Findings from the 10th German Start-up Monitor

The 10th German Start-up Monitor (DSM) was published in September. This report, presented by the Federal Association of German Startups, is considered to measure the pulse of the German start-up scene. Let’s take a look at the insights from the DSM and evaluate them.

German start-up monitor – representative or not?

Perhaps a note in advance: The DSM is not necessarily representative, since the federal association does not interview the start-ups, but they contribute to the DSM of their own accord in the period from May to June of this year. However, since the number of participants is large, this only slightly reduces the significance of the report.

Around 2000 start-ups with a good 4800 founders and 35000 employees took part. A start-up is a company that is less than 10 years old and highly innovative in terms of technology, business model or product/service and that plans to grow employees or sales.

The start-up hotspots

The DSM shows the hotspots for start-ups in Germany. Of course, Berlin is doing well, but at least in the context of this report, North Rhine-Westphalia is ahead (17.1 percent compared to 18.5 percent of the start-ups that took part). This is followed by Baden-Württemberg, Bavaria and Lower Saxony.

This shows that the efforts of the federal states in Germany to ensure more start-up activities are paying off. For example, the Technical University of Aalen or the University of Münster are named in the top ten universities that are of interest to founders.

As already shown in the DSM of the past few years, the eastern federal states are underrepresented. This is regrettable, as there have been increased efforts in recent years to become more attractive to founders. It remains to be seen whether the major projects by Tesla and Intel, for example, will increase start-up activities in these federal states.

Start-up Monitor: Interest in sustainable topics is increasing

While technical, financial and HR issues have dominated in recent years, the focus is now shifting. One of the most frequently mentioned demands on politicians is the promotion of entrepreneurial innovations to combat climate change.

And the strategies of the participating start-ups also point in this direction. Because although profitability dominates, eight out of ten start-ups say that it is important for them to have a positive social or ecological impact.

In addition, more than half of the start-ups that took part see a compatibility of ecological or social impact with profitability (63.4 percent), rapid growth (61.2 percent) or high market shares (60.4 percent).

Lack of employees

The start-ups see one of the biggest challenges in recruiting employees. According to the DSM, it shows that the participating companies think internationally when it comes to finding employees. On the other hand, they see problems when it comes to visas for foreign employees, for example.

And one of the greatest challenges, and at the same time one of the most urgent wishes of politicians, are usable employee participation opportunities. Start-ups obviously understand better than established companies that the retention of employees in a company works better when these employees are involved in a company and the company becomes “theirs”.

They see strength in this bond. However, there are no suitable models to create this bond in a way that takes into account the needs of the start-ups as well as the employees and any investors.

Germany could play an exciting role here with the introduction of a well thought-out employee participation model, because sooner or later such a model would certainly also be adopted by established companies. The start-ups could thus play a pioneering role in employee participation.

Start-up Monitor: The old song of oppressive bureaucracy

The DSM draws attention again to a nuisance that has been keeping founders busy for years and which unfortunately – again – is not being addressed by politicians, namely the bureaucratic hurdles that start-ups in Germany are exposed to.

40 percent of the participating start-ups say that administrative services need to be simplified. Fortunately, there are more and more digital offers in this area, but Germany is still poorly positioned in this area.

It starts with having different contacts instead of a “one-stop system” when founding a company, the time-consuming founding procedures involving the involvement of a notary instead of using an online form, or the complicated procedures for applying for subsidies or participating in public tenders.

A fundamentally positive view of the future

Although the DSM shows many construction sites with regard to the start-up landscape in Germany, there are also many positive approaches. On the one hand, it should be mentioned that around two third parties of the participants of the DSM rate their regional start-up ecosystem as good. Berlin and Munich are particularly outstanding with values ​​of 83 percent and 77 percent.

The proximity to universities, the exchange with other founders and cultural activities are mentioned as important for the evaluation of a good ecosystem. This shows that networking and exchange among each other is important, but also that the general attractiveness of a location for founders plays a role.

States and municipalities are therefore well advised not only to rely on subsidies and business incubators, but also to keep an eye on living conditions. Because these ultimately decide whether founders feel comfortable in a city or a federal state or whether they orientate themselves spatially elsewhere.

On the other hand, founders are positive about the future, especially when it comes to business expectations. Around 72 percent of the participants assess the future business situation as positive and at least another quarter as stable. This could be due to the fact that start-ups are naturally more likely to recognize opportunities and are more likely to derive positive consequences for their business from them.

Conclusion: 10th German Start-up Monitor

As always, the DSM offers exciting insights into the cosmos of start-ups in Germany. One can only congratulate the Bundesverband Deutscher Startups (Federal Association of German Startups) for being able to use this report to provide factual support for the long-standing demands of young companies with regard to better framework conditions for participation models, to attract foreign specialists or to remove unspeakable bureaucratic hurdles.

It remains to be hoped that the framework conditions will finally be improved. Germany as a business location would benefit from this – and not just for start-ups, but also for established companies. Federal Minister of Finance Christian Lindner has indicated that he understands the concerns and challenges of founders and start-ups and takes them seriously. Action should now follow in the form of better framework conditions.

Also interesting: