EXPLAINED: The German regions attracting startups

The number of new startups in Germany has risen again after stalling in the pandemic - and one southern region in particular is giving startup capital Berlin some competition.

Two people enjoy the view at the Starnberger See in Bavaria.
Two people enjoy the view at the Starnberger See in Bavaria. The Starnberg district is seeing a lot of startup growth. Photo: picture alliance/dpa/Katrin Requadt | Katrin Requadt

A total of 3,348 new startups were founded in Germany in 2021, according to an evaluation by Startupdetector – an increase of 11 percent compared to 2020.

After the first Covid-19 Lockdown in March 2020 caused the number of startups to plummet, the situation has now eased again.

“At a strong level of just over 800 startups per quarter, the numbers seem to be stabilising,” researchers at Startupdetector said.

Industry leaders are pleased with the development.

“Startups are the economic power of the future,” said Christoph J. Stresing, Managing Director at the German Startups Association.

However, he said a lot of potential still remains untapped. “This applies, for example, to the area of spin-offs from universities or research institutes,” said Stresing. “Despite an outstanding research landscape, we too often find it too difficult to transfer research results to marketable products and thus stand in our own way.”

READ ALSO: The surprising parts of Germany where new businesses are blooming

As well as new startups, the number of companies that were able to attract external investors such as venture capitalists rose by 27 percent to 2,087 last year.

However, Stresing points out that this still does not come close to the financing amounts in other countries: “Despite the positive development of investment figures in recent years, we in Germany are still very clearly behind not only the USA, but also countries like Sweden or the United Kingdom in terms of investment per capita,” he said. 

Berlin remains startup capital – but growth elsewhere

As in previous years, most startups were founded in Berlin in 2021: with 747 companies, around 22 percent of all new German startups were created there.

“In Berlin in particular, we see a startup ecosystem that has matured in many parts,” said Stresing. It consists not only of founders and investors, but also of highly qualified employees, universities and colleges, and is now able to “fuel itself from its own momentum”.

People in Berlin's Mauerpark.

People in Berlin’s Mauerpark. Photo: picture alliance/dpa | Jörg Carstensen

But other states were able to grow stronger too, as the number of startups increased in most of them. According to the analysis, Baden-Württemberg (with an increase of 21 percent), Lower Saxony (plus 30 percent), Saxony (plus 54 percent) and Saxony-Anhalt (plus 166 percent) recorded particularly high growth.

With 108 newly founded startups in 2021, Saxony is the front-runner among the eastern German states, where the start-up rate is comparatively low.

The evaluation of startups at the district level also shows something surprising: the district of Starnberg in Bavaria tops the list ahead of Berlin with a density of 20.5 new startups per 100,000 inhabitants.

“The companies from the Starnberg district are diverse: from the regional fresh food courier Regioluzzer to Servail, whose robots maintain railway tracks, to The Exploration Company, whose founder Hélène Huby wants to build a spaceship,” the analysts at Startupdector said.

The district southeast of Munich, which is home to stunning views of the lake and mountains, is one of Germany’s wealthiest. 

READ ALSO: Booming startups draw expats to Germany

What are some of the trends for German startups?

When it comes to sectors, software, medicine and e-commerce continue to dominate the startup scene, but things are changing. 

“The presumably pandemic-driven e-commerce boom of 2020 seems to be slowly subsiding, however, as a slight decline can be seen in this industry,” the report says.

In contrast, the number of startups increased particularly in gaming, media and environmental technology. New methods to combat the climate crisis seem to be becoming a big trend in startups and investments – this area was able to record an increase of 144 percent.

Startups are still mainly founded by men. However, the share of companies with at least one woman on the management board has been increasing for years and could exceed the 20 percent mark for the first time in 2021.

“This means that the share of female (co-)managed startups is still shockingly low, but 84 new female startups still correspond to an absolute increase of 14 percent compared to 2020,” said the analysts.

The proportion of people with an academic degree involved in a startup is strikingly high. About 14 percent of the teams have doctors or professors on board, while people with these titles make up just 1.2 percent of the total population.

Those who are thinking of launching their own innovative business idea quickly should pay close attention to the state they’re doing it in.

