Starting up Your Business in Germany.

Ten Reasons to found your Business / Startup in Germany

1 The largest economy in Europe

with 83 million citizens and a gross domestic product (GDP) of about 4 trillion US dollars

2 In the center of the European Union (EU)

with 28 member countries Germany is a gateway providing access to the common market of 500 million people generating a gross domestic product (GDP) of about 20 trillion US dollars per year equalling to about 25% of global GDP (for comparison: USA 19 trillion USD, China 14 trillion USD)

3 A strong startup ecosystem

with a mix of private and public organisations offering advise and funding. As per the Startupblink Startup Ecosystem Ranking Germany ranks no. 5 out of 125 countries (behind the USA, UK, Canada and Isreal) and after the Brexit it is now the leading startup ecosystem in the EU.

4 Third largest exporter

after China and the US with the largest trade surplus powered by the German Mittelstand with its Hidden Champions, Germany ranks third in the Deloitte 2016 Global Manufacturing Competitiveness Index.

5 One of most innovative countries

as Bloomberg ranks Germany as the most innovative country in the 2020 Bloomberg Innovation Index overtaking South Korea. “In the Bloomberg Index, Germany scored three top-five rankings in value-added manufacturing, high-tech density, and patent activity.”

6 A stable democracy

with a sound administrative and a good social security system. It is also very safe to live in (out of 38 OECD countries only the UK and Japan have a lower homocide rate).

7 A well trained workforce

including the unique dual vocational training system

8 A strong sense for quality

as well as an international reputation for it as reflected in the “Made in Germany” brand, which has the best image according to the Anholt-GFK Nation Brands Index in 2017

9 Globally well connected

with good infrastructure and ranked as the fourth best connected country out of 118 countries by the McKinsey Global Institute. in 2016 and ranked 7th out of 140 countries in the DHL Global Connectedness Index 2016

10 Leading land of immigration

with the largest immigration number of all OECD countries in recent years resulting in the inflow of new ideas and a global outlook (19.3 million people, i.e. 23% of the German population, have a “migration background”, i.e. themselves or at least one of their parents were not born with a German citizenship); Germany is offering working visas for startup founders and qualified international employees (e.g. Bluecard for engineers, IT etc., see under “Legal” for more details)

German Startup Scene

Google selected eleven startups (out of 1200 applications) for it new sustainable development accelerator program. Two German startups have been chosen: Apic.ai (Karlsruhe), which is using honeybees as biosensors to provide intelligence in the fight against the perishing of insects and Ororatech (Munich), which is the first commercial supplier of infrared satellite data for early detection and real-time monitoring of wildfires across the globe.

Germany has been ranked as the best country for entrepreneurship among 80 countries based on ten relevant attributes by US News / Wharton in 2018. “For the third consecutive year, Germany grabs the No. 1 position. True, creative energy does cluster in the country’s major cities, helping make Germany a startup haven.” (Also ranked in the top 10 best countries in the following categories: most modern, quality of life, power, most forward-looking, headquartering a corporation, most influential, transparency, green living, education, women and best countries overall.)

Munich (ranked 3rd), Duesseldorf (6th)  and Frankfurt (7th) are among the top ten cities globally with the best quality of live according to Mercer’s annual Quality of Living survey in 2018

The leading startup regions in Germany are Berlin (16,8%), Rhine-Ruhr Area (11,3%), followed by Stuttgart/Karlsruhe, Hamburg, Hannover/Oldenburg und Munich – all in the 6% range (KPMG Deutscher Startup Monitor). In addition other major startup regions include Frankfurt/Rhein Main Area and Leipzig/Dresden.

As per KFW 557,000 businesses (of those 234,000 full-time and 323,000 part-time) were founded in 2017 (14% less than in 2016). However, R&D driven startups increased by 31% to 76,000.

Startups are job creation machines and employ on average 13.2 employees including the founders (KPMG Deutscher Startup Monitor).

