‘German startup founders in general are much more extroverted’

New data based on social science tests reveal that Berlin and Munich founders are similar in that they are more open, creative and extroverted than founders elsewhere across the globe. But they have a few differences too.

'German startup founders in general are much more extroverted'
Photo of team members at a startup: Deposit Photos.

In the study by Founder Institute which looked at data from over 100 cities worldwide, Berlin founders ranked fifth in the world for their openness, trailing behind entrepreneurs in Denver (fourth), Rome (third), Tel Aviv (second) and Athens (first).

Based on data collected from founders in Munich and Berlin, the findings also show that German entrepreneurs are generally more open than their counterparts in Silicon Valley, the rest of Europe and across the globe.

READ ALSO: Berlin v. San Francisco: Which is better for startups?

“The more international or more liberal the city, the higher the openness and creativity,” co-founder of the Founder Institute, Jonathan Greechan, told The Local in a phone interview.

But it goes even deeper than that, says Greechan, who describes openness as a “big five personality trait” that involves creativity in addition to people who are “open to new experiences, who challenge norms and are more likely to take risks.”

Image: Founder Institute.

According to Greechan, a strong correlation exists between one's openness and entrepreneurial success.

The idea of developing a social science test that people could take to evaluate whether they have the potential to become strong entrepreneurs or not dates back to 2006. Back then, Greechan started conducting research on the topic with his now co-founder, Adeo Ressi, after having a hard time finding the right people to hire for their startup.

Since the Founder Institute – which describes itself as an idea-stage accelerator and startup launch program – kicked off in 2009, the results of 30,000 people from all over the world who have taken the test have been analyzed, including over 600 entrepreneurs in the capital city of Germany and the capital of Bavaria.

Having collected years of data, the team at the institute have used the results to determine traits they believe make a successful entrepreneur, regardless of one's locale, idea or demographic.

German entrepreneurs are also among the world’s most extroverted, according to the findings. The institute has found that extroverted people generally display high energy, assertiveness, and sociability; in these areas, too, Berlin and Munich founders displayed higher extroversion compared to their counterparts in Silicon Valley and the rest of the world.

“German founders and European founders in general are much more extroverted,” said Greechen.

“Definitely German founders are good at selling and compared to the rest of Europe, they are more hardworking,” he added, emphasizing that conscientiousness is another big five trait they have tested that aims to determine someone’s industriousness and ability to get things done.

Image: Founder Institute.

But one area in which German entrepreneurs fared lower in comparison to founders across the globe was agreeableness, one of the major traits the institute believes makes a good entrepreneur.

Berlin and Munich entrepreneurs showed lower than average agreeableness, a trait the institute says manifests itself in individual behavioural characteristics that are perceived as kind, sympathetic, cooperative, etc.

Greechan warns though that while agreeableness has to do with friendliness,“if you’re more agreeable that’s not generally a good thing; you want to be somewhere in the middle.”

And while Berlin founders have many similarities with Munich founders, they differ from them too.

The data show that entrepreneurs in Berlin are more creative than their Munich counterparts, something which Greechan speculates is because “Berlin is sort of an artsy city.”

But while Berlin founders have also shown they are more hard-working and extroverted than Munich founders, entrepreneurs in the capital city of Bavaria on the other hand are more agreeable, emotionally stable and have higher fluid intelligence.

Fluid intelligence describes one’s ability to learn and apply a rule set quickly in order to solve problems; it correlates positively with entrepreneurial success, says Greechan. Traits like emotional instability, conversely, correlate negatively.

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7 tips for how to survive as a freelancer in Germany

Taking the decision to go it alone and freelance in Germany can be a daunting prospect. But, if you do it right, it can be an exciting and liberating path. Here are some of our top tips on how to survive.

7 tips for how to survive as a freelancer in Germany

1. Get a tax advisor

The German tax system is complicated, even for Germans. All the associated paperwork uses the Amtsprache (authority language) which is more like legalese than ‘normal’ German, and mistakes when filling out tax forms can cause you, at best, a massive headache and, at worst, a costly fine. So it’s best that you employ someone who knows what they’re doing to help you out.

That person is called a Steuerberater (tax advisor) in Germany. They will help you register with the tax office, correspond with them and submit your tax declarations.

Be aware that, in Germany, different deadlines apply for tax returns depending on whether you employ an official tax advisor or not. If you are doing the tax return on your own, the deadline for submitting your annual tax return is earlier than if you use a tax advisor’s services. 

READ ALSO: What NOT to do when you’re freelancing in Germany

When looking for a tax advisor, a top tip is to use your network to get recommendations. Ideally, you want someone who will do more than just fill in the forms for you, but who will actually advise you on how best to manage your business finances so that you can make tax savings.

2. Keep your accounting in order

The better you keep your own accounts in order, the easier it will be for your tax advisor to compile your tax declarations and therefore the cheaper their services will be.

