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Germans don’t do tech startups – more access to capital might change that

destartupop 8y ago
I've been trying to build deep tech startups in Germany for 6 years. I managed to sell the first one I built to a US company (for a very small amount of money) and started afresh after taking a break as an employee. Right now I'm at the point of giving up again because it's so damn hard to find customers here. In my opinion, for deep tech startups the problem is not primarily access to capital but access to customers, as the corporate culture is extremely hostile towards startups. Large corporations are very risk-averse and most of them won't ever consider buying a product from an unproven startup. The ones that want to work with startups often have started their own incubators where they try out ideas by hiring teams and building startups that they fully control (50 % shares belong to the parent company from the beginning). Also, from my experience getting seed funding becomes harder the more experienced you are here: If you just finished university it's easy to get a so-called EXIST grant, which will pay a little more than 100.000 € to fund a team of three people for a year. That's how most (or at least many) of the successful startups get funded here. The thing is, if you have been working for 5 years or more you will be ineligible for that program, and your options for getting seed money are very restricted. This is weird as people with industry experience usually have a much better chance at building something relevant and successful than a recent university graduate with no business experience. They have a much harder time finding money though. There are counterexamples and very successful deep tech startups of course, I just think we could have many more of those if we had a system that actually encouraged and helped people to build these companies. I can understand that many people decide against it, especially when you're a good technician / engineer you can earn much more in industry and there's very little to gain by leaving your position.
- jayalpha 8y ago
  Agreed. * Lack of capital There is just much less VC available, even if normalized for the difference in size. I know the VC scene a little bit in Germany. Total monkeys. * Lack of attitude Germans are much more hierarchical. Both in science and entrepreneurship I found the American personality much more suited. * Lack of vision You will find money in Germany for a personalized cereal/granola mix shipment service (was just an exapmple, but in fact I think it exits) but if you are into a disruptive technology they will balk. Both have different risks but both also have different pay-offs. Edit: Reasons given due to the downvote
  - jayalpha 8y ago
    Why the down-vote? I think I know what I am writing about.
    - yorwba 8y ago
      > Total monkeys.
  - hef19898 8y ago
    Your cereal mix service is called Mymüsli. During the time I investigated funding options I was considering to enter a business plan contest. The information given by everyone was that only inovative tech start-ups would be considered. One of the runner ups in the end was a service that allowed you to by food from local farmers, limited to one metropolitan area. I have my doubts that the general start-up ecosystemin germany knows what they are doing.
- deleted 8y ago
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- Jdam 8y ago
  I‘d have been eligible for EXIST, but that program is a bad joke. 100k for 3 persons for one year before tax? C‘mon. That is financial sucide, if you’re in tech these days.
  - hef19898 8y ago
    Yeah, and than you have to pass a panel deciding whether your "idea" is innovative enough. It reminded me more of a game of buzzword bingo than a viable investment procedure. As your not allowed to incorporate before enter EXIST it is just a waste of time. Not to mention that it all depends on how well you are connected at your university, and if government funds are available.
    - destartupop 8y ago
      I'd say the chances of getting a grant are very good, back in the day the success rate was around 50 % and you could apply up to three times (to my knowledge), which made it highly likely that you'd get the money if you were persevering. It's true that you have to choose a good university as the quality of the provided coaching and mentorship varies wildly. I can recommend LMU & TU Munich as well as TU Berlin or one of the other well-known technical universities (e.g. RWTH Aachen), to my knowledge they have very good programs. You don't need connections at your university either, you just need to convince a professor to support your application, which they are often happy to do as it counts towards the amount of funding they raised, which is a relevant metric to them. If you can get that money it's really an excellent opportunity and will help you to get further funding, as I said before I just find it sad that nothing comparable exists for experienced people from industry.
      - hef19898 8y ago
        I tried a while back. Not being at one of the universities you mentioned ,I would have been an extension from TU Munich. Funds where hard to come by at that time (right after the elections, so no governmant, no government budget, no EXIST funds). In the end, I talked to all relevant profs at my university, they talked to the giys at TUM, and the feed-back was "no need to tey, your idea is not innovative enough. Try a bank or bet your house." Also the expected time line was around 6 months to get into the program, so for me it would have just been a colosal waste of time. EDIT: While coaching is anive thing, it is access to follow-up funding that matters. At let's be honest in that regard YC is different league all together. And if you don't need funding beyond 100k you really could have used bank in the first place.
- sarabande 8y ago
  Can you share which deep tech startup companies you find successful in Germany?
tjungblut 8y ago
More money alone won't solve this particular issue. The link that is referenced at the bottom of the article [1] highlights more of these challenges: - Government Policies: Taxes and Bureaucracy - Governmental Policies: Support and Relevance - Entrepreneurial Education at School Stage The first is a much bigger issue than missing capital. [1] https://www.gemconsortium.org/country-profile/64 https://www.gemconsortium.org/country-profile/64
- raverbashing 8y ago
  Everybody complains about taxes but I don't think that's the most important factor tbh Whenever someone discusses corp. taxes in the US and incorporation it seems it's full of gotchas, corner cases and traps. Not to mention every state having its own legislation as well. Taxes might be higher outside of the US (but then again, they're taxes: no profit, no taxes) but they're not necessarily more complex (though Germany ones are probably not the easiest tbh). Startups exist in more tax complex countries. You can't buy culture, customers and financing, the rest is doable.
  - thatsaguy 8y ago
    I don't know the exact situation in Germany or US, but in Italy, the "no profit, no taxes" is definitely not true. Depending on the company type you registered, there's a significant cost to just keep the ability to run the company to _do_ business in the first place. By experience, the dead cost of the smallest company you can run is between 5-15k per year. It might not seem much, but I've heard here on HN over and over how to grow a side/passive income, and there's basically no way to do this here. The moment you want to start a side business, the fixed minimal cost is sunk, so unless you start making a significant sum from the start you're just losing money that eats into your primary income. And there's no legal way to do the business below that. That's not how I understood people in the US do this sort of passive income. It sounds like "no money = no tax", but this is not true here. You often have to pay taxes in advance on the projected income of the next year, even if you never had a business first: the projection is based on god-knows-what market estimates you have no control over. The market segmentation, language barrier and tax situation in EU is a huge burden. If you're working on a niche product you want to start with a wide basin of users, at least as large as the EU block. Sounds stupid to start in a single country. It's doable, but don't expect to start with a small capital, and typically not with the wannabe-VC we have here in the EU. The 100k for 3ppl/year is not a joke.. a "100k-300k" ballpark is very common for startups here. I'd consider that just for marketing, or even then. With this money you basically cannot do anything serious, just considering how hard is to penetrate the market. I've yet to see something in the likes of Stripe in the EU. And a decent replacement for Paypal for smaller setups. I'd love to have candidates here. Accepting money is cumbersome if you're small. This is sad. Workforce is a problem. But not because of talent. The extra regulation here implies a strong commitment when hiring. This forces companies to grow very cautiously. You cannot resize the workforce to match the load. If you grow too much, you may doom the company at the first financial difficulty. This causes a lot of sub-contractual work to be done, with a significant decrease in quality and cohesion. Not to mention, this line of working is being limited more and more over time - I was working as an entrepreneur in the beginning of my career but I cannot do that anymore and have to be regularly employed. I could have started something from scratch much more easily 15 years ago compared to now just due to regulations. I could go on for pages...
eksemplar 8y ago
Germans absolutely do tech startups, in fact they’ve been on the forefront of building tech companies that mirror Silicon Valley, but in German. There’s been a German eBay, PayPal and Facebook. Europe doesn’t really do major companies though, and part of that is certainly a lack of demand to go global from capital investors, but there are other parts as well. Like language and regulation. I went to harzen for holiday this summer, very retro I know, and almost no one spoke English. In fact I had bigger luck with Danish than I had with English because they see so many Danish tourists. I’m not sure Americans can really understand how big the language and cultural barriers are from creating global companies when you’re de-attached from the Anglo-Saxon world. I think the reason that a lot of European startups that made it to the global scence came from Scandinavia, is exactly because we’re so attached to American culture that’s it’s almost second nature to us. Sure we don’t understand American individualism, not really, but we’re all brought up watching American tv-shows and movies, hell American politics and economics sometimes take up more news space than our own national news... The rest of Europe isn’t like that, so while Germany had its own eBay, that made its founders billionaires, no one outside of Germany has ever heard about it. Except for maybe eBay who couldn’t enter the market.
- pjmlp 8y ago
  Usually when I go around in Eastern Europe I have an easier way trying to speak German than English. And in southern Europe I am lucky to be able to speak most languages, as anyone beyond a certain age hardly speaks any word of English, specially outside the major cities. Which is indeed a challenge, on the other side is also something quite rich, as most traveling Europeans tend to speak fluently three languages on average.
  - deleted 8y ago
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  - prablenha 8y ago
    As a southern European I'm very happy about this situation. I don't want my country to be like the Scandinavian countries, the GP summed it up pretty well. Everybody knows English and American culture is literally swallowing the local culture. I'm happy with my language and my culture, thank you.
_petronius 8y ago
We do have tech startups here in Germany, and quite a few of them. It's just that they tend to be funded differently, and with less of the wild valuation-speculation that goes on in the US. I'm not sure that's a bad thing. As a corollary, the article cites European data protection law (in the context of not being able to collect usage data to improve the product) as a barrier to building startups which ... is also very wrong. You can (legally! Ethically! GDPR-compliantly!) collect all sorts of data with which to improve your product. I've seen it done, I've done it myself. There are a lot of people here, German and non-German alike, trying to furiously recreate the SV way of doing things, as if that's the only way to build a strong tech industry. To me that's both uninteresting (why replicate the same model everywhere?) and bad business (not all markets are the same, and that's not a bad thing). Maybe people would be more successfully adapting to the local context. It's certainly working for a handful of startup incubators I know in Berlin.
- zorkw4rg 8y ago
  meanwhile there is not a single tech startup from germany worth talking about, but yeah sure not everyone has to do it the SV way of doing things, like actually being successful
  - cabraca 8y ago
    > like actually being successful lets be honest, there is a huge amount of SV startups that bleed CV money like there is no tomorrow. not to mention the ones that failed.
- Jdam 8y ago
  I’ve lived in Berlin for some years. What I‘ve seen from most of the startup scene there was that people are more collecting memories than building businesses. The predominant mindset was like „we don’t want to take over the world and we will most likely fail anyway“. The successful ones, like Dubsmash, leave for the US after a while. If I, as a German, was to create a startup in Europe today, I’d do so in London.
  - 8y ago
roadbeats 8y ago
I moved to Berlin recently and started making a list of “cool” startups and venture capital firms in my public notebook. It can be a reference for people who are curious about the ecosystem here: cool startups: https://github.com/azer/notebook/blob/master/berlin.md#cool-startups https://github.com/azer/notebook/blob/master/berlin.md#cool-... venture capital firms: https://github.com/azer/notebook/blob/master/berlin.md#venture-capital https://github.com/azer/notebook/blob/master/berlin.md#ventu... PRs are welcome.
- jacquesm 8y ago
  Endeit Capital and Capnamic should be on your list, as well as Project-A ventures and Partech.
  - roadbeats 8y ago
    Could you send a PR?
    - jacquesm 8y ago
      No. I don't see why I should log in to another website or make an account there when you already have all the info you need right here.
      - roadbeats 8y ago
        Gotcha. I’ll add it then.
        jacquesm 8y ago
        Thank you. I'll see if I can dig up some more active German VCs for you, I should have a list somewhere.
mprev 8y ago
Has the author not heard of Rocket Internet? Hello Fresh? Zalando? Contentful? SumUp? Wooga? Deepstreamhub? Delivery Hero? N26?
- jayalpha 8y ago
  Rocket Internet were just the scumbags that ripped off every US based idea and tried to implement it in Germany. A few "me-too" businesses. Okay. There are very few big ideas that investors in Germany would pour money into.
  - yorwba 8y ago
    Their big idea was to copy every idea in markets where the original company hadn't expanded yet. It might not be the greatest technical achievement, but it certainly paid off for them, demonstrating that execution is more important than being the first to have an idea.
    - expertentipp 8y ago
      By "execution" you mean a wasp nest of POs, PMs, MBAs, friends'-friends and lawyers standing over and yelling at engineers and developers imported from Eastern Europe and India?