Top 100 German start-ups account for accumulated funding of USD 8.5 billion. Main cities were German investors are located: Berlin (21%), Munich (11%), Frankfurt (10%), Hamburg (8%), Stuttgart (6%)  (EY: Venture Capital and start-ups in Germany 2017)

The top 10 Venture Capitalists in Germany: High-Tech Gründerfonds (Bonn), HV Holtzbrinck Ventures (Berlin, Munich), Siemens Venture Capital (Munich),  Wellington Partners (UK, Munich),  Global Founders Capital (Berlin), EarlyBird Venture Capital (Berlin), Point Nine Capital (Berlin), Star Ventures (Israel, Germany), KfW Group (Frankfurt, Germany),  Deutsche Telekom Capital Partners (Hamburg) (Source: Dr. Hempel Network)

Deloitte Tech Hub Index for the German Top 10 Metropolitan Regions (out of 50 in total):

1 Munich
2 Berlin
3 Darmstadt
4 Hamburg
5 Stuttgart
6 Erlangen
7 Dresden
8 Frankfurt am Main
9 Karlsruhe
10 Aachen

Record cross-border capital flows into European tech – Germany second largest Investment Destination

Source: dealroom.co

Finally the (final?) Future is arriving

6G @ 1000 Gbps

Samsung’s 6G White Paper: “It is envisaged that the number of connected devices will reach 500 billion by 2030, which is about 59 times larger than the expected world population (8.5 billion) by that time. Mobile devices will take various form-factors, such as augmented reality (AR) glasses, virtual reality (VR) headsets, and hologram devices. Increasingly, machines will need to be connected by means of wireless communications. Examples of connected machines include vehicles, robots, drones, home appliances, displays, smart sensors installed in various infrastructures, construction machineries, and factory equipment. … Note that current AR technology requires 55.3 megabits per second (Mbps) to support 8K display (with one million points), which can provide enough user experience on a mobile display. However, in order to provide truly immersive AR, the density should be largely improved and it will require 0.44 gigabits per second (Gbps) throughput (with 16 million points). In addition, XR media streaming may have similar demands to 16K UHD (Ultra High Definition) quality video. For example, 16K VR requires 0.9 Gbps throughput …”

AI and Quantum Computing are advancing each at least at double exponential rate – what happens (if and) when singularity is reached?

At Singularity AI will be smarter than humans and it will be able to improve itself at a very high speed. Currently, experts discuss not anymore if Singularity will be achieved, but only when. As per Peter Diamandis Singularity will occur likely in 20-30 years from today. After this point the rate of change will be so fast, one cannot predict what will happen next. “Is this good news? I am personally excited about it.” It is like an event horizon, after this you cannot know what will happen afterwards.

Moore’s law, observed first by Gordon Moore in 1965, states that classical/traditional computer chips double computing power by every 18 to 24 months, i.e. they get more powerful expotionally, like 2^1=2, 2^2=4, 2^3=8, 2^4=16 …
Here is an excellent video by Peter Diamandis explaining what “simple” exponential growth means. It was recorded in February 2018. But “simple” exponential growth was yesterday, here is why! So possibly Singualarity will occur even earlier than projected.

According of Sam Altman, chairman of OpenAI and former chairman of Y Combinator (the most prominent startup accelerator globally), an expotential law also applies to advances in artifcial intelligence.

Hardware is improving at an exponential rate—the most surprising thing I’ve learned working on OpenAI is just how correlated increasing computing power and AI breakthroughs are—and the number of smart people working on AI is increasing exponentially as well. Double exponential functions get away from you fast.

So like 2^2^1 ,2^2^2 ,2^2^3 ,2^2^4,…. Resulting numbers get very large in a few years time (just check it out with Excel). 

Now replace classical computers with the emerging quantum computers, which grow possibly double exponentially as well as per Neven’s law. Hartmut Neven is the director of Google’s Quantum Artificial Intelligence lab. 

That rapid improvement has led to what’s being called “Neven’s law,” a new kind of rule to describe how quickly quantum computers are gaining on classical ones. The rule began as an in-house observation before Neven mentioned it in May at the Google Quantum Spring Symposium. There, he said that quantum computers are gaining computational power relative to classical ones at a “doubly exponential” rate — a staggeringly fast clip.

With double exponential growth, “it looks like nothing is happening, nothing is happening, and then whoops, suddenly you’re in a different world,” Neven said. “That’s what we’re experiencing here.”

