Founders of High-Tech Start-Ups Become Older – Downwards Trend Cannot Be Compensated by More Start-ups Founded by Older Entrepreneurs Germany’s founders of high-tech start-ups become older.

Founders of High-Tech Start-Ups Become Older – Downwards Trend Cannot Be Compensated by More Start-ups Founded by Older Entrepreneurs Germany’s founders of high-tech start-ups become older. This is the finding of a study published today, which was conducted by the Centre for European Economic Research (ZEW) in Mannheim and Microsoft Germany.

In 1995, the average age of high-tech start-up-founders was 37.2 years. In 2008, the average age increased to 40.8 years. Currently less than 25 percent of founders in the high-tech sector are younger than 32. The cliché of a young high-tech-founder starting a company right after graduation from university has to be revised. The study indicates that older people are more likely to found a company. However, the study also suggests that the downward trend in high-tech start-ups in Germany cannot be stopped in the long run. Between 1995 and 2008 the number of new start-ups in the high-tech sector already declined by 25 percent. If the conditions for founding a company in Germany do not change, the number of new start-ups will decrease continually due to the demographic change by 10 percent by 2030 and 20 percent by 2050.

Achim Berg, General Manager of Microsoft Germany, says: "The German government has recognized how important start-ups in the high-tech sector are and has included them in the coalition agreement. Now the right measures have to be tackled to make start-ups more attractive in Germany. If this does not happen, Germany will not be able to keep up with leading industrial and innovative countries. The foundation fund for start-ups in the high-tech sector has to be revised quickly, the credit crunch has to be overcome and the venture capital culture in Germany has to be revived." Berg also demands that new high-tech start-ups are not obliged to pay taxes and social security contributions for the first ten years in business. Investments in research and development should also be promoted.

German high-tech-founders have a lot in common

The current ZEW study focuses on the characteristics of high-tech-founders in different age groups as well as conclusions which can be made for improving the general conditions for innovative start-ups. The result is surprising. Start-up-founders of all ages have a lot in common, e.g. the motivation for founding a company, the research activity, the innovativeness of their products and their main source of funding. Differences can be seen in the sectors chosen. Young people found software and IT companies more often. Older founders prefer the research intensive sector. Older founders also tend to have more own capital and choose the legal form of the limited liability company. Young founders on the other hand prefer more cost-effective legal forms and use flexible employment models. Dr. Georg Licht, who supervised the ZEW study, explains: "Due to the study results we find that programmes promoting founders depending on their age do not aim at the right target. The differences between age groups are not significant enough. The framework conditions for founders of high-tech start-ups should be improved in general in Germany to tap the full potential of older people, women, and graduates." In 2008, a ZEW survey showed that only every twelfth high-tech start-up was founded by women.

Microsoft promotes innovative high-tech start-ups

With its initiative "found a company" (unternimm was), Microsoft has been promoting selected young entrepreneurs in the high-tech sector for five years. Microsoft individually provides know-how on technology and marketing as well as access to client and partner networks. The global Microsoft start-up programme "BizSpark One" additionally sets up a direct link to the Microsoft headquarter in Redmond and supports innovative start-ups when entering the global market. The international programme BizSpark provides cost-effective development instruments and platform technologies as well as technical support for start-ups.

Data base of ZEW study "high-tech start-ups in Germany – myth of the young start-up founder"

The ZEW study analyses the age structure of founders in Germany based on the Mannheim Enterprise Panel as well as the company statistics depending on the founders’ age group based on the KfW/ZEW-Gründungspanel. Moreover, two detailed case studies were conducted in two companies.

The study is available online as pdf-file

The press release is also available on Microsoft Germany’s website