Entrepreneurship in Germany

A survey of entrepreneurial activity and climate throughout the EU conducted on behalf of the European Commission in 2008 revealed that Germany scored “average” on all of the entrepreneurial activity indicators, such as overall entrepreneurship rate and the rate of business failure, but that there was a high share of opportunity-seeking, risk-taking “pull” entrepreneurs in Germany.  Germany was found to be good breeding ground for entrepreneurship with respondents being generally optimistic about the chances for success in starting a new business and relatively unconcerned that entrepreneurship would be viewed negatively or that failed entrepreneurs would not be given a second chance.  Interestingly, the researchers found that more than half of the entrepreneurs were living in rural areas, the high proportion among the EU countries studied, and that German respondents from rural areas were almost as likely to be entrepreneurs as respondents living in urban or metropolitan areas.  An important finding was that the Germans were less likely than respondents in the other EU countries studied to say that their education helped them to develop an entrepreneurial attitude and develop an interest in entrepreneurship, thus leading the researchers to recommend that further resources be devoted to entrepreneurial education in Germany.

Results from several 2012 surveys of attitudes regarding entrepreneurship in Germany reported on by The Economist on October 5, 2013 revealed a touch of reticence, with data from the Global Entrepreneurship Monitor indicating that the percentage of Germans agreeing that starting a business was an attractive idea stood at just under 50%, well below comparable percentages in several other European countries such as France (65%), the Netherlands (79%) and Poland (68%).  Figures compiled and released by Deutsche Bank indicated that a little less than 3% of the German population fell into the category of “new entrepreneurs”, defined as owners of businesses aged three months to three and a half years who had open those businesses by choice rather than necessity, while the comparable percentage in the US was just under 8% and high percentages were found in the Netherlands, the UK, France and Sweden.

Potential entrepreneurs in Germany still face cultural restraints to innovative risk-taking and lack the support and access to networks that has been so crucial for success in Silicon Valley.  One Berlin entrepreneur interviewed by Westervelt for a post for NPR All Tech Considered that appeared in July 9, 2012 commented that the German business world remains conservative and highly risk averse and, in fact, in Germany venture capital is commonly referred to as “risk capital”, a descriptive reminder of the aversion to risk among the German business community.  The 2012 GEM report found that 42% of the Germans surveyed would be deterred from starting a new business due to a fear of failing—comparable percentages in the Japan and the US were 53% and 32%, respectively—and commentators suggested that Germans were reluctant to view business failures as opportunities to learn for the next time and instead saw them as a sign that perhaps the best course of action was to return to a more stable career path with a university or one of the larger, more established German firms.

Many German entrepreneurs begin their careers by following traditional educational paths with the ultimate goal of becoming a scientist or engineers in academia or with one of the large German multinational companies.  If they encounter an idea that might be a feasible basis for a new start-up they often find that their supervisors discourage them from pursuing the project and that it is difficult to find local professional advisors who can assist them in developing plans to launch a new business.  In contrast, entrepreneurs in the US frequently get support from their universities and employers to explore new ideas and, quite importantly, have ready access to venture capitalists and professional advisors that provide access to their networks to assist the entrepreneur in making connections with incubators to secure space to pursue their projects, angel investors to provide seed funding, potential customers and technical and managerial talent to build out their teams.  Some commentators believe that there are signs of change and that entrepreneurship, working with technology-based start-up companies, is gradually but surely becoming recognized as a legitimate career path for young Germans just graduating from universities.

Another criticism that has dogged the technology scene in Berlin has been a reputation for copying business models first developed in the US as opposed to focusing on creating homegrown innovative ideas.  Scott, writing in the New York Times: Deal Book on April 29, 2013 on technology start-ups in Berlin, noted that critics have pointed to the Samwer brothers, who made substantial amounts of money incubating and selling German versions of eBay and Groupon to their original creators in the US and then used the proceeds of those sales to invest in companies that were essentially local versions of Facebook, Zappos and Zynga.  The Economist discussed Rocket Internet, the incubator established and managed by the Samwers, has become renowned for its “storm-the-barricades culture” and simultaneously funding several similar companies that share resources as they rush to be the first to succeed with respect to a common business model.

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