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The rosy times for German startups appear to be passé as they struggle with a weak economy and tougher financing conditions. According to a Startup Association survey conducted by Deutsche Presse-Agentur, the business climate in the industry is at one of the lowest levels since the low point during the Corona pandemic in 2020, with the current score of 38.1 points only slightly higher than in 2020 (31.8 points). This continues a trend that has been seen since the record-breaking 2021.
The survey, which is based on a similar calculation method as the Ifo Institute, reflects a high level of uncertainty among founders. About 65 percent of the startups surveyed have difficulty assessing the future situation. Nevertheless, a slight increase in business expectations is evident, while the current business situation remains at the lowest level since the beginning of the pandemic.
The association stresses that after a wave of innovations that followed the shock of the pandemic in 2020, the current situation has become more difficult. Rising inflation and higher interest rates have led startups to act more cautiously. One-third of companies have reduced hiring and adjusted funding plans.
Since 2022, German startups have faced major challenges. While they were able to raise record amounts from investors in 2021, geopolitical tensions, rising interest rates and economic uncertainty have dampened the market. Investors are more cautious, resulting in many startups having to cut jobs and funding dropping dramatically in 2022. The situation remained tight in the first half of 2023, as startups raised about half the funding they did last year.
In particular, the ability to secure large funding rounds has declined sharply. There has not been a round over 250 million euros this year, compared to four such rounds in 2022 and eight in 2021, and the majority of founders rate the willingness of funders, particularly venture capital funds, as poor.
In view of these challenges, the startup association is calling for increased support from the German government. In particular, the expected "Future Financing Act" should be passed promptly to strengthen the location for founders. Among other things, this law should offer more favorable regulations for employee shareholdings and easier access to the capital market for growth-oriented companies. However, the implementation of this project has been delayed so far.
On Tuesday, the federal ministries of economics and finance announced that a new financing instrument called "RegioInnoGrowth" will support startups and small innovative SMEs. For this purpose, the federal government plans to provide up to 450 million euros from the Future Fund and the ERP Special Fund. Companies can each receive up to five million euros in funding.
On August 15, 2023, the CEO of the German start-up association, Miele, expressed his wish for increased political attention and improved framework conditions for the local start-up scene. The German government, he said, should give the industry more priority, particularly to promote innovative strength and future orientation. Compared to countries such as the United Kingdom, the Netherlands and France, Germany is still at a disadvantage when it comes to framework conditions for startups. Areas such as immigration of skilled workers, digitization and access to capital are better developed in other European countries.
The competition for talented professionals is particularly demanding, and German startups often lose out. The industry focuses on start-ups with innovative business ideas and great growth potential. These start-ups are characterized by young founders and employees who focus on a digital orientation from the outset. Overall, the association is calling for better support from the political side to strengthen Germany's position in the European startup competition.
The recently published analysis of death rates in Germany for July 2023 by the Federal Statistical Office (Destatis) sheds light on interesting outliers and significant deviations from expectations in previous years. The figures show that a total of 75,686 people died during the month. This is close to the 2019-2022 median for the same period, but with a small deviation of -1%.
Calendar week 28 (July 10-16) is particularly striking, with a +4% increase over the comparative figure. This discrepancy could be due to a variety of factors, including possible external influences or even statistical outliers.
The analysis also highlights the possible link between high temperatures and mortality rates. The Robert Koch Institute report highlights heat-related mortality, showing that the weekly average temperature exceeded a critical threshold during this period. This threshold was identified as the point at which additional deaths are expected due to heat. The German Meteorological Service also confirmed elevated temperatures in the first half of July, but these decreased significantly in the second half of the month.
Interestingly, the weekly death case rates mirrored these correlations. During calendar weeks 29 and 30 (July 17-30), deaths decreased by -2% to -6% compared with the previous weeks. These declines correlate with the drop in temperatures during the month.
Note FDS: However, it is not just the heat-related effects that are striking. Other calendar weeks, such as numbers 1, 5, 12, 15, 46, and 48, showed deviations from expected mortality numbers that could indicate possible contributing factors or statistical outliers.