  - fulafel 8y ago
    Very few startups are based on a novel big idea. It's the execution that counts. Dropbox, Google, Amazon, Facebook.. none of those were novel ideas.
  - zby 8y ago
    Facebook was not an original idea either.
- prablenha 8y ago
  I'm European and I have never heard of any of those.
kensai 8y ago
I read this article a few days ago with three different ways of funding a startup in Germany, namely (1) crowdfunding/crowdinvesting, (2) business angels, and (3) wealth families (family offices). http://www.pr.uni-freiburg.de/pm-en/online-magazine/invent-and-establish/strategies-for-the-piggy-bank?set_language=en http://www.pr.uni-freiburg.de/pm-en/online-magazine/invent-a...
mrhackerpoland 8y ago
It's because they don't need to. Startups often include difficult and intense work environment. For exactly what? Better than average compensation discussion is frowned upon in Germany. There is ramphant latent descrimination against people from other countries. Which German company has a foreign born CEO? In US, Google and Microsoft have foreign born CEOs. This is my own experience, so downvoting is only silencing a voice.
- chobeat 8y ago
  > Startups often include difficult and intense work environment Compared to the USA? Lol, you have no clue. The standard for a software engineer in SV is to take drugs to work 12 hours a day 6 days a week, pay a fucking high rent living with 4 other people and if he's foreigner and freshly arrived, he has to suck his boss' cock everyday because they might take away his visa sponsorship and put him into troubles. In Berlin most people I know work less than 8 hours a day, can afford to have their own apartment at their first or second job and save enough money and energy to go travel somewhere every 3 months. Because you know, we have 30 days of holidays per year.
  - dang 8y ago
    In addition to being uncivil, this is wildly wrong ("The standard for a software engineer in SV") and you misread the parent comment. Please post civilly and substantively, or not at all. https://news.ycombinator.com/newsguidelines.html https://news.ycombinator.com/newsguidelines.html
  - mrhackerpoland 8y ago
    Startups are not average cushy corporate job. The only way to get any startup to work in EU is by importing immigrants and they'll work hard on their own and compensating them appropriately and making sure they can reach top ranks in a company otherwise no one will ne motivated to work hard. Germany has infrastructure. Taxes are not that bad. Any country which will accept foreigners with open heart and give them opportunities will have plenty of startups. There are still clubs in Germany which do not accept people of color.
  - 8y ago
kvz 8y ago
“Germans don’t do tech startups” is obviously clickbait but it’s equally obvious that Germany can’t compete with SF when it comes to startups. As a Dutch founder of Germany based scaleup Transloadit.com I’d say taxes and workforce-legislation are more prohibitive than a lack of funding (tho it may also be a problem for others as clearly there’s less going around). I realize why taxes and protection of the workforce are necessary and am happy to live in a country that sands down some sharper edges of capitalism, but when you are just starting out, it’s overwhelming the amount of money you can’t allocate for more growth, and the commitment/risk that comes with having people on the payroll. Even though we have work, and money to spend on having that done, going that route is like the last resort because it’s so scary (maybe there isn’t money/work next year, what if they become sick, it could just ruin the company). Not even talking about resources needed to get acquainted and comply with the rules. So currently we try to work with freelance/invoicing as much as possible, but that comes with its own set of legal constraints and high costs. Feels a bit like driving with the emergency brake on. If somehow the government could have a special set of lightweight rules for folks just starting out, I think you’d see more startups flourish.
mk89 8y ago
The mindset in SV is to fail fast - yes, with all the consequences for the investors. That's why investing in startups is a high risk investment. And that's also why the cautious way of doing business in Europe doesn't help with the startup economy. Being too cautious prevents from taking high risks. I interviewed several times with startups proud of not having any funding behind. Very nice. Still, my question is... Who cares? The main difference is that in the USA money is constantly being invested, there is a lot of debt but that's the way to innovate. In Europe on the other hand, if you fail, or if you make debts you better hide yourself.
- iforgotpassword 8y ago
  I agree. The way to run startups and maybe to some extend tech companies in general seems not that compatible to the German mind set. Every industry Germany is or was internationally successful in rewards you for being precise, optimizing a lot and generally investing a lot of time. It's pretty much the opposite of the fail fast approach where you quickly cobble something together, throw it at the wall and hope it sticks, if it does, you start to think about everything else. (Inb4 counter-examples. Yes this is oversimplified, exaggerated, stereotyped)
- hnkf 8y ago
  This is precisely why I despise startup culture. What about the risk for the workers and your customers? What are the grand innovations you think Europe couldn’t produce because we’re more careful?
  - mk89 8y ago
    Workers know what they are getting into. Customers know what they are buying. It's an ecosystem that lives on its own. Could you think of Google made in Europe? In Germany, in France, or in Italy? It's no wonder that many Europeans tend to go and live in the USA for that reason.
    - mirko22 8y ago
      That’s very presumptuous, there is loads of US people in Europe too... And you could argue if Google was startup back then or not. I would say not.
dschuetz 8y ago
In Germany most start-ups are self-funded with maximum personal risk. That means that you only fail once, after that you'll never be able to recover from bankruptcy only to do your next thing. As Germans are not known to be risk taking folks it's understandable why there are slim chances for the next Silicon Valley in Germany. It's all about risk and risk taking. Tweak those parameters economy-wise, then we talk about bold entrepreneurship.
- beberlei 8y ago
  I doubt that is true, do you have numbers for this claim? I see many companies founding limited structures (UG or GmbH) to have avoid maximum personal risk. It can be done with just 1€ of capital.
  - dschuetz 8y ago
    You still need liability capital for a GmbH (e.g. LLC) which most start-ups just don't have. They start off single or as a GbR with a second or more partners, and then eventually change the company liability type to GmbH, when they generated the capital needed. A real start-up doesn't have to be a GmbH at all. In fact about 2/3 are single start-ups in Germany with maximum personal risk, not even GbR which is only 8%. The rest are GmbH with 30% which also counts start-ups with a bigger company as backer. That paper is a bit dated, and in German, but still the general assumption that most start-ups are poor remains true for Europe, not only Germany. https://www.destatis.de/DE/Publikationen/WirtschaftStatistik/UnternehmenGewerbeanzeigen/Unternehmensdemografie_62013.pdf https://www.destatis.de/DE/Publikationen/WirtschaftStatistik... What is true though, a UG (e.g. Ltd), is an alternative to GmbH in terms of liability and capital. The 1 euro capital is a joke, imho. Because no sane credit institute would lend you money when they see your tiny liability investment. However, it is possible to make your business legal and profitable, and then borrow some money. But, honestly, starting with literally nothing is like starting a new game at maximum difficulty and perma-death, and who does that in RL?
mrhackerpoland 8y ago
Startups need immigrants. Germany only accept immigrants from EU, not from China or India which produce cheapest empoyees offering max value. One key difference is that Startups lack fund. So either: 1. Funding be made more generous by offering tax advantages to invesitors 2. Or, biggest expense are employees, so we need employees accepting a dream stock unit and very low wage, so we can hire more of them. But I've talked with German employees, literally, none of them will accept more money for more work. There is very strong emphasis on work life balance unlike US. So only way to overcome this issue is to get larger funding and that's smth government needs to fix. That way startup can become more competitive.
- deleted 8y ago
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- jlangenauer 8y ago
  This is not true. I'm Australian, and it was easy to get my Blue Card, and more recently my permanent residency in Germany. Compared to the nightmare of dealing with the UK Home Office, moving to Germany was a breeze. (For those who don't know: if you have a 4-year degree, and can get a job-offer that pays €48K or above, you can easily get a Blue Card, which lets you work in Germany. Keep that job, and after 21 months, you can get a Niederlassungserlaubnis (permanent residency) with B2-level German, or after 33-months with rudimentary German. It's an amazing deal.)
- blue_box 8y ago
  I've moved from non-EU country to Germany.
mrhackerpoland 8y ago
The largest German startup is Wirecard. If you received a prepaid card from online service like Payoneer, highly likely you've consumed services of this startup indirectly. There is also Dr. Bentz, creator of Bentz Bone which many people in Silicion Valley have used.
stesch 8y ago
The difference is: We have labor laws.
- NotCamelCase 8y ago
  Why is not there a middle ground between hire-and-fire-quick vs very strong/rigid labor laws that would give more optimized/successful end results for most involved than either of the two extreme points would generate? On one hand, I certainly would not want what's happened to e.g. Telltale employees who recently got laid off abruptly with no severance packages to happen to any of my friends/family. On the other hand, if you want a pool of opportunities of strong growth to co-exist within your economy, you gotta relax and give some room for those of us who are or want to be innovative. Come to think of it, with the safety net that is provided in most developed European countries (e.g. Sweden, Norway) one would think that there'd be more innovations (normalized by metrics like population, etc.) generated there than say, the USA but I doubt that is the case here without having any numbers or proof. Is it the scale that matters most or what am I missing? Overall, I for one wouldn't still trade strong labor laws with being the most innovative place but I do still hope for a better middle ground for everyone.
  - jashmatthews 8y ago
    Germany has trial periods for employees. If you put in the contract you can terminate the contract without reason for up to 6 months. It goes both ways. Employees can leave with almost no notice during the same period.
- kodablah 8y ago
  If amount/size of labor laws are inversely proportional to startup quality/quantity, how come a state with the most has more success than states with less? Because it's not the reason anymore than any other difference.
zenovision 8y ago
Germany has a lot of drawbacks to be the next silicon valley: * the most difficult tax system in the world. even freelancers have to use accountant services, because most people will not be able to pay taxes properly without it. * high taxes - 42% income tax + Solidaritätszuschlag 5.5% = 47.5%; for corporations it's ~30%. * A LOT of buerocracy. I can't even send an email to tax authorities in my area, because they only accept paper letters but nothing else. * highly qualified foreigners have to learn German and it's quite difficult language. * the market in Germany is much smaller comparing to USA. If you want to target EU, then you have to support a lot of different languages, date/time formats, regulations and laws etc. * recently the EU introduced a lot of additional regulations for internet companies (GDPR, new copyright directives that require checking uploaded files, etc...). * weather is not that appealing as in the valley. * the difference in salaries between regular developers and rockstars is very low. So there is zero motivation to become one. * low salaries for software engineers. The most of senior software developers will earn 50.000 - 60.000 EURO anually and after paying taxes it's only ~2.600 EURO per month (3.000 USD) * poor internet connection in a lot of places / poor connection speed - almost any country is better in this regard
- cabraca 8y ago
  > low salaries for software engineers. The most of senior software developers will earn 50.000 - 60.000 EURO anually and after paying taxes it's only ~2.600 EURO per month (3.000 USD) i have 5 years experience and already earn that much. our most senior staff gets their low 6 figures + bonus. what most dont see is, that additionally to those numbers, your employer pays their share of your healthcare and social security. thats probably another 15% or more. you get at least 20 vacation days. most of the time its around 30. they cant just fire you because you got sick. and in case you get fired, there is a social security net to catch you. yeah, from an US view it might look like a bad place and i would appreciate lower taxes. on the other hand: my mom is fighting cancer sind 1999. in the US i would already be bankrupt or my mom would be dead. or both
- southerndrift 8y ago
  For startups, taxes for corporations don't matter. You only pay taxes on profits. If you are living off venture capital, then you have none. If you are self-funding with organic growth then you have to make sure that you spend all your profits on growth which you should do anyway. Once you have matured, you can still restructure the company like Apple or Google and turn into an Irish or Estonian company. That's the advantage of the EU. High income taxes are a problem. But that's not a problem for founders since their profits are hidden in the increased value of the company. It's a topic for the employees. They have elected parties that redistribute income. It's their choice how they want to spend their income. If you compare wages between Germany and USA then those taxes haven't made German labor more expensive than US labor. People don't have to earn as much as possible right away because they don't face nothing should they ever become handicapped.
yayana 8y ago
Not mentioned in the article is that the EU is made up of many smaller markets that each demand a lot of customization. The Bay Area has instant access to 300 million consumers before anyone is dealing languages, currencies, etc. B2C is more successful in the EU because barriers relating to foreign vendors are less significant to businesses as consumers.
bogomipz 8y ago
I have a question. Are there any German laws or regulations that prohibit using startups from using stock options as part of total compensation? I thought I remembered hearing something about this once, namely that it wasn't possible in the same way it was possible in the US. Is there any truth to that?
- jlangenauer 8y ago
  Nope, equity is pretty common here as part of comp packages.
- wink 8y ago
  I think the mentality in general is a lot more conservative, financially speaking. So also a lot of employees won't take stock options over a bigger pay. I also think most developers are not in the mood to live like people in SF do - just barely scraping by after accomodation and food. Most people here want to live a good life on their "developer salary" which is already pretty good for Germany in the most cases.

