Navigation

Internal hyperlinks for navigation

Topic - Funding of SMEs

Start-ups: a driving force for growth and competition

Introduction

Start-ups form the basis for economic growth. New business models not only modernise the economic structure, they also create new jobs.

In Germany, some 390,000 entrepreneurs take the plunge into self-employment each year. Start-ups are of vast significance for the economy: not only do they create new jobs, they also foster competitiveness and innovation in a Social Market Economy.

Creating jobs:

Setting up a business has a positive impact on employment. New start-ups benefit the labour market and create jobs. In 2015, start-ups created some 610,000 new full-time jobs.
Promoting competition and structural change:
New start-ups increase the number of players competing on the market. Young companies not only challenge existing companies with new products and processes, but also stimulate competition. So start-ups are a driving force for structural change in the economy.

Producing innovations:

Entrepreneurs turn innovative ideas into reality, thus promoting progress, growth and competitiveness. With their new products and services, innovative start-ups safeguard a large number of sustainable jobs. Around 16% of entrepreneurs introduce an innovation onto the regional, German, or world markets. One start-up in five is “digital”, i.e. digitalisation or the use of digital technologies plays a crucial role in the realisation of the business concept.

Promoting liberty, diversity and stability in society:

Independent companies play a role in strengthening our democracy and our social fabric. Economic responsibility is spread across many shoulders, a concentration of power is prevented, and entrepreneurial freedom is fostered. The start-up scene is highly diverse. People of foreign origin are playing an increasingly prominent role.

Targeting the development of female entrepreneurs:

43% of all new businesses are founded by women; women account for 46.1% of gainfully active persons aged between 15 and 64 (microcensus). Positive developments can particularly be seen in side-line businesses. In the case of full-time start-ups, women account for 39% of new businesses. Targeted measures can further leverage the potential here, particularly with regard to innovative start-ups.

Four figures on start-ups

34%
Symbolicon für Menschen

percent of people starting out in business
in Germany are between 25 and 34 years old

69
Symbolicon für Besprechung

percent of all start-ups
take place in the services sector

16
Symbolicon für Glühbirne

percent of people starting up in business bring new innovations on to the market

43
Symbolicon für Frau

percent of all people starting up in business (full-time/side-line) are female

A New Age for Entrepreneurship

Strengthening the spirit of entrepreneurship in Germany

The Economic Affairs Ministry’s “New Age for Entrepreneurship” initiative is strengthening the spirit of entrepreneurship in Germany and supporting people starting up their own business.

If our economic growth is to remain strong and dynamic, we need more entrepreneurs who develop new markets and create lasting jobs. The Economic Affairs Ministry’s “New Age for Entrepreneurship” initiative aims to strengthen the spirit of entrepreneurship and to boost the number of start-ups in Germany, by making it more attractive for people to start up their own business. The initiative offers a wide range of measures, financing possibilities and support for young entrepreneurs.

A lot has already been done to breathe life into the new age for entrepreneurship: In the “WOMEN Entrepreneurs” initiative (website in German) some 180 role-model female entrepreneurs are encouraging girls and women to start out in business. The EXIST funding for start-up teams from higher education institutions has been substantially improved. The Act to Reduce Bureaucracy relieves start-ups of red tape, and particularly of reporting requirements for various economic statistics.

The spirit of entrepreneurship and entrepreneurial thinking starts in the classroom. The “Entrepreneurial Spirit in Schools” initiative gives pupils some initial practical experience in exciting business projects and lets them take responsibility in their own student companies.

The “INVEST – Grant for Venture Capital” for business angels investing private capital in innovative young start-up is already tax-exempt, and is being further improved. This is making the programme much more attractive, and will boost the supply of capital to young companies.

The “Deutsche Börse Venture Network”, which was launched at the initiative of the Economic Affairs Ministry, is also intended to improve this situation. It brings together young, fast-growing companies and international investors to ensure effective financing of growth and the establishment of a comprehensive network. The programme consists of a non-public online platform for the initiation of rounds of financing and offers various training and networking events.

