Start-ups in Germany: You don’t have the courage to take risks to keep up with the world – Economy

Climate crisis, digitization, demographic changes – the next generation is facing serious challenges. Yasmin Olteanu is also unsure where the answers will come from. “The breakthrough innovations we need to find solutions come from startups. You have real levers in your hands, ”says the professor of entrepreneurship at the University of Applied Sciences Berlin. But especially in this country, a risk-averse mentality prevents the startup scene from growing and becoming sustainable – despite the fact that it has so much potential.

A lot has happened in recent years. The corona pandemic in particular has spawned many startups, a study by McKinsey shows. Every year, around 2,900 startups are created in Germany. Last year, Europe managed to produce 100 unicorns – this is the name of startups whose value exceeds one billion dollars.

Investments also tripled in 2021 from EUR 6.2 billion to EUR 17.2 billion. Certainly also the effect of the expansionary monetary policy of central banks, but also proof of good business ideas.

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A look at the US, however, shows that Germany is still a long way off when it comes to startups, unicorns and funding. Even many startups that even manage to get through the first rounds of financing in Europe later migrate to the US because it is too difficult to raise more capital here. This is shown by a study conducted by the KfW development bank in March last year. The stage is not as big as it should be – and it should be able to compete well on a global scale.

Failure as a stigma

The reason for this is, among others common attitude towards startups in Germany and Europe. “The founders do not have the positive charisma that is celebrated in the USA. Why don’t we highlight inspiring personalities to make it attractive to young people as well? ”Says Karel Dörner. He has been a consultant at McKinsey for 16 years and has participated in several studies on the current startup culture. Startups are often not even public – unless they fail. Lack of success is immediately stigmatized and associated with something bad.

Oscar Höglund, founder of the Swedish unicorn “Epidemic Sound”, advocates breaking this cultural stigma. “We need to replace the word ‘failure’ with the word ‘learning’ and focus more on people who have learned a lot,” he says. “I’d rather hear from people who spent 10,000 hours doing something and didn’t quite achieve what they were going to do than someone who took 10,000 hours to do something and found it a success.”

fear of risk

However, startups don’t just fail because they fear failure. “Germany is probably generally more risk averse,” says Christoph Stresing, Managing Director of the German Startup Association. “The very word” venture capital “has a deterrent effect on many people.” For him it is a mental problem: if you asked the Germans if venture capital and pensions go hand in hand, they would answer no. However, Sweden, for example, shows how different things can be done: local workers contribute part of their pensions to funds. One of these funds, AP7, is also very successful across Europe.

“If private institutional investors such as insurance companies and pension funds only invested a small amount in European venture capital, it would have a big impact on the available venture capital from Europe,” says Stresing.

As Managing Director of the German Startup Association, Christoph Stresing is seeking more funding.Photo: private

Dietmar Hopp himself is the successful founder of the software development company SAP and is considered one of the richest Germans. It also condemns the German way of thinking. “I know a lot of people who left for America early with really good ideas, because they saw no chance of making money here,” he says in an interview with the Sunday newspaper Frankfurter Allgemeine in 2019. people willing to provide venture capital for startups ”.

It is different in the USA. Last year, 41 percent. investments for German startups came from the USA, with financing rounds of EUR 100 million and more, it was even 54 percent. A mistake, according to Stresing from the Startup Association. “Startups are becoming the economic power of the future. We have not yet fully recognized their potential, he says. This can become a problem in the long run.

Foreign capital harms the national economy

Currently, the state supports start-ups in the first stage of their creation. For consultant Dörner, this relationship is initially not a problem: “Foreign money is better than no money,” he says. Capital allows the company to develop, create jobs and become a global player. However, it would hurt the economy in the long run if actual growth were to take place outside Europe.

Stressing explains it with an example: In Canada, there is a teacher pension fund, the Ontario Teacher’s Pension Plan. It is a partner of European venture capital funds, which in turn invest in German technology companies. The returns from these companies eventually go back to the pension fund and thus pay pensions to Canadian teachers – successfully German companies.

Donning must become an option

To regain sovereignty over our own innovations and not to be left behind, we must be active in all areas, says Dörner. “And, above all, faster implementation.” There is a clear need for action at the political level, but most of all the consultant and founder of the two companies sees it as a task for society as a whole. “My children are not going to be founders because there is a new law in this regard,” says Dörner.

Rather, it is about showing people how startups can have a positive impact on welfare and what they can do for society. The best example is the company BioNTech from Mainz. After the gigantic growth, the city received commercial tax payments of 1.09 billion euros from the company. According to the Zeit Online report, the mayor of Mainz wants to pay off his debts and hopes for new jobs.

Other European startups have also established themselves in the global market: Swedish streaming service Spotify has long become a unicorn, as have the German delivery service Hello Fresh and the Swedish payment system Klarna.

Karel Dörner has already founded two companies himself.Photo: private

To become such a successful company, he needs this start-up capital, explains the consultant Dörner. So that startups can develop quickly and be successful. Because that’s the only way they can get to the point where they can finally make money and something returns to society. In a 2021 study, consulting firm Roland Berger examined how start-ups and scale-ups can strengthen the German labor market. He estimates that by 2030, four million jobs could be created in Germany – thanks to startups alone.

One way to change the attitude towards startups is through education. The reasons must already be considered in schools as an option for the future, says Dörner. Just like in universities. “When it comes to scientific publications, we are absolutely on par with the US. The quality is there, ”he says. Rather, turning your content into a business would be a hindrance. – As a result, we are wasting the potential that results from our outstanding research – agrees the managing director of the startup association.

Europe should go its own way

In particular, universities could come together to form thematic clusters to work on an interdisciplinary basis. This would create a variety that could constitute a “European way,” suggests Dörner. “We have so many ecosystems that represent different themes that we should use. A diverse environment also leads to greater innovation. ” These themes are characterized by the fact that they often concern not only the “symbol of the next monetary status”, but also sustainable solutions.

This is also confirmed by Olteanu, which, apart from the profession, also contributed to the creation of the Green Startup Monitor 2022. It is said that almost a third of all startups are green. He believes that high market value, as may appear to be good for the national economy, is not necessarily good for society. “We have to ask ourselves what we really want,” he says.

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That is why “transformation-oriented startups” are valuable. This applies to start-ups that want to contribute to a more sustainable development of society and the economy. And at the same time be successful in the mass market.

So is the sunny startup Enpal. In October 2021, it became the first green unicorn in Germany. “Many founders in Europe want to make a difference, not just chase money. I like to talk about “capitalism”: a combination of idealism and capitalism, says founder Mario Kohle.

No startups are not an option

A look at the startup scene shows that it’s no longer a question of who has the most unicorns. “We need these startups, otherwise we would not be able to. And if we do not, we are depriving ourselves of our own livelihoods, says Professor Olteanu. “Both from an ecological and a social point of view.”

And from an economic point of view, adds Managing Director Stresing. “By not using our potential sufficiently, we are destroying our own future profitability and we are not using our potential. If we don’t improve here, Germany will be left behind in the medium term, ”he says.
Everyone agrees that we can still do this. So far, however, there has been no courage to change.

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