The analysis showed that startups in Bavaria and Baden-Württemberg were registered after 28 days on average. In Hesse and Saarland, however, registration takes almost four more weeks. The fastest route is in the Bavarian city of Landshut, where registration takes only eight days.

What’s a startup?

Startups are innovative, mostly digital companies that develop new business models in mostly young markets. So not every newly founded company is a startup. Self-employed craftspeople or freelancers such as architects and lawyers, for example, are considered business founders – and not start-up entrepreneurs. A startup company – in addition to an innovative business idea – has the primary goal of growing quickly.

Although startups can be companies from all industries, in practice they are often active in the technology and internet sector. Typical sectors are e-commerce, application software, financial technology, biotechnology, nanotechnology, new manufacturing processes or aerospace technology.

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‘Lack of diversity is a problem’: What it’s like to work at a Berlin tech startup

Many foreigners dream of finding a job in Germany's growing startup scene. But aside from promises of free pizza, what's the culture like, is the pay good - and do you need to speak German? We spoke to two foreigners working at tech startups in Berlin to find out.

'Lack of diversity is a problem': What it's like to work at a Berlin tech startup

With over €5.1 billion in venture capital fund investments raised last year, the startup industry in Germany’s capital is booming. Startups are the fastest-growing job sector in Berlin, and more than 78,000 people are now employed in the sector.

The sector attracts highly qualified, ambitious people from all over the globe. But what is it really like to work for a Berlin startup?

We spoke to two insiders to find out. Gabriela, 36, is originally from Poland and has been a Business-to-Business Manager in a tech startup in Berlin since October last year. Giuseppe, also 36, is originally from Italy and has been working as a Human Resources Manager in various tech startups for the last seven years. 

Most important question first – do you actually get free pizza and office table tennis?

Giuseppe: These kinds of benefits have become a bit of a cliche that doesn’t really reflect the reality anymore. Yoga, soft drinks, and fruit baskets are nothing special. The real benefits are now to do with remote working and flexible working schedules. 

Gabriela: We haven’t really had many of these kinds of ‘incentives’ because we’ve been mainly working from home since I started. Only in the last month or so we’ve been going to the office at least once a week, and we do get free pizza and drinks once a month when the CEO’s give us their monthly update on how the business is going.

READ ALSO: The German regions attracting startups

Would you say that your work environment is diverse?

Gabriela: My team is a complete mix of people from different European countries. But the number of BAME (Black, Asian and minority ethnic) people on board is not very high and there is definitely a problem with the lack of female leadership, which the company is trying to address. The CEOs are all white Germans.

Giuseppe: (Lack of) diversity is still a big problem. Most of the CEOs and the highest earners are white – usually German – guys. Women and BAME people tend to occupy lower-paid jobs. It’s a systemic issue – and there is competition among a lot of startups that are trying to show who is more diverse. 

How much German is spoken in your company?

Gabriela: Hardly any. We speak all the time in English with each other and all of our meetings are in English.

Giuseppe: It’s the same with us. I’m hearing German less and less. 

READ ALSO: How easy is it to get an English-speaking job in Germany?

Is there anything then that indicates that the company you’re working for is German?

Gabriela: I think the presence of a strong labour law reminds you that you’re in Germany. In our company, there’s an employees representation group and certain clear rules. You know that you won’t be suddenly dismissed once you’ve passed your probation time.

Giuseppe: Yes, the labour law is what I would point to. It’s not easy to get rid of employees in Germany – there is a more robust framework that affects the environment and culture. 

What is the salary like?

Gabriela: I think it’s competitive. My company does salary benchmarking every summer to see what the standard is across the industry and adjusts its pay accordingly.

Giuseppe: Salaries have gone up a lot in the last few years and you could even say they are booming now. A ‘normal’ engineer can expect to earn at least €85,000 per year, and if you are in a serious leadership position, you can expect to earn up to €180,000.

READ ALSO: Do internationals face discrimination in the workplace

A woman working from home throws money in the air. Photo: picture alliance/dpa/dpa-tmn | Christin Klose

Would you say that it’s a high-pressure environment to work in?