I've been trying to build deep tech startups in Germany for 6 years. I managed to sell the first one I built to a US company (for a very small amount of money) and started afresh after taking a break as an employee. Right now I'm at the point of giving up again because it's so damn hard to find customers here. In my opinion, for deep tech startups the problem is not primarily access to capital but access to customers, as the corporate culture is extremely hostile towards startups. Large corporations are very risk-averse and most of them won't ever consider buying a product from an unproven startup. The ones that want to work with startups often have started their own incubators where they try out ideas by hiring teams and building startups that they fully control (50 % shares belong to the parent company from the beginning). Also, from my experience getting seed funding becomes harder the more experienced you are here: If you just finished university it's easy to get a so-called EXIST grant, which will pay a little more than 100.000 € to fund a team of three people for a year. That's how most (or at least many) of the successful startups get funded here. The thing is, if you have been working for 5 years or more you will be ineligible for that program, and your options for getting seed money are very restricted. This is weird as people with industry experience usually have a much better chance at building something relevant and successful than a recent university graduate with no business experience. They have a much harder time finding money though. There are counterexamples and very successful deep tech startups of course, I just think we could have many more of those if we had a system that actually encouraged and helped people to build these companies. I can understand that many people decide against it, especially when you're a good technician / engineer you can earn much more in industry and there's very little to gain by leaving your position.