(Source: Quantamagazine)

On January 29, 2021 I attended the online Meetup “Exploring Quantum Computer and Qiskit with a Rasberry Pi”, which was basically showing how to access IBM’s quantum computer services with a Rasberry Pi. IBM has a roadmap to increase the number of qubits every year until 2023 and beyond (2019: 27, 2020: 65, 2021: 127, 2022: 433, 2023: 1121 and by 2030: 1 million). Google and other companies have similar plans.

“As physicists and computer scientists, we are fascinated by the fact that with only 300 quantum mechanical bits, it is possible to calculate with more states simultaneously than there are atoms in the universe.” (Niklas Hegemann, one of the managing directors of JoS Quantum in FAZ article March 10, 2021)

“Two bits in your computer can be in four possible states (00, 01, 10, or 11), but only one of them at any time. This limits the computer to processing one input at a time. … We can say that if you have “n” qubits, you can simultaneously represent 2^n states. … In a quantum computer, two qubits can also represent the exact same four states (00, 01, 10, or 11). The difference is, because of superposition, the qubits can represent all four at the same time. … each additional qubit doubles the processing power. Three qubits gives you 2^3, which is eight states at the same time; four qubits give you 2^4, which is 16. And 64 qubits? They give you 2^64, which is 18,446,744,073,709,600,000 possibilities! That’s about one million terabytes worth.” (Cosmos Magazine)

Here is a good video how quantum computers principally work: Quantum Computing: Untangling the Hype by the Royal Institution at the University of Cambridge.

Triple exponentially (2^2^2^n) grows even faster – we should very seriously listen to Elon Musk and his thoughts on the danger of AI (see video below) before it is potentially too late.

Here is a glimpse of this not too distant future (read it to the end please!): OpenAI’s GPT-3 may be the biggest thing since bitcoin

News Ticker

“The German Bundestag approved a massive investment of state capital to promote start-ups in the country. The 2021 budget will see the government provide €2.4 billion via Germany’s developmental bank, the KfW, and other channels to help new and growing companies scale up their activities. … The government has committed to investing a total of €10 billion between next year and 2030. It is hoped that this financial infusion will create an additional €20 billion in private venture capital investments.” Source: PRNewswire / German Trade & Invest This is indeed a significant amount given that the total VC invested amount / deal flow in Germany was about EUR 5 billion in 2019.

Bloomberg ranks Germany as the most innovative country in the 2020 Bloomberg Innovation Index overtaking South Korea. “In the Bloomberg Index, Germany scored three top-five rankings in value-added manufacturing, high-tech density, and patent activity. South Korea lost its crown in part due to a relative slump in productivity, falling to No. 29 from last year’s No. 18 ranking in that category. …

Still, Brzeski cited several reasons why Germany shouldn’t be complacent about its innovation standing. Its services innovation is much less impressive, and about a third of research and development spending is in the auto industry, meaning “disruption and longer weakness of this sector could weigh on Germany’s innovative strength,” he said.

Germany’s status as a manufacturing giant has been built on the car-making industry, but pollution concerns, trade conflicts and slowing economies have weighed on demand.”

As per the EY Startup Barometer from Jan. 2020: “The financing boom in the German start-up segment continues: Young companies were able to raise more fresh capital in 2019 than ever before. In total, they received EUR 6.2 billion, 36 percent more than in the previous year. The number of financing rounds rose by 13 percent to 704.” The strong increase is mainly caused by Software & Analytics startups as the number of fundings in this area rose by 53 percent from 149 to 228.

On July 10, 2019 Nesto and Heisenberg Quantum Simulations have won the founder pitch at KIT’s Neuland annual innovation day in Karlsruhe. Nesto uses AI to schedule working hours of personnel. HQS is developing quantum algorithms to predict molecular properties of chemicals. Merck (Darmstadt) is cooperating with HQS. (In April BASF invested in Zapata Computer located in Cambridge, Massachusetts, USA. The startup is active in the field of quantum computing as well.) Dr. Wieland Holfelder, Vice President Engineering and Head of Google development center in Munich (Google Germany GmbH), also stressed that Google is now focusing on quantum computing during his presentation at Neuland. Very interesting was also the startup Prenode, which enables the exchange of AI models between companies (without sharing the data). Bascially AI models become tradable. Prenode has founders from KIT and MIT. Overall the Neuland innovation day has demonstrated the high technical level of KIT.

