Number of start-ups overcame the coronavirus downturn to grow again in 2021

• 61,000 innovative or growth-oriented businesses
• Number of start-ups receiving venture capital remained steady
• Fewer female start-ups, particularly among those seeking VC finance

The number of innovation- or growth-driven young enterprises in Germany has recovered again. The number of start-ups grew to 61,000 in 2021, after the coronavirus-induced downturn in 2020 saw a drop in numbers to 47,000. The increase last year is primarily due to the revival of entrepreneurial activity. Pushed by this base effect, the number of start-up businesses rose again. The structure of entrepreneurial activity changed at the same time. Businesses were founded by significantly more young entrepreneurs (under-30s), which is also having a positive effect on the number of start-ups as the projects of younger entrepreneurs are more likely to have start-up characteristics. These are the findings of the KfW Start-up Report 2022, which is based on the KfW Entrepreneurship Monitor.

Dr Fritzi Köhler-Geib, Chief Economist of KfW, commented: “The recovery in the number of start-ups in Germany is good news because innovative and growth-oriented businesses drive change and the further development of the economy and society, as well as playing a special role in tapping into new markets and developing jobs that are fit for the future.”

For start-ups with very high capital or growth needs, venture capital can be a method of financing that fits their cash flow and risk profile. It has been found that entrepreneurs wishing to use VC are more likely to have characteristics that make it easier for them to access VC. They are more likely to combine an orientation towards innovation and growth, more likely to have an academic background, and much more likely to have digital offerings, Internet-based business models and international target markets. However, only a fraction of start-ups seeks to obtain VC finance. Of the 61,000 start-ups, only 12% ( 7600) wanted to finance their future growth this way in 2021. Unlike the total number of start-ups, their number is less volatile.

The long-term average share of female entrepreneurs in the start-up ecosystem sits at 19%, half as high as in all newly founded businesses (39%). In start-ups seeking VC finance, the share of female entrepreneurs is 12%. This suggests that female start-up entrepreneurs are less likely to seek VC than their male counterparts, which other surveys have confirmed. There can be different reasons for this. One of them may be that a larger proportion of business models, business goals or views about finance entertained by female-headed start-ups are less compatible with VC as a financing tool. Limitations on the supply side may be another reason. Thus, female entrepreneurs have greater difficulty obtaining VC, for which (unconscious) bias on the part of VC providers evidently plays a role as well.

“The continuing low share of women in the start-up scene remains a fly in the ointment in what is generally a positive trend. Gender stereotypes remain powerful, both among many female entrepreneurs and on the part of potential financing partners. The whole of society is called upon to make sure that gender and background no longer play a role in founding and financing innovative and fast-growing businesses because after all, Germany depends on realising its full innovative potential wherever possible”, said Dr Fritzi Köhler-Geib.

The KfW Start-up Report 2022 is available for download at
KfW Entrepreneurship Monitor und KfW Start-up Report.