Et is an unusual situation for the German start-up scene. For years things only went uphill for the founders. Money was cheap because of the low interest rates, and investors willingly pumped billions into the market. With interest rates rising, that’s over. Added to this is the subdued consumer mood due to the high inflation rates. Many startups have problems getting fresh capital, some have already had to lay off employees on a large scale. Not particularly easy times for young companies. How well can the German start-up sector navigate through the crisis?
The tenth German start-up monitor comes to the conclusion that German start-ups are robust despite the uncertainties. According to the study, the nearly 2,000 start-ups surveyed planned an average of nine new hires. The Federal Association of German Startups and the management consultants from PwC create the report once a year in cooperation with the University of Duisburg-Essen to analyze the situation in the industry. The planned new hires made it clear that “young companies also want to grow under the current conditions,” according to the authors of the study.
At the same time he does it skills shortage It is difficult for the start-ups to actually fill the vacancies. Finding suitable staff is described by 35 percent of the founders as a key challenge. In the previous year it was just under 27 percent. The lack of staff hits larger start-ups even harder: in companies with more than 50 employees, almost two-thirds complain about problems recruiting staff. Incidentally, the high need for personnel should not be due to the fact that the bosses work too little. On average, the founders work 55 hours a week, seven of which are at the weekend.
Issue of employee participation
As a measure against the shortage of skilled workers, the start-up association calls for more attractive regulations for employee participation. Employees receive shares in the company and share in the profits. “Employee participation is crucial for startups to attract top talent,” says Franziska Teubert, Managing Director of the startup association. The German regulations are not internationally competitive and need to be simplified.
The founders seem to be most likely to trust the Greens with political solutions. 50 percent of respondents would vote for the party. The FDP, as the second strongest force, only comes to just under 26 percent and thus loses five percentage points compared to the previous year.
Even beyond the tiresome debate about employee participation, the mood is bad. The business climate in the German startup scene fell by 10 points from 52.2 to 42.2 compared to the previous year. However, this is still a higher value than was measured at the beginning of the corona crisis. The business climate there was only 31.8.
But when looking to the future, the start-ups are much more pessimistic. In 2021, 72.1 percent of the companies still assumed that business would develop positively, in 2022 it was only 54.2 percent. This value is even below the forecast during the crisis year 2020.
Extensive capital requirements
One reason for this may be that 68 percent of the companies surveyed will need fresh capital from external investors in the next twelve months – an average of 3.1 million euros. 43.8 percent of start-ups complain about funding bottlenecks. Many founders are currently still benefiting from the glut of money last year, when investors’ money was still loose. How resilient the start-ups actually are will probably only become apparent in the spring of 2023.
The survey also shows that venture capital in particular has become a rare commodity. For example, 44 percent of start-ups would like to be financed through venture capital – but this is actually the case for just under 19 percent. Instead, three out of four start-ups use their own savings, although only around 29 percent actually want to.
Fresh money from investors would actually be urgently needed in order to expand abroad. German start-ups generate almost 80 percent of their sales on their home market, more than 12 percent in Europe. That leaves just eight percent for the rest of the world. “When it comes to internationalization, German start-ups still have enormous growth potential,” says Christoph Stresing, managing director of the start-up association.
Startups are declining
The number of start-ups has already declined significantly this year. In the first half of 2022, for the first time since 2019, fewer people founded a start-up than in the previous half-year. The German commercial register 2022 registered 1508 new companies from January to June. In the second half of 2021, there were 1,618 start-ups. This corresponds to a decrease of seven percent.
At least the sector has made progress in terms of the proportion of female founders. One in five start-ups is now founded by a woman. Compared to the previous year, this is an increase of more than two percentage points – after all.