jayalpha 8y ago
Agreed. * Lack of capital There is just much less VC available, even if normalized for the difference in size. I know the VC scene a little bit in Germany. Total monkeys. * Lack of attitude Germans are much more hierarchical. Both in science and entrepreneurship I found the American personality much more suited. * Lack of vision You will find money in Germany for a personalized cereal/granola mix shipment service (was just an exapmple, but in fact I think it exits) but if you are into a disruptive technology they will balk. Both have different risks but both also have different pay-offs. Edit: Reasons given due to the downvote
- jayalpha 8y ago
  Why the down-vote? I think I know what I am writing about.
  - yorwba 8y ago
    > Total monkeys.
- hef19898 8y ago
  Your cereal mix service is called Mymüsli. During the time I investigated funding options I was considering to enter a business plan contest. The information given by everyone was that only inovative tech start-ups would be considered. One of the runner ups in the end was a service that allowed you to by food from local farmers, limited to one metropolitan area. I have my doubts that the general start-up ecosystemin germany knows what they are doing.
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Jdam 8y ago
I‘d have been eligible for EXIST, but that program is a bad joke. 100k for 3 persons for one year before tax? C‘mon. That is financial sucide, if you’re in tech these days.
- hef19898 8y ago
  Yeah, and than you have to pass a panel deciding whether your "idea" is innovative enough. It reminded me more of a game of buzzword bingo than a viable investment procedure. As your not allowed to incorporate before enter EXIST it is just a waste of time. Not to mention that it all depends on how well you are connected at your university, and if government funds are available.
  - destartupop 8y ago
    I'd say the chances of getting a grant are very good, back in the day the success rate was around 50 % and you could apply up to three times (to my knowledge), which made it highly likely that you'd get the money if you were persevering. It's true that you have to choose a good university as the quality of the provided coaching and mentorship varies wildly. I can recommend LMU & TU Munich as well as TU Berlin or one of the other well-known technical universities (e.g. RWTH Aachen), to my knowledge they have very good programs. You don't need connections at your university either, you just need to convince a professor to support your application, which they are often happy to do as it counts towards the amount of funding they raised, which is a relevant metric to them. If you can get that money it's really an excellent opportunity and will help you to get further funding, as I said before I just find it sad that nothing comparable exists for experienced people from industry.
    - hef19898 8y ago
      I tried a while back. Not being at one of the universities you mentioned ,I would have been an extension from TU Munich. Funds where hard to come by at that time (right after the elections, so no governmant, no government budget, no EXIST funds). In the end, I talked to all relevant profs at my university, they talked to the giys at TUM, and the feed-back was "no need to tey, your idea is not innovative enough. Try a bank or bet your house." Also the expected time line was around 6 months to get into the program, so for me it would have just been a colosal waste of time. EDIT: While coaching is anive thing, it is access to follow-up funding that matters. At let's be honest in that regard YC is different league all together. And if you don't need funding beyond 100k you really could have used bank in the first place.
sarabande 8y ago
Can you share which deep tech startup companies you find successful in Germany?