Merck from Darmstadt/Germany and the oldest pharmaceutical company is looking to partner with 20 African healthtech startups in the new “MERCK – MAKE-IT AFRICA STARTUP PROGRAM“, application deadline is July 17, 2019

Startups from Berlin (3 winners) Darmstadt (2 winners) and Munich (1 winner) have won in the startup competition “Digital Innovation” by the German Ministry of Finance and Energy on May 15, 2019.

SET Award 2019 honours five start-ups in the fields of climate protection and energy transition. SET is a global initiative that identifies leading start-ups in the fields of energy transition and climate protection and brings them together with companies, investors and other start-ups. It includes the SET Award, the SET Tech Festival and the SET Network. Across the globe, more than 100 partners from politics, industry, science and non-government organisations are getting involved. The present round of the competition is being supported by partner countries Canada and Sweden, the German 1Federal Ministry for Economic Affairs and Energy, plus many other partners and sponsors.

Munich, Berlin and Darmstadt scored the top three positions out of 50 cities ranked in total as Germany’s leading digital hub. For the subindex “Tech Hub Potential” the ranking was Munich first, Darmstadt second and Berlin third.

Germany launches digital strategy backed with EUR 3 billion in public funding to become artificial intelligence leader (DW)

IW Consult together with WirtschaftsWoche und ImmobilienScout24 published the yearly German city ranking with 100,000 citizens or more. Munich scored first in the prosperity level ranking category and dynamic ranking category whereas Darmstadt scored no. one in the future ranking category.  The overall city ranking:  Munich (1st), Ingolstadt (2nd), Stuttgart (3rd), Erlangen (4th), Wolfsburg (5th), Frankfurt (6th), Regensburg (7th), Augsburg (8th), Darmstadt (9th) and Würzburg (10th). Hamburg (11th) drops out the top 10 compared to last year. In the future ranking category Erlangen (2nd) and Stuttagart (3rd) follow Darmstadt (1st).

KfW-Start-up-Report 2018 has been released in German. In 2017  the number of innovative startups (i.e. those conducting R&D or introducing a new product to the German market and founded within the last five years) in Germany increased by 16% from prior year to 108,000. As top three barriers for startups, who are innovative and fast growing (in total 29,000 startups) the following is reported: Gaining customers, financial risk and recruitment. Across all startup categories bureaucracy is major issue.

An interesting piece of research given some quantitative feeling for the high failure rate of startups “Dissecting startup failure rates by stage

Germany has been ranked third (after the US and Singapore as well as overtaking Switzerland compared to last year) out of 140 countries in the Global Competitiveness Index of the World Economic Forum. “How well countries adapt to the Fourth Industrial Revolution (4IR) will determine whether they ‘thrive’ or ‘stagnate’ …” Germany scored the top position in the subindex innovation capability and 2nd in the subindex business dynamism.

formnext, the international exhibition and conference on the next generation of manufacturing technologies, will take place in Frankfurt from November 13-16, 2018. In the „formnext Start-up Challenge 2018“ five startups received an award, two from Germany (AMendateKumovis), one each from France (Aerosint), the US (Fortify) and Canada (Nanograde).

More than 125 startups from the area of industrial tech and smart services – VR/AR, IoT, robotics, AI, block chain, and cyber security – will present their digital innovations at the Digital Demo Day 2019 in Duesseldorf on February 7, 2019.

In order to promote the startup scene in the chemical industry and related industries like biotech the Society of German Chemists (GDCh) , DECHEMA (expert network for chemical engineering and biotechnology in Germany), the VCI (Association of the erman Chemical Industry) und the German Startup Association as well as the Business Angels Network Germany and the High-Tech Gründerfonds have joined forces to found the „Forum Startup Chemie“.

Overview

Germany Trade & Invest (GTAI)

Insights into Germany’s Startup Scene (Deutsche Welle)

Taking off: A new breed of German startups (The Economist)