History suggests that Germany lags behind its European neighbors Building a globally competitive venture capital market. But the next five years will be important for the German venture capital industry, and I think the future signs are very bright.
German start-ups raised 6.4 billion euros in 2020. This is more than France which raised 5.7 billion euros. Another advantage is a healthy mix of national and international investments in the early stages of the market. German funds dominate investments in German startups. Seed and Series A phase. Foreign investment plays a major role as the business grows – Half of transactions on the $ 50 million financing round are entirely led by foreign investors , only 5% are managed by German investors and mix of foreign and domestic investors at the caps table.
I think this is where the German venture capital market is needed now. Major innovations are financed and supported by local funding. As these companies grow and become winners, they will attract the best investors from all over the world and allow them to go international from their German locations. Early stage VCs are rewarded and continue to invest in local German talent. We are confident that more German venture capital will be invested in the growth phase as the market matures.
And the outlook is good. The German market is flourishing. Even the pandemic has had little effect on this fundamentally positive trend in the tech industry.
The German market is flourishing. Even the pandemic has had little effect on this fundamentally positive trend in the tech industry.
In addition to increasing levels of domestic and international investment in German technology, policymakers have created better conditions for startups and venture capital funds to thrive in Germany.
The German Federal Government has launched a EUR 10 billion future fund and we have invested additional money in the Deep Tech Future Fund. This not only immediately injects more capital into the market during the growth phase, but also shows that Germany is âopen for businessâ. This sends a clear signal to the world that Germany understands the link between innovation and concrete improvements in society. It is a powerful and welcome indicator of funding from around the world.
Germany is very attractive not only for investors but also for engineers. More and more technicians Relocated to Germany, The Welfare State offers a model for the future.
It looks good in the long run. Germany is world famous in the manufacturing and engineering sector. Germany is one of the few countries which still produces a trade surplus thanks to domestic production. Manufacturing and engineering have yet to experience a big leap in innovation. Therefore, German start-ups are in an excellent position to benefit from the increased activity of âIndustry 4.0â innovation, and the talents of the German manufacturing center continue to grow in Berlin and Munich. We are ready to integrate into the human resources pool.
Sharing options and spinoffs are the Achilles heel of the German startup scene
I think the German venture capital and tech markets will take off and reach new heights. However, there are two areas that need to be drastically improved. This is a regulation on stock options and employee splits.
Germany is stifling bureaucracy, which threatens innovation. Tesla’s new Gigafactory is the latest example of how a bureaucratic process can slow everything down.
For German start-ups, there is an urgent need to reform employee share ownership plans (ESOP) so that they can benefit from their success and their ecosystem can develop on their own.
The Â· Current Invoice Providing Better Tax Incentives Does Not Reflect Industry Needs. For example, the tax exemption is only accessible to employees of companies under 10 years old. If an employee changes employer, he must first pay taxes on the company‘s shares, which poses a significant risk of bankruptcy. Many startups haven’t made a profit after 10 years, so you only have to pay taxes when your employees actually profit from their shares – that is, when they sell their shares. After all, startups just don’t offer new ESOPs to their employees.
Another example: the spin-off. In Germany Most patent applications in Europe. However, start-ups are often unable to adapt innovative technologies to the product market. The spin-offs of the main German research institutes struggled to gain a foothold due to the institutions’ high fixed and licensing costs at the time of the split. Here, Germany needs to be more flexible and provide the necessary space and funding for startups.
Cut fixed costs and take on the founders of a huge bureaucracy in spin-offs. Investors need to provide more operational and organizational support to those who have gone from researchers to founders. Additionally, VCs must have the courage to invest more in innovative ideas and technologies that may take some time to succeed. BioNTech is the best example of how this will pay off in the long run.
More German unicorns?
As it stands, plenty of new unicorns have already been seen from Germany in 2021. Personio, Mambu, Sender, gorilla And Trade Republic Reach a multibillion dollar valuation – and almost certainly more.
Germany’s tech and venture capital industry will reach new heights if regulators end up breaking bureaucratic formalism around stock options and spin-offs. We look forward to positive changes and the entire German unicorn list in the years to come.
German venture capital industry ready to take off, but bureaucrats must release handbrake – TechCrunch Source link German venture capital industry ready to take off, but bureaucrats must release handbrake – TechCrunch