The economic downturn in Germany is affecting start-ups: the mood among young entrepreneurs is currently more subdued than it has been since the first Corona year in 2020.

The business climate index collected annually by the German Startups Association fell by 14.1 to 38.1 points compared to the previous year. Only 15.4 percent rate the current willingness to invest among venture capitalists and benevolent investors (“business angels”) positively. The start-up association published the report on the Munich trade fair Bits

Reliant on external donors

External investors are particularly important for start-ups because the majority of young companies do not make any profits. Almost 70 percent of the 1,825 companies surveyed from May to July reported that they will need financing in the next 12 months. A good quarter of these require larger sums of two million euros or more. According to Start-up Monitor, in the very large financing rounds with investments of over 100 million euros, the money comes from the USA in almost half of the cases (46.1 percent).

“A look at the start-up landscape in Germany shows that the current situation is also a burden for young growth companies,” said Franziska Teubert, managing director of the start-up association. Start-ups remain an “irreplaceable engine of innovation” for the German economy. At the same time, the majority remains optimistic: 56.8 percent of the companies surveyed expect the business situation to develop well.

Berlin is the most popular city for founders

From a regional perspective, the long-standing imbalance remains: The vast majority of German start-ups are founded in a few federal states: The most popular city for founders is still Berlin, with a share of over a fifth, followed by Munich (7.2 percent and Hamburg (6.6 percent).

Looking at the federal states, almost 85 percent of all start-ups are founded in just six countries: Berlin, Bavaria, North Rhine-Westphalia, Baden-Württemberg, Hesse, Hamburg and Lower Saxony. In addition to the association, the management consultancy PWC and the economist Tobias Kollmann from the University of Duisburg-Essen were also involved in the monitor. The start-up association surveyed 1,825 companies with 31,925 employees from May 17 to July 20. Among other things, questions were asked about assessments of the business situation and financing situation, business areas and locations.