Berlin Despite difficult financing conditions and a persistently weak economy, more companies are relaunching. In the first half of this year, a total of 1,293 start-ups were born, an increase of 16% over the previous six months. This is the result of data obtained by industry service StartupDetector in cooperation with the Entrepreneurship Association.
The trend is clearly positive: 689 young companies were founded between April and June, according to StartupDetector. This is the highest number of restarts in the previous three quarters. Those numbers are nowhere near the boom times of the COVID-19 era, when a lot of construction was being built. Last year’s bottom, though, appears to be behind us for the time being.
A particularly high number of start-ups were launched in June. Xu Feiyu and Vanessa Cann also competed that month. The former AI boss of SAP, the head of the AI Federation Association and other comrades founded the start-up company Nyonic. They hope to use this to build artificial intelligence language models for European industrial companies. You are building a trending theme that is popular with investors compared to other themes.
Times are still tough for start-ups. Investments by young German companies in the first three months amounted to just 1.5 billion euros, according to the Pitchbook data service. The total in 2022 is 14.5 billion euros.
Investors are more selective and prefer to put money into less risky business models. This in turn creates difficulties for start-ups as they mainly finance themselves through available venture capital due to the lack of regular sales.
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Many founders try to adapt to this. “Successful start-ups are currently adapting their business models to the requirements of the market. They try to achieve reliable sales early on,” says Carsten Rudolph from the Bavarian start-up network Bay-Start-up. This can lead to very favorable positioning of the company.
The young Hamburg start-up 21Done also generated revenue from the start. “The last funding round was still not as high as expected,” says founder Thomas Suwelack, who is building the New Work platform while teaching at the Brand University of Hamburg.
Most companies are established in Berlin and Hamburg
Most of the founding events this year took place in the two city-states of Berlin and Hamburg. After a sharp decline in 2022, from January to June, 262 new start-ups were established in the capital, an increase of 40% over the same period last year.
The situation was similar in Hamburg, where 90 new companies were founded. Berlin and Hamburg have more start-ups per capita than the other federal states. In absolute terms, 27% of start-ups were born here in the first half of the year. In Munich, on the other hand, development stalled in the first half of the year.
“As in the Covid-19 era, certain industries have proven to be crisis-resistant, or even crisis-winners,” said Felix Engelmann, co-founder of StartupDetector. This year, the topic of artificial intelligence is definitely one of them. Besides Nyonic, there are many other startups popping up in this space.
According to the AI initiative AppliedAI, there are currently 508 active AI startups in Germany, a 67 percent increase from the previous year. In addition to enduring software, there are relatively many startups in the green tech space. Entrepreneurs Nils Brüggemann and Omar Khalaf also rely on it.
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The two Berliners recently chose to launch Alganize. The start-up hopes to remediate polluted soil with metabolites from the microalgae Chlorella. “When you explain to a lot of investors that you want to build a business that uses microalgae as a fertilizer replacement, they shrug it off. But some people find it very exciting,” said Brugman, whose start-up The company has been supported by a grant to date and is now close to receiving its first cash infusion from investors.
Response to financing crisis with equity
As interest rate inversions make it difficult for start-ups to finance, there is now a growing number of young businesses trying to survive without any outside capital, financed entirely through equity and first sales.
In turn, these start-ups can also attract investor interest in the medium term. “We’re currently looking at companies that have so far only been funded through bootstrapping,” says Peter Singlehurst, a partner at British investor Baillie Gifford. , they generally have better cost discipline.
Despite the challenges for start-ups, Christoph Stresing, managing director of the Start-Up Association, believes the recent momentum won’t disappear anytime soon. “Even if our start-up ecosystem is not yet at the level of activity it will be in 2021, we are optimistic,” Stresing said.
Start-ups in various industries demonstrate how broadly young businesses can bring innovation into the national economy.
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