The start-up business climate continues to cool, the investment climate is difficult and there is reluctance on the subject of venture capital. But there is also good news: After the number of startups dropped significantly in 2022, more new startups emerged again in the first half of 2023. And the founders are relatively unimpressed by the difficult situation: Nine out of ten say they want to start up again – 83 percent of them here in Germany. This is why start-up support networks like the Startup Port are so important.
With almost 2,000 respondents, the German Startup Monitor (DSM) by the Startup Association and PwC Germany is the most comprehensive study on the startup landscape in Germany. Last year, the topic “Startups and Innovation in Uncertain Times” was examined: Many of the challenges remain or have even worsened: weak economy, inflation, interest rate turnaround and cautious investment. Financing has stabilised, but is below the levels of 2022 and 2021. Between inflation, the turnaround in interest rates and the economic slump, the mood among German founders continues to cool – the business climate is only just above the previous low point in Corona year 2020.
In addition to the business situation, the general assessment of the start-up ecosystem has also clouded over and, with 58 percent positive assessments, is ten percentage points below the previous year’s value. This leads to the conclusion: The innovation ecosystem in Germany is currently under pressure – but the German Startup Monitor 2023 also shows that the founders in this country are facing these challenges and taking new paths. The vast majority of startups remain on course for growth, pursue ambitious goals and face the current challenges. This determination and the growing confidence of founders to take the step into self-employment again – especially in Germany – underline the importance of platforms like Startup Port. With centralised access to start-up support units, Startup Port offers not only essential resources but also a strong network to back founders in the Hamburg metropolitan region. In an uncertain climate, Startup Port is a crucial anchor point that offers stability, trust and support. In view of the transformation process the entire German economy is undergoing, this is good news, because startups make an important contribution here.
Founders adapt growth strategy
Since the record financing year of 2021, raising capital has become more difficult for start-ups – in view of the new financing environment, only 15 percent of founders currently rate the investment readiness of VCs and business angels positively. In addition, many are adapting their strategy: While 44 percent of start-ups still preferred venture capital financing in their planning last year, this figure has dropped significantly to just over one-third. At the same time, the issue of liquidity is coming back into focus and is currently a key challenge for around a third, compared to a quarter in the previous year. This primarily affects the faster-growing start-ups, as larger financing rounds are becoming more difficult.
Start-ups assert themselves as an economic factor
Despite the many challenges, however, there can be no talk of a slump in the development of the start-up ecosystem: The average number of employees in German startups remains stable at 19. Although 15 per cent of startups had to make redundancies within the last year, the vast majority (56 per cent) were able to continue hiring and create an average of eight new jobs during the same period. There is no frustration among the founders either – nine out of ten would found a start-up again and the vast majority of them in Germany (83 percent). This proves the general assessment that times of crisis are also times of start-ups.
Unleashing development potential through more women founders
After steady growth in the share of women founders in previous years, the figure hardly changed this year and stands at 21 percent. Especially in difficult times, progress in diversity seems to fall by the wayside. In the competition for scarcer resources, networks can play an important role, which threatens to increase entry barriers for women. Yet it is especially important now to attract as much talent as possible, and thus significantly more women, to the innovation ecosystem. Because the diversity effect is intensifying in the company: For example, the proportion of female employees (44 per cent) and managers (40 per cent) in mixed founding teams is significantly higher than in all-male founding teams (29 per cent and 14 per cent respectively).
Universities and research institutions as innovation drivers
Universities and research institutions are elementary for many start-ups: at 49 percent, every second start-up states that it has already received support in this context. The main focus is on providing contacts and business know-how as well as support from individuals such as professors. Universities and research institutions play a central role for the start-up ecosystem, especially with regard to competitiveness in innovative technologies. The development in the area of artificial intelligence is particularly noteworthy here: the share of startups for which AI has a major influence on their business model has once again increased significantly compared to the previous year, from 45 percent to 52 percent.
Further findings from the German Startup Monitor
- The share of startups with cooperative relationships with the established economy continues to decline: in 2020, it was 72 percent, today only 61 percent.
- 82 percent of startups use tools such as ChatGPT – generative AI is used frequently, especially in marketing (64 percent).
- 47 percent of startups see themselves as part of the green economy and want to contribute to climate and environmental protection, 42 percent more than in 2018.
- On average, founders have seven other founders in their circle of friends, and the networks are even stronger in the hotspots Berlin (12) and Munich (11).
- The number of German Unicorns has more than quadrupled since 2018 to 33 – but in an international comparison, we are still significantly behind locations such as the USA or Israel per capita.
- The hotspot Berlin has been hit harder by the current turbulence and financing bottlenecks: here, 24 per cent of start-ups had to make redundancies last year, compared to a national average of only 15 per cent.
- RWTH Aachen, TU Munich and WHU are the top 3 start-up universities – 13 percent of the surveyed founders graduated here.
The detailed German Startup Monitor 2023 can be found here.
About the Startup Association:
The Startup-Verband has almost 1,200 members and was founded in Berlin in September 2012. The association sees itself as the representative and voice of startups in Germany: It represents the interests, viewpoints and concerns of startups vis-à-vis legislation, administration and the public. It promotes innovative entrepreneurship and wants to bring the startup mentality into society. The association sees itself as a network of start-ups in Germany.