tjungblut 8y ago

More money alone won't solve this particular issue. The link that is referenced at the bottom of the article [1] highlights more of these challenges: - Government Policies: Taxes and Bureaucracy - Governmental Policies: Support and Relevance - Entrepreneurial Education at School Stage The first is a much bigger issue than missing capital. [1] https://www.gemconsortium.org/country-profile/64 https://www.gemconsortium.org/country-profile/64

raverbashing 8y ago
Everybody complains about taxes but I don't think that's the most important factor tbh Whenever someone discusses corp. taxes in the US and incorporation it seems it's full of gotchas, corner cases and traps. Not to mention every state having its own legislation as well. Taxes might be higher outside of the US (but then again, they're taxes: no profit, no taxes) but they're not necessarily more complex (though Germany ones are probably not the easiest tbh). Startups exist in more tax complex countries. You can't buy culture, customers and financing, the rest is doable.
- thatsaguy 8y ago
  I don't know the exact situation in Germany or US, but in Italy, the "no profit, no taxes" is definitely not true. Depending on the company type you registered, there's a significant cost to just keep the ability to run the company to _do_ business in the first place. By experience, the dead cost of the smallest company you can run is between 5-15k per year. It might not seem much, but I've heard here on HN over and over how to grow a side/passive income, and there's basically no way to do this here. The moment you want to start a side business, the fixed minimal cost is sunk, so unless you start making a significant sum from the start you're just losing money that eats into your primary income. And there's no legal way to do the business below that. That's not how I understood people in the US do this sort of passive income. It sounds like "no money = no tax", but this is not true here. You often have to pay taxes in advance on the projected income of the next year, even if you never had a business first: the projection is based on god-knows-what market estimates you have no control over. The market segmentation, language barrier and tax situation in EU is a huge burden. If you're working on a niche product you want to start with a wide basin of users, at least as large as the EU block. Sounds stupid to start in a single country. It's doable, but don't expect to start with a small capital, and typically not with the wannabe-VC we have here in the EU. The 100k for 3ppl/year is not a joke.. a "100k-300k" ballpark is very common for startups here. I'd consider that just for marketing, or even then. With this money you basically cannot do anything serious, just considering how hard is to penetrate the market. I've yet to see something in the likes of Stripe in the EU. And a decent replacement for Paypal for smaller setups. I'd love to have candidates here. Accepting money is cumbersome if you're small. This is sad. Workforce is a problem. But not because of talent. The extra regulation here implies a strong commitment when hiring. This forces companies to grow very cautiously. You cannot resize the workforce to match the load. If you grow too much, you may doom the company at the first financial difficulty. This causes a lot of sub-contractual work to be done, with a significant decrease in quality and cohesion. Not to mention, this line of working is being limited more and more over time - I was working as an entrepreneur in the beginning of my career but I cannot do that anymore and have to be regularly employed. I could have started something from scratch much more easily 15 years ago compared to now just due to regulations. I could go on for pages...

