When are you going to be profitable?
“That is the first question German investors ask before they consider getting on board a start-up,” said Steffen Kiedel of the Berlin start-up 6Wunderkinder. “American investors are more interested in the company story, and they answer more quickly, whether they’re interested or not.”
Mr. Kiedel is the chief financial officer of 6Wunderkinder, the first German company to receive funding from U.S. venture-capital firm Sequoia Capital.
The American Chamber of Commerce in Germany is making an effort to bring young entrepreneurs and U.S. investors together regularly to promote the German start-up scene.
“There are a lot of good ideas in Germany,” Andreas Povel, the chamber’s managing director, said Thursday at the first of such networking event. But implementation of these ideas, he added, often falls flat because of financing issues.
“Venture capital is lacking on all fronts,” Mr. Povel said.
German customs hinder young entrepreneurs, even before things even get started, according to some U.S. experts.
“I have heard from many entrepreneurs in Germany that participating in entrepreneurship is seen from the perspective of ‘getting yourself into debt,’” said John B. Emerson, the U.S. ambassador to Germany. “This attitude dampens the willingness to experiment, something that is essential for a start-up culture.”
“We don’t lack ideas, we lack the financing, everyone knows that.”
The German Startups Association and auditing firm KPMG reported in their Startup Monitor in September that only one out of five start-ups had venture capital funding. Most entrepreneurs rely on their personal savings.
“German and European investors are not willing enough to provide entrepreneurships with financial reward in advance,” said Erik Heinelt of the Startups Association. And investment is needed for continuous financial growth, even more than for the initial push. “This is decisive in creating successful firms out of good ideas that can also be international,” he added.
Mr. Heinelt emphasized the need for German investors to engage – or risk losing the most innovative entrepreneurs and the best minds to the United States.
Most tech start-ups in Germany are located in Berlin, and many of them have with annual revenue of more than €10 million. “There is unbelievable talent here,” said Irena Goldenberg of Highland Capital Partners, a U.S. venture capital firm with a branch in Switzerland.
“We don’t lack ideas; we lack the financing, everyone knows that,” said Tim Dümichen of KPMG, questioning why so few investors in Germany are willing to support start-ups “That really needs to be scrutinized now.”
Silke Kersting was a Handelsblatt correspondent in Madrid for three years before returning to Berlin. She specializes on consumer issues, construction and environmental politics. To contact the author: firstname.lastname@example.org