As a freelancer, there are a lot of costs you can deduct from your taxes – from train tickets, working materials, to meals out – so it’s best to keep hold of all your receipts and to keep them in good order.

2 euros and 50 cents lie on a receipt in a beer garden. Photo: picture alliance/dpa | Peter Kneffel

In Germany, you’re obliged to keep hold of receipts for two years, in case of a tax inspection, so it’s a good idea to photocopy the type of machine-printed receipts you get from restaurants so that they stay legible for a long time.

There are also a few things to be aware of when writing your own invoices. Firstly, make sure that you include your tax number. This isn’t the 11-digit Steueridentifikationsnummer that everyone gets when registering in Germany, but the 10-digit Steuernummer you get from the Finanzamt after registering yourself as a freelancer. 

Most companies won’t pay you if you don’t have this on your invoices so make sure you include it.

You should also make sure that you number your invoices properly – ideally in ascending order so that you can easily keep track of them. You are not allowed to issue two invoices with the same number and if you do so and the finance office notices, you could face an inspection of your whole accounting system.

There are numerous great accounting software programmes you can use to help you, such as Lexoffice and Sevdesk and, even if you have to pay for them, the costs will be tax deductible!

3. Find out if you’re eligible for financial support

In Germany, there are several opportunities for freelancers to gain financial support and to cut their outgoings, and its worth finding out if you’re eligible for them.

If you’re claiming unemployment benefits under ALG 1 and are thinking about becoming a freelancer, the employment office offers a special type of financial support to help you to get your freelance business off the ground.

Called the Grundungszuschuss (“foundation grant”) the payment is a six-month grant equalling your monthly entitlement under ALG 1 plus €300 towards your insurance costs can be applied for those in receipt of this unemployment benefit.

READ ALSO: Will freelancers benefit from Germany’s €300 energy allowance?

If you are engaged in some form of artistic profession in Germany – which can include journalism to pottery – you may be entitled to membership to the Kunstlersozialkasse (artists’ social insurance).

Being a member of the KSK means you only have to pay half of your health insurance and pension contributions, and the KSK will pay the rest.

4. Work out how much you think you will earn

As with starting any business, you need to have some idea of your expected earnings from the outset.

If you’re just starting out as a freelancer, or have some freelance gigs on the side of an employment position, then it might be worth considering registering yourself as a Kleinunternehmer (“small business”).

As a Kleinunternehmer, you can currently earn up to €22.000 per year without having to charge VAT and having to submit only yearly tax declarations. 

An income tax declaration form lies on a table. Photo: picture alliance/dpa/dpa-Zentralbild | Hans-Jürgen Wiedl

Be aware that if you are registered as this kind of freelancer, you must include the following sentence in your invoices: ‘Gemäß § 19 UStG wird keine Umsatzsteuer berechnet’ which means ‘In accordance with Paragrah19 of the German VAT law, no VAT has been added to this invoice.’

READ ALSO: Everything you need to know about your German tax return in 2022

If you think you will earn more than €22.000 per year, you will need to pay Umsatzsteuer (VAT) and will have to submit tax declarations in advance and more often. Depending on how much you earn, this could be every month or every quarter. 

5. Get your insurance in order

In Germany, it’s a legal requirement to have health insurance.

If you’ve just made the move from employment to being a freelancer and want to keep the same health insurer, you should get in contact with your health insurance provider straight away to tell them about your change of circumstances. They will ask you to re-register and to tell them your projected freelance earnings for the year, so they can amend your monthly fees.

If you don’t keep your health insurer provider updated, you could continue to be charged the higher rate that you had from your previous salary.

The insurance cards of the health insurance companies DAK, AOK, Barmer and Techniker-Krankenkasse TK lie with euro notes under a stethoscope. Photo: picture alliance / dpa | Daniel Karmann

It’s not just health insurance you need to think about as a freelancer. It’s also wise to think about protecting yourself from any sort of claims that could arise as a result of any working mishaps. 

If, for example, you lose your laptop which contains confidential client information, you need to be protected against claims.

That’s why it’s good to have both Betriebshaftversicherung (business liability insurance) and Rechtschutzversicherung (legal protection insurance).

6. Plan your time wisely

All of these bureaucratic obligations take time. So it’s really important that you take account of that when planning your time. For example, planning half a day a week to deal with your invoices, filing, emails to clients, and conversations with authorities can be really beneficial when scheduling your working time. 

7. Grow your network

As a freelancer, networking is absolutely crucial to success. 

Keep an up-to-date profile on websites like LinkedIn and German equivalent XING and keep in contact with anyone you’ve ever worked with, no matter how brief the contact was. 

Having a network is not only about getting more clients, but also about building a support network in your field to exchange advice, tips and generally for your own enrichment. 

Participating in workshops related to your field, going to seminars, and meet-ups, can be great ways of broadening your network.