Economic downturn hitting start-ups, German Startup Monitor finds

The number of German start-ups' employees fell from 18.9 to 16.7 per cent in 2024 despite continuous growth in recent years. The  proportion of female founders dropped from 20.7 to 18.8 per cent this year. More than half (50.7 per cent) of respondents said a negative funding situation as impacting their strategic focus. Most founders (73.8 per cent) cited  profitability rather than rapid growth as their main goal at present and more and more sales (74.7 per cent) are being generated (2023: 70.4 per cent). "Today's motto is 'solve real problems and increase productivity'. German start-ups have internalised this and are focusing on profitability, growth, AI, spin-offs and deep tech, which are shaping and changing the start-up ecosystem," said Verena Pausder, CEO of the Startup Association.

Despite economic challenges, almost half (48.1 per cent) of the start-ups surveyed are committed to environmental sustainability and see themselves as part of the green economy. Many of the start-ups surveyed rely on artificial intelligence and one in five start-ups (22 per cent) see this future technology as their core product. Some 11.4 per cent now count as deep tech companies. "Thanks to our world-class research, founders are opening up exciting business areas for German economy, e.g., nuclear fusion and quantum computing," said Sebastian Pollok, Deputy Chairman of the German Startup Association.

Deep-tech start-ups frequently bring the latest scientific findings and technologies to the market which requires collaboration with universities or research institutions (2024: 55.1 per cent; 2023: 49.2 per cent), which four out of five founders (80.5 per cent) rate positively. Established companies can also be important R&D partners and for sales. Around 61.9 per cent of the start-ups surveyed undertake such projects, but fewer and fewer are seizing such opportunities In 2020, the proportion was 71.8 per cent and only 37.5 per cent found the opportunities for co-operation "good". "Collaboration with start-ups, corporate investments or acquisitions are the most important ways for companies to be innovative - but unfortunately not all companies in Germany have recognised this yet," Pausder noted.

Around 74.1 per cent of the start-ups surveyed compared to 69.5 per cent in 2023 intend to raise external capital in the coming months. However, the amount of capital requested has  increased from 58.7 per cent in 2023 who needed EUR 500,000 to 69.9 per cent in 2024. However, only 29.8 per cent of respondents rate access to capital and investments positively down from 37.2 per cent in 2022 and 33 per cent last year. Yet, 19.2 per cent of start-ups would set up their company again without capital from external investors and  83.8 per cent of respondents would found a start-up again.
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