KfW/ZEW Start-up Panel – High-Tech Start-ups Are Few but Have Impact

Many important impulses for national economies emanate from high-tech start-ups. In particular industrial start-ups within the high-tech sector, though comparably small in number, have a large workforce and are both innovative and eager to invest. These are the results of the KfW/ZEW Start-up Panel, a structural analysis of the economic activity of firms that have been founded in Germany within the last four years. The study was conducted by the KfW Bankengruppe (KfW banking group), ZEW and the credit rating agency Creditreform.

The results in detail:

• The average expenditures of high-tech start-ups on research and development amount to EUR 97,000, that is, more than twice the average expenditures of start-ups for all sectors taken (EUR 40,000). With an average amount of EUR 59,000, high-tech service providers and software companies are likewise spending more on R&D. About half of the start-ups engaging in R&D already start taking steps into that direction in their first year of business.  
• 16 per cent of high-tech service providers and software companies as well as 25 per cent of high-tech start-ups introduced nation-wide or global market novelties in 2012. This is twice and three times as much as the overall average (8 per cent).
• The average employment during the start-up phase is by one third higher: high-tech start-ups founded in 2012 employed 3.3 full-time equivalents when thgey started operating, which is considerably above the average employment of all start-ups (2.5). The numbers are also higher when compared to the previous year. High-tech start-ups make a disproportionally high contribution to employment. These figures, however, should not hide the fact that, due to the large number of firms, the biggest share of employment is held by companies outside the narrowly defined high-tech sector.
• While some 70 per cent of all start-ups made investments in 2012, it is particularly the firms in the high-tech sector that spend large amounts (an average of EUR 59,000 as compared to an overall average of EUR 29,000).
• In 2012 the high-tech start-ups generated an average turnover of EUR 180,000 (as compared to an overall average of EUR 104,000). Product innovations make a substantial contribution to the turnover with a share of 27 per cent (vs. an overall average of eleven per cent). If operating costs and investment expenses cannot be financed from operating activities, start-ups depend on external capital providers. One out of three (35 per cent) high-tech start-ups with third-party capital sources received more than EUR 100,000, and for six per cent the capital inflow exceeded EUR 500,000 (vs. an overall average of two per cent).

Starting a high-tech firm requires thorough preparation, for it is risky, time-consuming and demands financial means.

The KfW/ZEW Start-up Panel

The KfW/ZEW Start-Up Panel originates from a cooperation of the Centre for European Economic Research (ZEW), the KfW Bankengruppe (KfW banking group) and the credit rating agency Creditreform. This longitudinal data set is the first of its kind in Germany. It contains data on the first years of operation of start-ups and provides a wide range of firm-specific information. The current report contains information of the sixth survey wave. The annual sample of about 6,000 firms is based on active start-ups, i.e. new firms which are either recorded in the commercial register, have had recourse to external capital, trade credits or similar funds, or are included in the economic process in any other way.

Contact

Jürgen Egeln, Phone +49(0)621/1235-176, E-mail egeln@zew.de

The German study is available for download at "KfW/ZEW-Gründungspanel 2013 – Junge Hightech-Unternehmen trumpfen auf"