The German startup scene is colorful and diverse, but also a little bit indefinite. After all, there is no central register for startups and even the definition of which companies actually fall into this category is not entirely clear. The best overview of the ecosystem is provided by the Deutsche Startup Monitor, which was created in 2013. We take a closer look at the results of the 2020 edition here.
According to the Deutsche Startup Monitor, startups are companies that are not older than ten years, are engaged in (highly) innovative technologies or business models and have high growth potential. In the survey for the 2020 edition, 1,946 startups took part, bringing together a total of 4,745 founders and 25,966 employees. The selection is not representative in the strict sense because nobody knows the total number of startups in Germany and their structure, but the high number of cases allows for a lot of of meaningful results. The survey was initiated by the Bundesverband Deutsche Startups with the support of PwC Germany.
Berlin is Germany’s international startup metropolis
19.1 % of the companies surveyed are based in North Rhine-Westphalia, followed by Berlin with 17.7 %. This does not necessarily mean that almost one-fifth of all German startups actually come from the capital. The scene there is particularly active and well-connected and therefore tends to be overrepresented in the survey. But Berlin undoubtedly deserves its status as a startup metropolis of international standing. This is also reflected in another result: almost 43 % of the employees in startups there are not from Germany, and English is the predominant working language in more than 60 % of the teams. No other federal state can boast such figures; on average, the proportion of foreign employees is a good 26 %.
On another issue, diversity is far from being the case. The proportion of female founders is only just under 16 %, a figure that has hardly changed in recent years. This is particularly sobering because the overall proportion of women starting businesses in general is as high as 36 %. More encouraging is the role that startups are increasingly playing in the labor market. The average number of employees is rising continuously and this year stands at 14.3. 90 % of the startups are planning to hire an average of six new employees in the coming 12 months despite the corona crisis.
Trending: artificial intelligence and sustainability
By far the largest startup sector is concerned with information and communication technologies. Almost one third of all the young companies recorded are to be found here. The categories of nutrition/food and consumer goods as well as medicine and health care goods follow with around 10 % each. The most common business model is Software-as-a-Service with almost 27 %, followed by platforms with almost 18 %. On the technological side, artificial intelligence (AI) is becoming increasingly important. Around 43% of those surveyed stated that AI has a great or very great influence on their business model. The figure for blockchain is only around 8 %. Another trend topic is sustainability. 43 % of the startups from the Monitor can be assigned to the Green Economy.
One of the hot topics for startups is financing. In the beginning, mainly one’s own savings and money from family and friends flow into the company. After all, 63% have already been able to raise external capital, primarily from business angels and from state subsidies. Venture capital (VC) is particularly sought after, but here there is still a big gap between wish and reality. 42 % want it, only 19 % have actually received it nationwide, but things are looking better in the big cities: In Berlin the VC share is 39 %, in Munich 29 % and in Hamburg 22 %. At the same time, the desire for an exit and the self-declared willingness to take risks are increasing.
How Corona influences the startup world
There is one topic that the Deutsche Startup Monitor 2020 cannot avoid: Corona. The pandemic, which is also an economic crisis, affects 74 % of the startups surveyed. The current development has on the other hand had a positive impact on the business development of 13 % of the companies. The areas of education and finance have the fewest problems, and as expected the outlook is bleak in the media and creative industries and in tourism. In terms of business models, online trade and networks are proving to be particularly robust. Despite the need to drive forward the much-cited digitization in all areas, software products are still rather restrained. Many potential customers are struggling with the crisis themselves.
Startups have used the crisis period primarily to further develop their products (56 %) and to adapt their business model (36 %). 50 % had to postpone planned investments, but only just over 11 % have reduced staff. Financial support was mainly provided by the state’s Corona emergency aid (36 %) and short-time work compensation (22 %). It remains to be noted that the results of the study were published in September 2020 and the survey was already completed by the end of June. The effects of the current second corona wave can therefore not yet be estimated at all. If you want to know more about the Deutsche Startup Monitor, you can download the entire study here.
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