A new study highlights Berlin’s emerging status as an international startup hub, with companies in the capital apparently three times more likely to attract investment from outside the EU than counterparts in other parts of Germany.
The “German Startup Monitor 2013“, published last week by the German Startups Association (BVDS) and the Berlin University of Economics and Law, surveyed 454 of Germany’s approximately 5,000 startups. Most respondents hailed from Berlin (60 per cent) and the ICT sector (75 per cent).
For many of those surveyed, securing investment funding is seen as crucial to growth. That’s no surprise – according to a not-yet published part of the study obtained by the Wall Street Journal Deutschland, only one in five of the young companies surveyed is bringing in annual revenue of more than €500,000. Almost every second company surveyed brought in less than €50,000.
Raising funds is difficult everywhere and Germany is no exception. While 34 per cent of respondents said they required more than €1m in growth financing, about 72 per cent said attracting venture capital was difficult. Closing a round of financing took an average of 6.5 months.
Startups in Germany that do raise an initial Series A venture capital round are likely to raise a relatively small amount – about $900,000 compared to $7.1m in the US and $2.6m in the UK.
Where’s the money coming from?
German companies might like to raise funds from the US but few actually receive it. Overall, 88 of respondents who raised money did so from investors in Germany, with 45 per cent raising funds from elsewhere in the EU and just 24 per cent from further afield.
Startups in Berlin appear to have a strong advantage. According to the BVDS, respondents based in Berlin were three times more likely to raise funds from investors outside the EU. Companies in Berlin were also more likely to attract public funding, at 55 per cent compared to 34 per cent for other regions in Germany.
Again reflecting Berlin’s lead as an emerging international tech hub, respondents in the capital were more likely to say Germany’s employment provisions for non-EU citizens had a negative impact on performance (43 per cent compared to 27 per cent for non-Berlin respondents).
The BVDS intends to carry out the survey again next year. “This year’s study was our very first one, and there were a lot of time constraints,” BVDS spokesman Thomas Bachem said. “So there are plenty of things that we want to improve.” The organisation intends to increase the number and diversity of surveyed companies – and make sure survey forms are available in English.
featured image – flickr user GonzaloMMD
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