Enterprise Startups in Germany - Where to Look

In a past blog post I hypothesized that enterprise SW related startups do exist in Europe, but that they are hard to find. I now used the data from the recently published annual German Startup Monitor survey* to test this hypothesis for B2B startups. I also wanted to find the best hunting ground for investors in Germany.

The key takeaways for investors to find enterprise focused startups?

Berlin is by far the largest breeding ground for enterprise startups. These startups have easier access to capital to speed up growth. The ready availability of talent makes internationalization strategies easier to pursue.

• More than 50% of all startups in the survey are B2B focused (although not all B2B startups are in software)
  
• The unofficial startup capital Berlin has more than three times as many (B2B) startups as any of the other regions surveyed
  
• Berlin has the best access to domestic and international venture capital
  
• The startups in the industrialized Southwest region of Stuttgart/Karlsruhe are predominantly B2B focused, but there was only one fourth as many startups compared to Berlin
  
• Stuttgart/Karlsruhe startups have little access to venture capital. Hence, they are more often self financed compared other regions, including Berlin

Contrary to public - and media - opinion, B2B startups exist

More than 50% of all surveyed startups are B2B focused. That percentage even reaches 80% in the Southwest. Since there are four times as many startups in Berlin, Berlin also has the highest absolute number of B2B startups.

Only half of all startups consider themselves innovative enough to go international

Investors with large aspirations should be concerned about the lack of internationalization and innovation. There is a clear bifurcation among startups: Only half of the startups have ambitions to compete globally or across Europe. The other half is not even trying: Innovation, if there is any, is limited to Germany, or only to a region in Germany.

Internationalization seems easier to pursue for Berlin based startups. Here, one third of startup employees are from outside of Germany.

Self funding is common

Across the country, 20% of startups have not raised outside funding at all. In the Southwest, that ratio reaches 25%. These companies may have never been noticed by angel investors, venture capitalists, and journalists. In terms of public awareness, they are flying under the radar. In Berlin, that share is only 10%. One reason is the ready availability of angel and venture capital.

Berlin has the the best access to (international) venture money

Across the country, one third of all startups are using capital from business angels. Venture capitalist have  funded 30% of Berlin startups, versus 8% in the Southwest. Berlin also has the highest share of international venture capitalists with over 30%. In the Southwest that percentage drops to less than 5%.

*The survey is based on self-disclosed data and was published in September 2015. The survey compared five regional clusters across Germany.

Photo credit: thisrecording.com