eksemplar 8y ago

Germans absolutely do tech startups, in fact they’ve been on the forefront of building tech companies that mirror Silicon Valley, but in German. There’s been a German eBay, PayPal and Facebook. Europe doesn’t really do major companies though, and part of that is certainly a lack of demand to go global from capital investors, but there are other parts as well. Like language and regulation. I went to harzen for holiday this summer, very retro I know, and almost no one spoke English. In fact I had bigger luck with Danish than I had with English because they see so many Danish tourists. I’m not sure Americans can really understand how big the language and cultural barriers are from creating global companies when you’re de-attached from the Anglo-Saxon world. I think the reason that a lot of European startups that made it to the global scence came from Scandinavia, is exactly because we’re so attached to American culture that’s it’s almost second nature to us. Sure we don’t understand American individualism, not really, but we’re all brought up watching American tv-shows and movies, hell American politics and economics sometimes take up more news space than our own national news... The rest of Europe isn’t like that, so while Germany had its own eBay, that made its founders billionaires, no one outside of Germany has ever heard about it. Except for maybe eBay who couldn’t enter the market.

pjmlp 8y ago
Usually when I go around in Eastern Europe I have an easier way trying to speak German than English. And in southern Europe I am lucky to be able to speak most languages, as anyone beyond a certain age hardly speaks any word of English, specially outside the major cities. Which is indeed a challenge, on the other side is also something quite rich, as most traveling Europeans tend to speak fluently three languages on average.
- deleted 8y ago
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- prablenha 8y ago
  As a southern European I'm very happy about this situation. I don't want my country to be like the Scandinavian countries, the GP summed it up pretty well. Everybody knows English and American culture is literally swallowing the local culture. I'm happy with my language and my culture, thank you.

_petronius 8y ago

We do have tech startups here in Germany, and quite a few of them. It's just that they tend to be funded differently, and with less of the wild valuation-speculation that goes on in the US. I'm not sure that's a bad thing. As a corollary, the article cites European data protection law (in the context of not being able to collect usage data to improve the product) as a barrier to building startups which ... is also very wrong. You can (legally! Ethically! GDPR-compliantly!) collect all sorts of data with which to improve your product. I've seen it done, I've done it myself. There are a lot of people here, German and non-German alike, trying to furiously recreate the SV way of doing things, as if that's the only way to build a strong tech industry. To me that's both uninteresting (why replicate the same model everywhere?) and bad business (not all markets are the same, and that's not a bad thing). Maybe people would be more successfully adapting to the local context. It's certainly working for a handful of startup incubators I know in Berlin.

zorkw4rg 8y ago
meanwhile there is not a single tech startup from germany worth talking about, but yeah sure not everyone has to do it the SV way of doing things, like actually being successful
- cabraca 8y ago
  > like actually being successful lets be honest, there is a huge amount of SV startups that bleed CV money like there is no tomorrow. not to mention the ones that failed.
Jdam 8y ago
I’ve lived in Berlin for some years. What I‘ve seen from most of the startup scene there was that people are more collecting memories than building businesses. The predominant mindset was like „we don’t want to take over the world and we will most likely fail anyway“. The successful ones, like Dubsmash, leave for the US after a while. If I, as a German, was to create a startup in Europe today, I’d do so in London.
- 8y ago

roadbeats 8y ago

I moved to Berlin recently and started making a list of “cool” startups and venture capital firms in my public notebook. It can be a reference for people who are curious about the ecosystem here: cool startups: https://github.com/azer/notebook/blob/master/berlin.md#cool-startups https://github.com/azer/notebook/blob/master/berlin.md#cool-... venture capital firms: https://github.com/azer/notebook/blob/master/berlin.md#venture-capital https://github.com/azer/notebook/blob/master/berlin.md#ventu... PRs are welcome.

jacquesm 8y ago
Endeit Capital and Capnamic should be on your list, as well as Project-A ventures and Partech.
- roadbeats 8y ago
  Could you send a PR?
  - jacquesm 8y ago
    No. I don't see why I should log in to another website or make an account there when you already have all the info you need right here.
    - roadbeats 8y ago
      Gotcha. I’ll add it then.
      - jacquesm 8y ago
        Thank you. I'll see if I can dig up some more active German VCs for you, I should have a list somewhere.

mprev 8y ago

Has the author not heard of Rocket Internet? Hello Fresh? Zalando? Contentful? SumUp? Wooga? Deepstreamhub? Delivery Hero? N26?

jayalpha 8y ago
Rocket Internet were just the scumbags that ripped off every US based idea and tried to implement it in Germany. A few "me-too" businesses. Okay. There are very few big ideas that investors in Germany would pour money into.
- yorwba 8y ago
  Their big idea was to copy every idea in markets where the original company hadn't expanded yet. It might not be the greatest technical achievement, but it certainly paid off for them, demonstrating that execution is more important than being the first to have an idea.
  - expertentipp 8y ago
    By "execution" you mean a wasp nest of POs, PMs, MBAs, friends'-friends and lawyers standing over and yelling at engineers and developers imported from Eastern Europe and India?
- fulafel 8y ago
  Very few startups are based on a novel big idea. It's the execution that counts. Dropbox, Google, Amazon, Facebook.. none of those were novel ideas.
- zby 8y ago
  Facebook was not an original idea either.
prablenha 8y ago
I'm European and I have never heard of any of those.

