income at all.

It’s annoying when the grievances are pointed out year after year, but nothing happens. And it’s even more annoying when a new federal government starts as a “progressive coalition” but then nothing really happens and the initiatives that have been initiated are announced with fanfares, but have little substance in terms of content and that becomes clear without having to look closely at them.

Fire letter from the start-up scene to the federal government

That’s why a few of the most outstanding heads of the German start-up scene have now written a letter to the federal government, including the federal ministers Habeck and Lindner.

Among them: Personio founder Hanno Renner, Delivery Hero founder Niklas Östberg, Flixbus founder Jochen Engert and Julia Bösch, Outfittery co-founder. In the letter, they name the problems that concern the start-up scene and have led, for example, to a 30 percent decline in start-up activities.

Start-up scene: A letter with important content

And this letter has it all. Not because the signatories address so many issues or because these issues are so new, but because they put their finger in the wound with their demands and personally show what is going wrong and how easy the solutions could be.

Weak opportunities for employee participation

The opportunities for employee participation must be strengthened and, in particular, be easy to implement. The previous concerns that wages could be depressed by these shows typical pro-employee thinking. Employees at start-ups regularly work there because they want to.

Especially in the current situation, where employees are missing everywhere, they can also look for other jobs. When they go to a start-up, they do so with the knowledge of the risk that the earnings may be low at the beginning, but there is a legitimate hope of more later.

It is more than incomprehensible why our country does not trust employees to make this decision on their own responsibility.

Attracting workers from abroad

It is then warned that it must become much easier to be able to employ workers from abroad. Against the background of digital transformation, which is currently affecting all areas of the economy, this demand is all the more urgent.

Because start-ups are not only looking for employees in the place where they are based, but nationally and worldwide. In particular, they have understood that diversification across different cultures, languages ​​and countries brings them advantages – and that increases potential talent pools.

Germany cannot meet the need for skilled workers itself. Modern visa conditions are therefore a must, not only to attract future talent, but also to cover current needs.

Start-up scene: Strengthening investors

And also attracting external capital is not a new, but important requirement. German start-ups are poorly equipped when it comes to growth capital. In particular, financing must therefore become easier and more attractive for investors. Because if you want to invest, you have to think bigger than with investments of 50,000 or 100,000 euros.

German start-ups are not in competition with other German companies, but with companies worldwide. And these are simply better equipped financially and can therefore grow faster. In order for German start-ups to keep up, investments must become simpler and more rewarding, also from a tax point of view.

However, I am cautious about one demand in this context: the signatories demand that insurers and pension funds should be able to invest more easily in venture capital funds. However, it should be noted that this proposal is too general.

Because these types of investors depend on secure and predictable returns, which is not the case with start-ups. In order to be able to make “secure” investments, special expertise would be required that would be better off elsewhere: in strong private investment funds that, for example, invest more in start-ups as partners of public institutions, perhaps even alongside private investors .

In my view, strengthening this would probably make more sense than giving pension funds the opportunity to invest in risky companies.

Brandbrief: Justified demands that focus on innovations

Now one could dismiss these demands as positions that are not only well-known, but also boring because they have been repeated for years. But that would be a big mistake. Because in the meantime it is becoming increasingly clear that Germany is losing touch with the rest of the world, especially with regard to digital development. In Europe, for example, Germany is currently only available 13th placeafter 11th place in 2021.

And even if Germany still as innovative applies, the political and economic framework conditions are even deteriorating. Of course, the citizens also see this when they use services such as Uber abroad, make payments anywhere with their mobile phones without any problems or can of course contact authorities online and all of this is not possible in Germany because thinking in terms of vested rights is already in the bud of every innovation suffocated.

Conclusion: This is how the German start-up scene is doing

In addition, although the demands refer explicitly to start-ups, they should be seen in a larger context. The economy in general in Germany complains about too much bureaucracy, too great a shortage of skilled workers and too few investment opportunities.

Bringing about changes here that may be aimed at start-ups but generally strengthen the economy will ensure that Germany, the growth engine, does not stutter even more. That is not only good for Europe, but also for the local workers. Federal Minister of Finance Lindner has already reaction announced in response to the letter that it would make things easier, particularly with regard to employee participation.

It remains to be hoped that this will not be another mini-step, but rather a regulatory “leap”. Then perhaps soon people will not speak admiringly of the “Asian tiger” making an economic leap, but with equal admiration of the “German wildcat”.

Also interesting: