As of: February 16, 2024, 9:35 a.m
By: Lisa Mayerhofer
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German start-ups are finding it increasingly difficult to get money.
Experts expect further job losses in the industry.
Verena Pausder, CEO of the startup association, calls for a rethink in Germany.
Frankfurt/Main – The financing crisis among German start-ups has worsened significantly.
Young companies raised six billion euros in venture capital in 2023, 39 percent less than in the previous year (9.9 billion euros), shows a study published on Tuesday by the auditing and consulting company EY.
However, Verena Pausder
,
CEO of the startup association, is optimistic and calls for more pride in successful German entrepreneurship.
“I would like to celebrate world market leaders in the same way as when we become football world champions”
Pausder said in an interview with
ntv
that she would like to be more proud of successful German companies : “I would like to celebrate world market leaders just like when we become football or basketball world champions.
If we develop an innovation here that the whole world is talking about, then Germany will once again be the talk of town and then Made in Germany will not be a narrative of the past.”
Verena Pausder is the new chairwoman of the startup association.
© Marijan Murat/dpa
But things are looking rather bleak at the moment: 2023 was the second year in a row with a sharp decline.
Compared to the record year of 2021, investments shrank by almost two thirds (65 percent) - back then, investors had invested 17.4 billion euros in start-ups.
Startup association speaks of an “alarm signal”
EY partner Thomas Prüver pointed to high inflation, increased interest rates, the weak economy and uncertainty due to wars.
“In order to obtain fresh capital even in these difficult times, good ideas alone are no longer enough for start-ups.” What is needed are solid business models and the prospect of profitability.
The tough times for start-ups are also reflected in the financing rounds.
According to EY, their number fell by 15 percent in 2023 compared to the previous year to 861 deals.
In addition, there were only eight large deals worth more than 100 million euros - in 2022 there were 19. Overall, investments fell back to around the pre-Corona level of 2019.
The startup association spoke of an “alarm signal, especially with the lack of mega deals.”
Start-ups: Will the boom fizzle out after the corona pandemic?
Start-ups rely on investors because they focus on growth before making profits.
Large funds and corporations invest in young companies with venture capital in the hope that their ideas will prevail.
Start-ups experienced a boom during the corona pandemic.
They benefited from the fact that interest rates were low and digitalization received a boost - for example in financial transactions, online shopping or food deliveries.
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But with the rise in interest rates, the crisis followed: many start-ups cut jobs, others like the Gorillas delivery service were taken over.
The number of start-ups also went downhill: according to the startup association, almost 2,500 companies were created in 2023, five percent fewer than in the previous year.
EY partner Prüver expects job losses in the industry to continue.
Start-ups would also have to make significant savings in 2024.
“This also and especially affects personnel costs.”
In addition, Germany lags behind other countries when it comes to venture capital.
In this country, 85 euros per capita is invested in venture capital, in Great Britain it is 171 euros, said Pausder.
The gap to the tech nation USA is even greater.
For large financing rounds, local start-ups usually rely on Anglo-Saxon investors.
And US investors in particular have recently been holding back on commitments in Europe, reported the venture capitalist Atomico - which is affecting start-ups in Germany.
Outlook for the future: “I think that was the bottom”
After all: Despite the Corona boom, Germany as a start-up location has made great progress.
The number of start-ups valued at billions has increased almost fivefold to 33 since 2018, according to the startup association.
These include the online bank N26, the translation service DeepL and the long-distance bus and train operator Flix.
EY expert Prüver therefore remains optimistic.
“Exaggerations from the boom years are now behind us; investors and founders have become more cautious and realistic.” There is some evidence to suggest that financing has bottomed out.
“The start-ups that are emerging today, growing and receiving fresh money have already passed the first test and proven themselves to be resilient.”
As CEO of the startup association, Pausder sees it similarly to
ntv
: “I think that was the bottom.
Now it's more about how we can ensure that the successful German start-ups remain German or European and not just receive money from outside Europe in order to continue to grow." She suggests that in Germany they should focus more on immigration and digitalization and should therefore reduce bureaucracy.
With material from dpa