Senior founders

German Start-ups Are Developing an Age Problem

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The proportion of start-up founders over 45 has doubled in recent years. Source: dpa Picture-Alliance

Jörg Bienert was 41 when he quit regular employment to found his first software start-up in 2007, and very comfortably in his mid-40s when in 2011 he set up Parstream, a data analytics company he sold to US giant Cisco Systems four years later. “There was so much opportunity,” the Cologne-based entrepreneur enthused about his career switch.

A shining example of the virtuous circle of entrepreneurship (founding, sale, re-investment of proceeds), Mr Bienert is also a symbol of a very German start-up phenomenon: The country’s tech entrepreneurs are old, and getting older – no 19-year old Facebook founders here. Almost 20 percent of German tech company founders were over 45 last year, twice the level seen three years earlier, according to KPMG’s German Start-Up Monitor 2016.

Younger entrepreneurs have to contend with two problems – a small venture-capital scene; and a university system that, despite its size and renown for technical education, still fails to create founders. Only 6 percent of startups are spinoffs from universities or research institutions, according to the German federal education and research ministry.

“American universities are three steps ahead of us Germans in terms of spinoffs”

Florian Nöll, Chairman, the German Startups Association

But Johanna Wanka, the minister in charge of that government department, hopes to boost universities’ start-up activity – and by extension to lower the age of entrepreneurial activity. Over the coming years, she plans to double federal funds for spin-offs from the €150 million ($178.4 million) allocated in 2015. In a five-point plan seen by Handelsblatt, Ms. Wanka pledges to revamp Germany’s academic culture to make it more conducive to enterprise.

Indeed, the position paper talks of fostering nothing less than a “new Gründerzeit” for startups – a term that harks back Germany’s rapid industrialization and modernization in the latter half of the 19th century and shows just how important start-up support has become for German politicians. Hardly any sector has recently enjoyed more political attention.

Since 2013, hundreds of millions of euros have been made available to foster young entrepreneurs’ ideas. Twelve tech hubs – where startups can network with established companies – have spring to life, or are being planned; Economic Affairs Minister Brigitte Zypries hosts regular meetings with female founders to find out about their needs; Finance Minister Wolfgang Schäuble promised – and delivered – less red tape and tax relief.

According to consultancy EY, venture capital invested in German start-ups hit a record €2.2 billion in the first half of 2017, twice the amount seen in the same period the prior year. But with US data service Crunchbase reporting investments in the US totaled about €37 billion, it is clear Europe’s largest economy is still waiting for a real breakthrough in start-up support.

Florian Nöll, the head of the German Startups Association, sees two reasons for this. “American universities are three steps ahead of us Germans in terms of spinoffs,” he said. “In Germany, no one considers starting a company based on research findings.” Secondly, be bemoaned that politicians had so far failed to take decisive steps to mobilize private venture capital. “Our main request is that the government encourage insurance companies, pension funds and family offices to invest in startups,” he said.

Flanking Ms. Wanka’s university push, Ms. Zypries told Handelsblatt: “We want to double venture capital in Germany in the coming years.” Institutional investors are expected to play a bigger role, with €2 billion in public funds available to top up VC-investments. Both ministers hope more young entrepreneurs will grasp opportunities like Mr. Bienert did.

 

Barbara Gillmann, Dana Heide, Martin Greive are political correspondents for Handelsblatt in Berlin. Chris Cottrell and Gerrit Wiesmann adapted this story for Handelsblatt Global. To contact the authors: gillmann@handelsblatt.com, d.heide@vhb.de, greive@handelsblatt.com.

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