With 1,825 companies surveyed, the German Startup Monitor is the most comprehensive survey of startup founders in Germany and is published annually by the Startup Association in cooperation with its partner and co-publisher PwC Germany. The first data on the assessment of the business situation and the investment situation are now available.
Despite some challenging developments, the German startup landscape is remarkably robust and adaptable. Although the startup business climate has fallen to its second-lowest level since the pandemic shock in 2020 with a current score of 38.1 points, founders remain optimistic.
Continuation of job growth at start-ups
Particularly impressive is the continued job growth, which has not stalled despite adverse circumstances: the job engine of startups is not sputtering and many companies continue to hire. More than half of German startups created new jobs last year, only 15 percent had to cut jobs. This underlines the resilience of the industry and the confidence of the founders in the long-term prospects: despite a noticeable decline in investments in German startups, the founders are not discouraged. The figures show that the majority of startups are still focused on growth and willing to hire talent. Even in Berlin’s challenging ecosystem, which is more affected due to its financing and industry structure, job cuts are limited at 24 percent.
Overall economic situation is difficult
The currently tense overall economic situation is also reflected in the mood in the startup ecosystem. The startup business climate determined in the German Startup Monitor continues to fall in line with the ifo business climate and is at its second-lowest level since Corona appeared in 2020.
In particular, the changed interest rate environment as well as inflation pose special challenges for many start-ups. Business expectations, i.e. the outlook for the future, have risen slightly, but the bottom line is that the mood is characterised by great uncertainty: 65 percent of all start-ups currently find it difficult to assess future business development.
Uncertainty in the financing sector
A major source of this uncertainty is the financing sector. Investments in German start-ups have recently declined significantly, but are still above the pre-Corona level of 2020. The current negative trend can be explained primarily by the lack of larger financing rounds: Thus, in 2023, there was still no financing round over 250 million euros – in the record year 2021, there were a total of 8, and in 2022, there were still 4. The founders also rate the willingness to invest accordingly – almost half rate this as poor, and only 15 percent rate the current willingness to invest of business angels and VC funds as good.
In view of the great uncertainty and the tense economic situation, the start-ups are adapting their strategies – profitability is currently more important than growth. They are also planning more cautiously: every third startup has – as already mentioned – reduced the number of new hires and adjusted its financing plans. Despite all adversities, however, the job engine startups as a whole has not yet stuttered and many companies continue to hire.
Christian Miele (CEO Startup Association):
“The overall economic situation is not leaving German startups unscathed. In view of a declining business climate and growing uncertainty, we need more focus on future topics in Germany to avert the innovation slump. Start-ups are the companies of the future and can drive the economic turnaround. The Federal Government must give start-up issues more priority. This applies, for example, to the Future Financing Act, which German startups have been waiting for for a long time – it should now be passed quickly.”
The report is available here.
About the report:
This publication is an excerpt from the German Startup Monitor 2023, which will be published for the eleventh time in September 2023. It presents the assessment of the current and future business and investment situation as well as the strategies of the startups surveyed as part of the German Startup Monitor 2023.
With 1,825 companies surveyed, the German Startup Monitor is the most comprehensive startup study in Germany and is published annually by the Startup Association in cooperation with its partner and co-publisher PwC Germany.
About the Startup-Verband
The Startup-Verband sees itself as the voice of startups in Germany: since its founding in 2012, the association has represented the interests of startups vis-à-vis politics, business and the public. In its network, which now has over 1,200 members, the association also aims to create an exchange between startups themselves, but also between startups and the established economy.