German Startup Monitor Records Continued Business Confidence

Positive trend despite noticeable “Corona effect”

Business confidence in Germany’s start-up landscape continues to improve and is back to 2019 pre-crisis levels according to the German Startup Monitor 2021. The annual report, published by PwC in partnership with Bundesverband Deutsche Startups (“German Start-ups Association”), finds that a “corona effect” is still being felt, with 51.2 percent of companies surveyed indicating that the pandemic continues to affect their activities. However, this is markedly below the 74.2 percent of respondents reported in the 2020 study.

Increased diversity and jobs

The share of female founders increased to 17.7 percent this year, compared to just under 16 percent in 2020. Average workforce size grew to 17.6 persons per company compared to 14.3 persons per company in 2020. International staff levels increased by 1.4 percent, with the cities of Berlin and Munich being hotspots of international activity. More than 90 percent of companies surveyed plan to recruit new staff – at an average rate of 8.7 employees per company – within the next 12 months.

Strengthened start-up ecosystem

German’s universities and research institutions continue to strengthen the domestic start-up ecosystem, with one in four start-ups and more than a third of founder teams being university spin-offs. The European Startup Monitor also reports that companies are marginally more receptive in their perceptions of the domestic start-up landscape, with a 3.7 percent increase in positivity levels.

Digitalization and government support driving maturity and confidence

Digitalization measures introduced to counter the Covid-19 crisis have contributed to increased maturity in Germany’s start-up scene. A raft of protective measures introduced by the German government in 2020, including EUR 2 billion in funding to support start-ups, have helped counter the worst potential effects of the coronavirus crisis. The “future fund” for start-ups will also help start-ups emerge from the crisis successfully in the medium term. According to Dr. Kim Zietlow, Trend & Innovation Scouting Director at Germany Trade & Invest and responsible for internationalizing the Digital Hub Initiative, there is cautious reason for start-up optimism despite the various challenges facing the sector in the year ahead. “The past year has been dominated by large funding rounds – increasing the number of German unicorns to 21. However, coping with the hangover of corona effects and talent recruitment will pose challenges for most German start-ups in 2022. Having said that, we look positively to the future, with the new government showing signs that start-ups are being taken seriously.”