kensai 8y ago

I read this article a few days ago with three different ways of funding a startup in Germany, namely (1) crowdfunding/crowdinvesting, (2) business angels, and (3) wealth families (family offices). http://www.pr.uni-freiburg.de/pm-en/online-magazine/invent-and-establish/strategies-for-the-piggy-bank?set_language=en http://www.pr.uni-freiburg.de/pm-en/online-magazine/invent-a...

mrhackerpoland 8y ago

It's because they don't need to. Startups often include difficult and intense work environment. For exactly what? Better than average compensation discussion is frowned upon in Germany. There is ramphant latent descrimination against people from other countries. Which German company has a foreign born CEO? In US, Google and Microsoft have foreign born CEOs. This is my own experience, so downvoting is only silencing a voice.

chobeat 8y ago
> Startups often include difficult and intense work environment Compared to the USA? Lol, you have no clue. The standard for a software engineer in SV is to take drugs to work 12 hours a day 6 days a week, pay a fucking high rent living with 4 other people and if he's foreigner and freshly arrived, he has to suck his boss' cock everyday because they might take away his visa sponsorship and put him into troubles. In Berlin most people I know work less than 8 hours a day, can afford to have their own apartment at their first or second job and save enough money and energy to go travel somewhere every 3 months. Because you know, we have 30 days of holidays per year.
- dang 8y ago
  In addition to being uncivil, this is wildly wrong ("The standard for a software engineer in SV") and you misread the parent comment. Please post civilly and substantively, or not at all. https://news.ycombinator.com/newsguidelines.html https://news.ycombinator.com/newsguidelines.html
- mrhackerpoland 8y ago
  Startups are not average cushy corporate job. The only way to get any startup to work in EU is by importing immigrants and they'll work hard on their own and compensating them appropriately and making sure they can reach top ranks in a company otherwise no one will ne motivated to work hard. Germany has infrastructure. Taxes are not that bad. Any country which will accept foreigners with open heart and give them opportunities will have plenty of startups. There are still clubs in Germany which do not accept people of color.
- 8y ago

kvz 8y ago

“Germans don’t do tech startups” is obviously clickbait but it’s equally obvious that Germany can’t compete with SF when it comes to startups. As a Dutch founder of Germany based scaleup Transloadit.com I’d say taxes and workforce-legislation are more prohibitive than a lack of funding (tho it may also be a problem for others as clearly there’s less going around). I realize why taxes and protection of the workforce are necessary and am happy to live in a country that sands down some sharper edges of capitalism, but when you are just starting out, it’s overwhelming the amount of money you can’t allocate for more growth, and the commitment/risk that comes with having people on the payroll. Even though we have work, and money to spend on having that done, going that route is like the last resort because it’s so scary (maybe there isn’t money/work next year, what if they become sick, it could just ruin the company). Not even talking about resources needed to get acquainted and comply with the rules. So currently we try to work with freelance/invoicing as much as possible, but that comes with its own set of legal constraints and high costs. Feels a bit like driving with the emergency brake on. If somehow the government could have a special set of lightweight rules for folks just starting out, I think you’d see more startups flourish.

mk89 8y ago

The mindset in SV is to fail fast - yes, with all the consequences for the investors. That's why investing in startups is a high risk investment. And that's also why the cautious way of doing business in Europe doesn't help with the startup economy. Being too cautious prevents from taking high risks. I interviewed several times with startups proud of not having any funding behind. Very nice. Still, my question is... Who cares? The main difference is that in the USA money is constantly being invested, there is a lot of debt but that's the way to innovate. In Europe on the other hand, if you fail, or if you make debts you better hide yourself.

iforgotpassword 8y ago
I agree. The way to run startups and maybe to some extend tech companies in general seems not that compatible to the German mind set. Every industry Germany is or was internationally successful in rewards you for being precise, optimizing a lot and generally investing a lot of time. It's pretty much the opposite of the fail fast approach where you quickly cobble something together, throw it at the wall and hope it sticks, if it does, you start to think about everything else. (Inb4 counter-examples. Yes this is oversimplified, exaggerated, stereotyped)
hnkf 8y ago
This is precisely why I despise startup culture. What about the risk for the workers and your customers? What are the grand innovations you think Europe couldn’t produce because we’re more careful?
- mk89 8y ago
  Workers know what they are getting into. Customers know what they are buying. It's an ecosystem that lives on its own. Could you think of Google made in Europe? In Germany, in France, or in Italy? It's no wonder that many Europeans tend to go and live in the USA for that reason.
  - mirko22 8y ago
    That’s very presumptuous, there is loads of US people in Europe too... And you could argue if Google was startup back then or not. I would say not.

dschuetz 8y ago

In Germany most start-ups are self-funded with maximum personal risk. That means that you only fail once, after that you'll never be able to recover from bankruptcy only to do your next thing. As Germans are not known to be risk taking folks it's understandable why there are slim chances for the next Silicon Valley in Germany. It's all about risk and risk taking. Tweak those parameters economy-wise, then we talk about bold entrepreneurship.

beberlei 8y ago
I doubt that is true, do you have numbers for this claim? I see many companies founding limited structures (UG or GmbH) to have avoid maximum personal risk. It can be done with just 1€ of capital.
- dschuetz 8y ago
  You still need liability capital for a GmbH (e.g. LLC) which most start-ups just don't have. They start off single or as a GbR with a second or more partners, and then eventually change the company liability type to GmbH, when they generated the capital needed. A real start-up doesn't have to be a GmbH at all. In fact about 2/3 are single start-ups in Germany with maximum personal risk, not even GbR which is only 8%. The rest are GmbH with 30% which also counts start-ups with a bigger company as backer. That paper is a bit dated, and in German, but still the general assumption that most start-ups are poor remains true for Europe, not only Germany. https://www.destatis.de/DE/Publikationen/WirtschaftStatistik/UnternehmenGewerbeanzeigen/Unternehmensdemografie_62013.pdf https://www.destatis.de/DE/Publikationen/WirtschaftStatistik... What is true though, a UG (e.g. Ltd), is an alternative to GmbH in terms of liability and capital. The 1 euro capital is a joke, imho. Because no sane credit institute would lend you money when they see your tiny liability investment. However, it is possible to make your business legal and profitable, and then borrow some money. But, honestly, starting with literally nothing is like starting a new game at maximum difficulty and perma-death, and who does that in RL?

mrhackerpoland 8y ago

Startups need immigrants. Germany only accept immigrants from EU, not from China or India which produce cheapest empoyees offering max value. One key difference is that Startups lack fund. So either: 1. Funding be made more generous by offering tax advantages to invesitors 2. Or, biggest expense are employees, so we need employees accepting a dream stock unit and very low wage, so we can hire more of them. But I've talked with German employees, literally, none of them will accept more money for more work. There is very strong emphasis on work life balance unlike US. So only way to overcome this issue is to get larger funding and that's smth government needs to fix. That way startup can become more competitive.