Advice for Start-ups

Planning a successful start-up

The route to self-employment consists of many different steps that have to be taken. For this reason, the German government helps entrepreneurs as they set up in business. Information and careful planning are the foundation for a successful start as a new business.

It is always difficult to get started. This is also true of people setting up in business. Many questions need to be answered and decisions prepared: How do I make a business plan? How can I make a reality of my business idea? And where can I get hold of my initial capital?

These are important questions which must be clarified in advance if the new business is to succeed. The Economic Affairs Ministry’s start-up website www.existenzgruender.de offers a host of information, e-training courses, checklists and overviews, as well as listing people to talk to about starting out in business.

There is a wide-ranging network of support services, initiatives and advisory services for entrepreneurs, such as:

  • chambers of industry and commerce (Industrie- und Handelskammern – IHK) and chambers of skilled crafts (Handwerkkammern – HWK)
  • local or regional agencies or business promotion companies
  • innovation, technology and business-incubation centres
  • employment agencies
  • professors of entrepreneurship / entrepreneur networks
  • start-up trade fairs
  • nation-wide, regional and local start-up initiatives and
  • business-plan competitions

Start-up Financing

A successful start-up needs sound and sufficient finance. In addition to the available equity, many entrepreneurs need external sources of funding. They need to invest in real estate, equipment, machinery and often in people. The business plan must also include the cost of the entrepreneur’s own living expenses. So entrepreneurs need to sort out the financing at an early stage so that their promising ideas can become successful businesses.

The following programmes in particular are available to help with finance:

  • ERP Start-up Loan
  • ERP Capital for Start-Ups
  • Guarantees
  • “Business start-ups in science” programme (EXIST)
  • High-Tech Start-Up Fund
  • INVEST – Grant for Venture Capital
  • German Micro-Mezzanine Fund

Financing growth

Small and medium-sized companies (SMEs) make a key contribution to economic growth, innovation, and employment. However, new companies face particular challenges as they plan and implement their projects: novel projects need detailed preparation and advice; investment and operating funds need to be financed; securities need to be lodged for external capital.

In this situation, funding programmes offered by the Federal and Länder governments help companies to cope and to implement promising projects. A key role here is played by public financial support, and also by information and advisory services.

“Young Digital Economy” Advisory Board

The “Young Digital Economy” Advisory Board gives the Federal Minister for Economic Affairs and Energy first-hand advice on current issues of the information and communication industry, and particularly on the development and potential of the young digital economy, on new digital technologies, and on how to provide start-ups with a better environment in which to grow. In view of the dynamic nature of the digital economy, it is flexible and open and offers the German start-up scene a direct and practical dialogue with policy-makers.

Hand-over of Businesses to the Next Generation

Making the hand-over work

Successful hand-overs of companies not only safeguard jobs, but also keep expertise in Germany. To encourage business people to start working at an early stage on the question of handing the company on to the next generation, the Economic Affairs Ministry has launched the “nexxt” initiative.

In Germany, an average of 27,000 companies a year need to find someone to take them over. In this transitional period, approximately 400,000 jobs are at risk due to the forthcoming hand-overs. For this reason, the Economic Affairs Ministry wants to make entrepreneurs and potential successors even more aware of the issue.

According to the successors, more than 80% of the family-owned companies handed over in recent years prepared the transfer well. But more than a third of the owners had difficulties finding a suitable successor. Demographic change and the skills shortage were factors here, as were the prospects for potential successors. This means that it is particularly important for company owners to sort out the hand-over at an early stage, so that traditional family businesses can continue to thrive in Germany with their jobs and their expertise.

nexxt business succession initiative

Back in the year 2000, the Economic Affairs Ministry started to address the issue of company hand-overs, and launched the “nexxt” initiative in order to raise awareness of the issue amongst entrepreneurs. The “nexxt-change” match-making site (in German) is at the heart of the initiative: people seeking a successor can make contact with people seeking a company via the free online exchange. Nationwide, more than 800 regional partners – chambers, savings banks and credit unions – work to assist both owners and potential successors of companies placing the advertisements.

Further information

Wall with post-its from an Start-Up; Quelle: Getty Images/Kelvin Murray