ZEW Study: High-Tech Start-Ups in Germany at All-Time Low

The high-tech sector cannot escape the economic crisis. The number of start-ups dropped to a new low point in almost every high-tech sector. In total, the number of high-tech start-ups, which had been stable for years, decreased by eleven percent to about 15,300 start-ups in 2008. These are the findings of a study conducted by the Centre for European Economic Research (ZEW) in Mannheim in cooperation with Microsoft Germany. The study was presented today in Munich. The sectors affected the most are advanced technology and technology-oriented services. The development in IT services, especially in the software sector, is rather stable. The high-tech founders expect a clear market adjustment, but they are still optimistic regarding their firms' future. The founders consider the politicians' task to create good general conditions for start-ups in the long run.

"Many high-tech start-ups are not yet affected by the economic crisis like start-ups in the capital goods sector. However, the downward trend for start-ups in the future-oriented industrial sectors is alarming. Especially in times of an economic crisis, the course for the future economic growth is set. The German start-up scene definitely needs new impulses if it wants to have a long-term effect on the economic development", says Professor Wolfgang Franz, ZEW President.

"If Germany wants to continue playing in the Champions League of industrial nations, we have to become Europe's Silicon Valley. Governmental programmes providing support for start-ups in the first few years are great. However, high-tech start-ups need a long-term individual support to grow permanently. Our initiative 'found a company' (unternimm was) aims at providing such support", says Achim Berg, General Manager of Microsoft Germany, commenting on the study results. "In the next legislative term, Germany has to become an attractive region for Business Angel and Venture Capital in Europe again, e.g. by means of tax incentives for private investment's in our future markets." Microsoft supports selected young entrepreneurs in the high-tech sector with its initiative 'found a company' to advance the growth of ambitious start-ups. Microsoft provides know-how on technology and marketing as well as access to client and partner networks individually for every start-up.

In comparison, the number of start-ups in all high-tech sectors is the highest in the German federal states Bavaria, Schleswig-Holstein/Hamburg and Hesse. Bavaria, Thuringia and Baden-Wuerttemberg have the highest number of research-intensive start-ups. Baden-Wuerttemberg falls back from first to third place due to a declining number of start-ups after being number one for several years. In almost every high-tech sector, Bavaria now holds the leading position. Martin Zeil, Business Minister of Bavaria, explains: "The study indicates that good politics was made for start-up founders in Bavaria. We must continue to support high-tech start-ups. This will result in fast-growing firms which create a large number of new jobs."

Optimism despite crisis

The ZEW study conducted a qualitative survey among twelve high-tech start-ups. The results indicate that start-up founders are still optimistic despite the economic crisis and a clear uncertainty regarding their future. The start-up founders expect a market adjustment but do not consider their own existence in danger by the crisis because they were confronted with a difficult situation from the beginning. Niches and technological advances as well as contacts and networks from a time before the start-up was founded now prove successful. In general, the start-up founders participating in the study are cautious and avoid risky growth strategies or short-term staff adjustments. The long-term object of the company is most important. Depending on the innovativeness of their products, young entrepreneurs are affected by a declining number of orders and the resulting liquidity problems. Nevertheless, they are critical towards interference in the economy by the government because it distorts competition. The start-up founders see the politicians' task in creating good general conditions for start-ups. The most important issues are simplifying taxes, more fairness in taxes, unbureaucratic and transparent supportive programmes for high-tech start-ups as well as long-term investments in all areas of education, from primary school to university.

Data base of ZEW study "high-tech start-ups in Germany"

The ZEW study analyses the development and regional differences of start-ups in Germany based on the Mannheim Enterprise Panel. In addition, detailed interviews with twelve start-ups in different sectors were conducted.

The press release is also available on Microsoft Germany's website.