Number of start-ups in Germany was steady at 70,000 in 2019; impact of the coronavirus crisis as yet unclear

• More start-ups plan to use venture capital
• Share of female start-up entrepreneurs was 19%
• Coronavirus crisis acts as a tailwind for digital or internet-based business models

In 2019 the number of start-ups in Germany was 70,000, unchanged from the year before. Thus, the growth trend from the two previous years (2016: 54,000, 2017: 60,000, 2018: 70,000) did not continue. What did increase noticeably, however, was the share of start-ups planning to use venture capital to finance their future growth. Nearly one in five start-ups (19%) – twice as many as in the previous year – were now planning to work with VC partners. These are the findings of the new KfW Start-up Report 2020. In the report, KfW Research surveys young enterprises founded not more than five years ago that are innovation- or growth-driven, offer new-to-market innovations, or conduct research and development in order to make a technological innovation market-ready.

With an average team headcount of 1.8, the 70,000 start-ups represent around 127,000 active entrepreneurs, of whom a good 24,000 are female, putting the share of women at 19%. The noticeable rise in start-ups’ demand for venture capital was also accompanied by an increased supply of capital. Annual VC investment by institutional investors increased 2.8-fold since 2014 to around EUR 1.9 billion in 2019.

There is still no way of telling how exactly the coronavirus crisis will impact on the start-up scene in Germany. In early summer many start-ups feared that the losses in turnover would force them to close before the end of the year. Some financing deals that were believed to be certain also fell through. Venture capital investors, too, expect a higher rate of defaults in their portfolios. The situation has now eased slightly. At the same time, the coronavirus crisis acts as a tailwind for digital or internet-based business models. It remains to be seen whether the number of these new start-ups can offset those that were lost to the crisis.

The Chief Economist of KfW, Dr Fritzi Köhler-Geib, commented on the results of the Start-up Report as follows: “The growing number of start-ups in the past years reflects the level of maturity of the start-up ecosystem. That is a very good development for Germany as a location for innovation. The coronavirus crisis now weighs heavily on this ecosystem because initially more businesses can be expected to fail and fewer start-ups will be taking their place. That is why the start-up support provided by KfW and the German Federal Government was important to stabilise the start-up ecosystem. But the crisis can also act as a catalyst, particularly for new digital business models. Entrepreneurs can seize this opportunity, and the positive development of Germany’s VC market will surely help them. By international comparison, Germany still lags behind in start-up finance, but we are on the right track.”

The KfW Start-up Report 2020 is available for download at www.kfw.de/PDF/Download-Center/Konzernthemen/Research/KfW-Start-up-Report/KfW-Start-up-Report-2020_EN(PDF, 531 KB, non-accessible)