An Overview of the German Entrepreneurial Ecosystem for Science-based Start-ups

This responsibility for the sustainable economic development of the region, as well as the demographic development of the country in the past years, an ageing population among others, are the reasons for the steadily increasing priority of the topic of entrepreneurship and innovation on the government agenda.

Especially research-based start-ups constitute a main pillar in the current public policy promoting technology entrepreneurship. Those are young companies mainly monetising a technology or know-how created in a higher-education or research institution, such as the results of a university study or a patent filed at a private institute. Research-based start-ups can be founded “outside-in” by external teams, sourcing the innovation from research against license fees, but also “inside-out” by internal teams launching a subsidiary or proactively looking for licensees, called “spin-offs”.

Role of the government

Other than in the United States, the German entrepreneurship landscape has been actively driven by the government – in terms of both – regulations and public support options. For the past twenty to thirty years it has evolved towards a well-defined entrepreneurial ecosystem connecting private and public resources and individuals for motivating, coaching, financing, and supporting new entrepreneurs. During this time the government agenda regarding entrepreneurship also matured – from decreasing unemployment in its first efforts, towards supporting sustainable economic development and growth through high-tech companies today.

In Germany research-based start-ups are therefore supported by numerous measures – on a federal, state, and municipal level. On a federal level the initiatives are coordinated between the Federal Ministry of Education and Research (BMBF) and the Federal Ministry for Economic Affairs and Energy (BMWi) with clearly defined resorts. Whereas the BMBF provides funding for research projects, research performing organisations, and their efforts to increase the number and quality of spin-offs (e.g. Fraunhofer Society, Helmholtz Association, Max Planck Society, and Leibniz Association), the BMWi develops programs and funding directly targeting research-based start-ups from universities (e.g. an EXIST Business Start-up grant for technology-oriented foundations from universities). Next to increasing the number of new company formations in general, both ministries target the transfer of innovation and the market-adoption of new technologies through spin-offs as a key objective.

Next to the federal level initiatives, each German state defines their own agenda for fostering entrepreneurship and research-based start-ups in addition. In Bavaria, for example, the Bavarian Ministry for Economic Affairs, Regional Development and Energy is financing a variety of institutions and grants (e.g. StartZuschuss). BayStartUp, one of the oldest in the country, runs the official business plan competitions in the state next to a large business angel network. The institution closely works with the university entrepreneurship centres in the state, which provide education and coaching for student entrepreneurs as well as accelerator programs (e.g. LMU Entrepreneurship Center at the LMU Munich). Those, as well as the professorships, are also funded by the ministries, creating a large network of Chair for Entrepreneurship in every second university in Germany, such as are Center for Entrepreneurship & Transfer (CET) at TU Dortmund and Entrepreneurship Centre at Hochschule für Technik und Wirtschaft Berlin. Universities in Germany are independent but work closely with federal institutions to connect talent with capital and resources, creating well-defined “entrepreneurial journeys”, especially for research-based start-ups. Once a start-up successfully grows it can use benefit by the support of publicly funded institutions such as Bayern International, or Baden-Württemberg International for its international market expansion, e.g. through joint exhibitions or networking support abroad.

The municipalities are the third source of public support in the country. In addition to the federal, and state grants available, some cities provide extra support for founders. The city of Munich e.g. supports a crowdfunding campaign as well as a local online start-up news service.

Other cities, like Bremen (Bremen Invest), Berlin (The Berlin Adlershof Science City) or Karlsruhe (Technologiefabrik Karlsruhe) run municipal entrepreneurship centers with affordable office space, or support private business plan competitions in public-private partnerships.

Role of the private sector

Private organisations play a critical role in supporting and amplifying the effect of public policy.

In Germany the private entrepreneurship ecosystem is well-evolved with more than 300 co-working spaces, a well-diversified event scene with flagship events, like the annual Bits & Pretzels in Munich or Techcrunch in Berlin, private, public and international investors, as well as a huge variety of corporate accelerators.

Despite its efforts the number of company foundations in Germany has been stagnating, reaching its lowest number for nine years in a row in 2019 with 265.700 new business starting. In the digital economy not the quantity matters but their innovative power. Focusing on research-based start-ups, Germany is pursuing a long-term agenda of economic empowerment. The fully-fledged ecosystem continuously increases the quality of the spin-offs, the professionalism of the programs, and opens additional opportunities for freelance consultants, business coaches, and matchmakers. This has raised the success odds for all new start-ups and positively influences the conditions for starting and running a business in Germany, as a whole.