It should be emphasized that such data interpretations should be made prudently. Statistical deviations can have a variety of causes, including natural variations, unusual events, or even data quality issues. More in-depth analyses are needed to better understand these outliers.
Overall, the results of this analysis highlight the need to consider several influential factors that may affect mortality rates. This underscores the importance of comprehensive data interpretation and in-depth analysis to uncover the true causes of statistical anomalies.
In Germany, life for expats - people who live and work far from home - is apparently anything but easy. A recently published survey by "Expat Insider" reveals that starting a new life in Germany comes with a variety of challenges. From bureaucratic hurdles to a lack of digitalization and difficulties with social integration - the list of obstacles is long.
The international expat community took to the "Expat Insider" report to offer insight into the lives of expats in various countries. Germany ranked 49th out of a total of 53 countries. The situation seems to be even more difficult only in some other countries. The general quality of life in Germany still reaches 18th place in the ranking. Factors such as the healthcare system, travel and commuting infrastructure and leisure opportunities are included here. Germany also does relatively well at work, with 15th place for earnings and career opportunities, work culture, and job security and wages.
However, a different picture is revealed in the social sphere, with Germany landing in 50th place, indicating a lack of friendliness, difficulties with social networking and an inadequate welcoming culture.
Expats complain in particular about the lack of digitization in Germany. The "Expat Essentials Index," which evaluates the infrastructure designed to help foreigners organize a life abroad, places Germany in last place. A lack of digitization, the tight housing market and language barriers pose significant challenges. Germans' preference for cash meets with a lack of understanding.
Expats working in Germany are often in IT, manufacturing and engineering or the financial sector. They come predominantly from the U.S., the U.K. and India. So the hurdles to a happy life in Germany appear to be high for expats, while other countries are rated as much more hospitable and livable.
The "Expat Insider" survey thus makes it clear that while Germany appears to be an attractive work destination for expats, it faces a number of difficulties in the areas of social integration and infrastructure. Improving these aspects could benefit not only expats, but also the country itself by increasing its appeal to international professionals.
From the fight against uncertainty to a possible turnaround: More startups in the first half of 2023
The past year has been a touchstone for many young companies in Germany, marked by wars, economic instability and rising interest rates. But now there are signs of a possible turnaround as startup formation picks up steam in the first half of 2023
According to a study by the German Startups Association in collaboration with industry service Startupdetector, 16 percent more companies found their way into the business world compared to the previous six months, representing nearly 1,300 startups.
The once-booming German startup scene experienced a peak period in 2021, with record levels of funding from investors. The COVID-19 pandemic acted as a catalyst for digitization in areas such as finance, food delivery and online shopping. However, the environment changed with the Russian war on Ukraine and rising interest rates and uncertainty in the economy. Investors pulled back, and many startups were forced to cut jobs.
The number of start-ups also showed a downward trend. After the record year of 2021 with almost 3,200 startups, this number dropped to 2619 in 2022. Nevertheless, the first half of 2023 shows a positive development, even if the total number of startups remains comparatively low at just under 1,300.
The tourism, mobility, food and software sectors in particular saw an increase in startups compared to previous periods. In contrast, there was less startup activity in the blockchain and cryptocurrencies sectors.
The cities of Berlin and Hamburg stood out in particular. Berlin saw a 40 percent increase in startups (262) after a decline in the previous year. This is particularly noteworthy given that Berlin had to contend with difficult financing conditions last year. Hamburg also recorded significant growth with 90 new startups. In Munich, on the other hand, the startup rate rose only slightly by two percent to 95 companies.
In terms of population, however, Munich remains the leader: in the twelve months from July 2022 to June 2023, 12.6 new start-ups were counted per 100,000 inhabitants in arithmetical terms. This is slightly higher than in Berlin with 12.3 start-ups per 100,000 inhabitants.
The optimistic signs of rising startup activity give hope that German startups can recover from the challenges of the past year and experience a new upswing.