Mannheim Start-up Panel 2014 - High-tech Industry Start-ups Often Founded on Sideline Basis

Researchers often found a new business on a sideline basis while keeping their main jobs and secure incomes. Most sideline start-ups appear in the technology-intensive sectors of the manufacturing industry. This is the result in the current edition of the report on the Mannheim Start-up Panel, an annual survey among young German companies. The survey is conducted by the Centre for European Economic Research (ZEW) in cooperation with Creditreform. For the first time, the researchers have examined the significance of sideline start-ups.

In 2013, more than 20 per cent of young businesses, which started between 2010 and 2013, exist on a sideline basis. The main source of income is another employment. The advantage is that the start-up can test the market acceptance of the product or service while relying on a stable income by the main employment. Sideline start-up businesses, therefore, are very reasonable for companies that launch completely new products or services, so they can test the demand for those offers. Thus, a withdrawal from the market will be easier.

The percentage of sideline start-ups is relatively high for non-technical consulting services (26 per cent).The lowest percentage can be found in the construction sector (11 per cent). The most sideline start-ups are founded (28 per cent) by research companies in technology-intensive sectors of the manufacturing industry.

A closer look makes clear that the share of sideline start-ups by people involved in research is clearly more than average. 30 per cent of the sideline start-ups are founded by at least one former researcher. Sideline start-ups founded by currently practising researchers provide 48 per cent. In technology-intensive sectors of the manufacturing industry, the majority of sideline start-ups of 71 per cent is founded by researchers. The research employment thus remains the main source of income for these founding members.

Further analyses make clear that setting up new businesses on a sideline basis is an intentional strategy to enter the market. The longer companies participate in the market the lower is the percentage of the sidelines. This is an indication for the fact that founders firstly start their project with reservation to give up their stable source of income years later when their sideline is successful. This can be particularly observed for foundations by researchers in the industrial high-tech area. Those companies potentially launch products deriving from own research results. But it takes years to achieve a successful turnover.

For the full report on the results of the Mannheim Start-up Panel Spring 2015 (in German language) please refer to

http://ftp.zew.de/pub/zew-docs/gruendungspanel/MannheimerGruendungspanel_012015.pdf

For more information please contact

Jürgen Egeln,  Phone +49/621/1235176, E-mail egeln@zew.de