Gabriela: For me, there isn’t the kind of pressure that if you don’t perform you won’t get the money you should be getting. Instead, my company is trying to get you to think that your own success is intertwined with the success of the company. There are good incentives to work hard and we have also a certain amount of shares in the company, so if it does well we benefit too.

Giuseppe: I personally feel pressure, but I love what I do, so for me it’s fine. But I have seen a lot of cases of people burning out – especially young people. I think because there are a lot of young managers, who get into leadership roles without having the tools or strength to resist the pressure.

How do you find the work-life balance? 

Giuseppe: I feel like I’m working all the time, but again, that’s because I love my job and I want to, it’s not necessarily the expectation, it’s not like in the US. In Berlin tech startups, there is a tendency to slow down around 6pm.

Gabriela: For me, the work-life balance compared to previous jobs is very good. Telecommuting is great, there are flexible starting times and last-minute holiday requests are usually approved. I think it’s very good for people with children and more complex schedules. 

How many days holiday do you get?

Gabriela: We get 28 days holiday per year.

Giuseppe: We get between 23 and 30 days holiday per year, depending on how long you’ve been working in the company.

What are the career progression opportunities like?

Gabriela: Very dynamic. For myself, I don’t see a clear career path at the moment, but I see a lot of movement happening and people moving to different roles. There is a feeling of being in a constant state of change. 

Giuseppe: If you join a startup at the right time, you can very easily become a manager very quickly.

READ ALSO: EXPLAINED: How to boost your career chances in Germany

What was different about working for a Berlin start-up than you expected?

Gabriela: I thought that working from home would be easier, because I hadn’t done that much before, but I find it much harder to be engaged than I expected. I think a lot of startups (in Berlin) are struggling now to find the right balance between the competing interests of their employees – some of whom want to be fully remote and others who want to come more regularly to the office.

Giuseppe: Before I started working for tech startups I had this romantic image that they were all led by geniuses with big ideas who started in their garages. But in reality, I’ve found this emotional, big-dreaming side to be lacking. There are a lot of people who work for startups who just see it like any other job.

A work team exchanging ideas with notes on a whiteboard.

A work team exchanging ideas with notes on a whiteboard. Photo: picture alliance/dpa/dpa-tmn | Christin Klose

What are the best things about working for a Berlin tech start-up?

Giuseppe: You can make an impact with what you do, to build a product and say it’s mine. There is also creativity and freshness in the team dynamics. I was deeply unhappy in the years I spent working for big corporations because I didn’t know what the goal was. In startups, the objectives are clear.

Gabriela: You can grow with the company, and there are a lot of positions opening all the time, and it’s very common for startups to promote internal talent.

READ ALSO: EXPLAINED: The German regions attracting startups

What are the worst things about working for a Berlin tech start-up?

Gabriela: Sometimes it can be hard to keep up with the pace of change. It sometimes feels like we are constantly onboarding new people or people are changing roles and there is a slightly chaotic feel to things. The buzzword “agility” is used and abused, and sometimes means staff is expected to go along with anything and everything.

Giuseppe: In the tech start-up world here there seem to be a lot of people who get into the top jobs because they speak a lot, not necessarily because they are the most competent. There is a lot of networking and self-promotion required to push yourself forward. It’s also not a good environment for people who don’t like change, because things change a lot. 

Do you think Berlin is a good place for foreigners to work?

Gabriela: Yes, definitely. You have a lot of choice when it comes to places to work – so it’s unlikely you’ll have to stick at a job which
you don’t like. It’s also a big help for foreigners that most startups in Berlin don’t require German language skills.

Giuseppe: Definitely. For me, the mix of cultures and ideas in the workplace is really inspiring and motivating. And, of course, the city of Berlin itself is full of cultural events and has a great night life – so it’s a great place to live for when you want to detach from work too.

Do you have any advice for anyone thinking about joining a tech start-up in Berlin?

Giuseppe: Try to develop an entrepreneurial mindset instead of an employee mindset as soon as possible. Always look for opportunities, don’t take things personally, don’t think about what happened yesterday, and focus on the now. 

Gabriela: Be open-minded and be prepared for change.