A Glance on German Startup Culture

Author: Thilo Koch

When people around the world think of Germany and its economy, probably other things come to mind than the digital startup scene. Renowned car builders like BMW, Mercedes, and Porsche; software giant SAP or headphone manufacturer Sennheiser could be your first guesses. A (wo)man of vast reading might have heard of the German “Mittelstand,” too: Mid-sized companies that are “hidden champions” in their category, oftentimes still run in long family tradition. A prominent example is special glass manufacturer Seele, a company that delivers the giant concave glasses for Apple’s new UFO headquarters.

However, the successes of the old economy now have to be transformed to the digital era. In order to achieve that, much more than machines have to be changed: the German culture has long promoted values like stability and humility, and graduates often settle for the less risky job alternative of joining an established company, rather than getting their hands dirty in a startup. In my eyes, the risk-averse attitude has to make way for a realization that you can have many jobs during your work life. So, why not start with a more exciting option while you are young and have nothing to lose? – be it founding a startup or helping it grow. This applies not only to Germany, but also to US graduates. However, the US promotes startup failure in a way that no other culture in the world does. In Germany, many people still fear the adventurous step of starting a company because they are frightened to lose a reputation if they fail. Fortunately, this misconception is slowly being shattered in the “old world” and failing is coming to be seen as an invaluable experience.

Aware of this trend, the government is keen to encourage German entrepreneurs and has set up state funds for founding teams (“Exist”) or initiated a venture capital fund (“High-Tech Gründerfond”). In order to promote internationalization, they also started 3-month accelerator programs in Silicon Valley, and as of late, in New York. Nevertheless, venture capital is still a scarce commodity, and difficult to obtain in Germany. Venture capital in Germany amounts to only around one tenth of Silicon Valley’s invested capital in 2014 ($~3bn vs. $30bn). In the opinion of German-born Peter Thiel, this is also due to the fact that German founders don’t go for the long end, but rather settle for the $50m exit. Thus, their VCs never receive a big return on investment, from which VCs normally boost and leverage their returns.

Peter Thiel might have a point, because Germany is still waiting for its first Internet tech star to be born. Historic success stories center around e-commerce models and companies that are exceptional in execution and internationalization. The most prominent example thereof is e-commerce company builder Rocket Internet, whose vision is to be the home screen of the world (USA and China intentionally excluded). They basically run Amazon or Zappos-like business models in every continent and profit from the fact that US companies barely target markets other than their domestic one. While some people say they only produce copycats, others would rather highlight the challenges Rocket Internet tackles: To adapt their products to the peculiarities of their 100+ markets they operate in and actually make it work. Having set up a remarkable infrastructure of bringing a proven business model to any market in 90 days, they have grown massively since their foundation in 2007.

Apart from that, other highly valued startups that seem promising include ResearchGate, a platform for scientists, in which Bill Gates and Peter Thiel are invested; Stylight, an affiliate-based fashion catalogue and magazine; and Freeletics, a fitness app that is on the verge of skyrocketing. Moreover, only recently, Peter Thiel and Earlybird announced an investment in German Fintech startups Number26 and Kreditech, who want to revolutionize banking. Of course, this selection is only a small sample and should be taken as a starting point for enthusiasts.

Speaking of your personal starting point in Entrepreneurship, I hope more and more (German) graduates take that advice: If you don’t feel comfortable to start your own startup at first, join a rocket ship, acquire your toolbox and eventually try it yourself. Alternatively, just have an exciting job in the fast-changing Internet industry that still pays well – due to the lack of experts in the digital space. If you are among the first risk takers in a company and a good negotiator, you might even get a share of the company. Who doesn’t want to end up like the lucky employees of Facebook, Instagram, or Airbnb, who are cashing in on their shares? Doesn’t that sound more promising than trying to climb up a never-ending corporate ladder?

April studies Neuro-Cognitive Psychology at Ludwig-Maximilians-Universität and started CDTM in Fall 2014. She is interested in how we affect, and are affected by, technology in our increasingly digital world.