Bootstrap Germany

Over the past decade, Germany has turned itself into a hot destination for international start-up investors. Berlin is particularly attractive to innovative, young technology companies, while other parts of the country are drawing entrepreneurs in the green energy and solutions sectors. Lower rents and salaries are undercutting Silicon Valley.
 

August 2020

Germany’s start-up scene is boom­ing – largely thanks to foreign investment. In 2018, German start-ups raised nearly EUR 5 billion, most of it from overseas. There are solid reasons for this. According to Stefan Franzke, CEO of Berlin Partner, Berlin’s start-up promotion agency, Germany’s extensive industrial expertise and science and research institutions “provide a sound foundation” for investors and “deep experience in Germany’s core industries.”

The founders of the start-up INERATEC © INERATEC

Mobility and green energy sectors

For example, TIER, a micro-mobility start-up based in Berlin, was able to leverage Germany’s reputation for mobility and engineering to attract investment. Having succeeded in renting out electric scooters by the minute in a car-crazy country, the company convinced investors that its business model could work elsewhere. The company recently raised EUR 100 million, 90 percent of which came from outside Germany. “The level of investments and exits has really changed in the last five years,” says TIER spokesman Bodo Braunmuehl. “The scene has become more professional in all aspects.”

Green energy is another coveted sector. INERATEC, based in Karlsruhe in southern Germany, has developed a technology to produce gasoline and jet fuel from CO2 and renewable electricity. As a small, research-based start-up, INERATEC received German Government funding to help commercialize its technology, and now has clients in Finland and Spain. As it has grown, INERATEC’s CEO Philipp Engelkamp says that foreign investors have become more important. “From EUR 500,000 to 5 million, finding investors in Germany is not a problem,” he says. “As soon as you go into the EUR 10 to 50 million range, you have to go international.”

Facts & Figures

Sources: 1) E&Y Start-up-Barometer January 2020; 2) www.gruenderwoche.de/fileadmin/gew/downloads/ueber-gruenderwoche/internationalisierung-von-start-ups.pdf

Understanding the German market

Franzke cautions that foreign investors often stumble when entering the German market because they are unfamiliar with the business culture and legal environment. Berlin Partner runs courses to introduce newcomers to the peculiarities of the German scene, from the paperwork required to hire and fire to the laws concerning funding. “Even if we’re all international, cultural differences are big,” says Franzke.

Regardless, entrepreneurs find it easy to attract talent from around the world to Germany, with its high quality of life, even though salaries are typically lower than in Silicon Valley. “Our team consists of 45 different nations and we are very proud that so many international employees came to Germany to work with us,” says Gunnar Froh, CEO of Hamburg-based mobility software start-up Wunder Mobility. “Investors are always positively surprised at the value they get.”

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