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jlangenauer 8y ago
This is not true. I'm Australian, and it was easy to get my Blue Card, and more recently my permanent residency in Germany. Compared to the nightmare of dealing with the UK Home Office, moving to Germany was a breeze. (For those who don't know: if you have a 4-year degree, and can get a job-offer that pays €48K or above, you can easily get a Blue Card, which lets you work in Germany. Keep that job, and after 21 months, you can get a Niederlassungserlaubnis (permanent residency) with B2-level German, or after 33-months with rudimentary German. It's an amazing deal.)
blue_box 8y ago
I've moved from non-EU country to Germany.

mrhackerpoland 8y ago

The largest German startup is Wirecard. If you received a prepaid card from online service like Payoneer, highly likely you've consumed services of this startup indirectly. There is also Dr. Bentz, creator of Bentz Bone which many people in Silicion Valley have used.

stesch 8y ago

The difference is: We have labor laws.

NotCamelCase 8y ago
Why is not there a middle ground between hire-and-fire-quick vs very strong/rigid labor laws that would give more optimized/successful end results for most involved than either of the two extreme points would generate? On one hand, I certainly would not want what's happened to e.g. Telltale employees who recently got laid off abruptly with no severance packages to happen to any of my friends/family. On the other hand, if you want a pool of opportunities of strong growth to co-exist within your economy, you gotta relax and give some room for those of us who are or want to be innovative. Come to think of it, with the safety net that is provided in most developed European countries (e.g. Sweden, Norway) one would think that there'd be more innovations (normalized by metrics like population, etc.) generated there than say, the USA but I doubt that is the case here without having any numbers or proof. Is it the scale that matters most or what am I missing? Overall, I for one wouldn't still trade strong labor laws with being the most innovative place but I do still hope for a better middle ground for everyone.
- jashmatthews 8y ago
  Germany has trial periods for employees. If you put in the contract you can terminate the contract without reason for up to 6 months. It goes both ways. Employees can leave with almost no notice during the same period.
kodablah 8y ago
If amount/size of labor laws are inversely proportional to startup quality/quantity, how come a state with the most has more success than states with less? Because it's not the reason anymore than any other difference.

zenovision 8y ago

Germany has a lot of drawbacks to be the next silicon valley: * the most difficult tax system in the world. even freelancers have to use accountant services, because most people will not be able to pay taxes properly without it. * high taxes - 42% income tax + Solidaritätszuschlag 5.5% = 47.5%; for corporations it's ~30%. * A LOT of buerocracy. I can't even send an email to tax authorities in my area, because they only accept paper letters but nothing else. * highly qualified foreigners have to learn German and it's quite difficult language. * the market in Germany is much smaller comparing to USA. If you want to target EU, then you have to support a lot of different languages, date/time formats, regulations and laws etc. * recently the EU introduced a lot of additional regulations for internet companies (GDPR, new copyright directives that require checking uploaded files, etc...). * weather is not that appealing as in the valley. * the difference in salaries between regular developers and rockstars is very low. So there is zero motivation to become one. * low salaries for software engineers. The most of senior software developers will earn 50.000 - 60.000 EURO anually and after paying taxes it's only ~2.600 EURO per month (3.000 USD) * poor internet connection in a lot of places / poor connection speed - almost any country is better in this regard

cabraca 8y ago
> low salaries for software engineers. The most of senior software developers will earn 50.000 - 60.000 EURO anually and after paying taxes it's only ~2.600 EURO per month (3.000 USD) i have 5 years experience and already earn that much. our most senior staff gets their low 6 figures + bonus. what most dont see is, that additionally to those numbers, your employer pays their share of your healthcare and social security. thats probably another 15% or more. you get at least 20 vacation days. most of the time its around 30. they cant just fire you because you got sick. and in case you get fired, there is a social security net to catch you. yeah, from an US view it might look like a bad place and i would appreciate lower taxes. on the other hand: my mom is fighting cancer sind 1999. in the US i would already be bankrupt or my mom would be dead. or both
southerndrift 8y ago
For startups, taxes for corporations don't matter. You only pay taxes on profits. If you are living off venture capital, then you have none. If you are self-funding with organic growth then you have to make sure that you spend all your profits on growth which you should do anyway. Once you have matured, you can still restructure the company like Apple or Google and turn into an Irish or Estonian company. That's the advantage of the EU. High income taxes are a problem. But that's not a problem for founders since their profits are hidden in the increased value of the company. It's a topic for the employees. They have elected parties that redistribute income. It's their choice how they want to spend their income. If you compare wages between Germany and USA then those taxes haven't made German labor more expensive than US labor. People don't have to earn as much as possible right away because they don't face nothing should they ever become handicapped.

yayana 8y ago

Not mentioned in the article is that the EU is made up of many smaller markets that each demand a lot of customization. The Bay Area has instant access to 300 million consumers before anyone is dealing languages, currencies, etc. B2C is more successful in the EU because barriers relating to foreign vendors are less significant to businesses as consumers.

bogomipz 8y ago

I have a question. Are there any German laws or regulations that prohibit using startups from using stock options as part of total compensation? I thought I remembered hearing something about this once, namely that it wasn't possible in the same way it was possible in the US. Is there any truth to that?

jlangenauer 8y ago
Nope, equity is pretty common here as part of comp packages.
wink 8y ago
I think the mentality in general is a lot more conservative, financially speaking. So also a lot of employees won't take stock options over a bigger pay. I also think most developers are not in the mood to live like people in SF do - just barely scraping by after accomodation and food. Most people here want to live a good life on their "developer salary" which is already pretty good for Germany in the most cases.