Start-ups do finally receive the attention they deserve: On 1st June 2022 and for the first time, the German government presents targets and measures for a comprehensive start-up-strategy. The details still require precise wording and legislative implementation. Initial voices welcome the holistic approach to developing Germany and Europe into a stronger start-up location. The draft of such strategy paper is available here (German language only).
Relevance of Start-ups
Germany is a strong business location. However, the main pillars are industry and small and medium-sized enterprises, not start-ups. Nevertheless, the German government recognizes that start-ups are of great importance for the German economy. At the same time, the government broadens its view and emphasizes the relevance for society in general and ecology in particular: For example, almost one-third of all start-ups perform activities in the field of climate and environmental protection, and, thus also contribute significantly to the sustainable transformation of the German economy.
According to the government’s paper, start-ups are idea generators and innovation drivers and therefore create momentum, renewal and transformation. Thus, they are materially important to promote.
The main objectives of the start-up-strategy are ambitious and have been named as follows:
- strengthen financing for start-ups,
- make it easier for start-ups to attract talent – make employee participation more attractive,
- igniting the start-up spirit – making start-ups easier and more digital,
- strengthen female start-up founders and diversity,
- facilitate start-up spin-offs from science and universities,
- improve framework conditions for public benefit start-ups,
- mobilize start-up competencies for public contracts,
- make it easier for start-ups to access data,
- strengthen real-labs – facilitate access for start-ups and
- put a general focus on start-ups.
Implementation of the Start-up-Strategy in a Nutshell
At present, it is difficult for new and fast-growing German start-ups with huge capital requirements to raise sufficient funds – loans are hardly an option. For this reason, financing is provided by government support programs and specialized public and private investors. This is where the start-up-strategy essentially kicks in. In summary, the financing of start-ups – in addition to many other measures – is to be conducted by the following steps:
- Among other things, the German government will use the future fund and its individual modules to support innovative technology-oriented start-ups in the growth phase and provide EUR 10 billion in new public funding over an in-vestment period until 2030.
- In addition, the INVEST program is to be relaunched to further and sustainably stimulate the business angel market in Germany. The effective date for a new INVEST funding guideline is targeted for 1st January 2023.
- The requirements for initial public offerings (IPOs) are to be reviewed, simpli-fied and modernized.
- Sales tax exemption for venture capital funds shall be implemented.
- Establishment of a capital stock in statutory and private pension plans as well as a minimum investment quota in venture capital funds.
Moreover, in view of the tight applicant situation on the labour market the following priority measures are planned to attract more talents:
- Further development of the “skilled labour strategy” (Fachkräftestrategie) to simplify and accelerate the immigration of skilled workers from foreign countries, in particular by anchoring the professional and university degrees of foreign skilled workers and simplifying administrative procedures.
- Improving income tax law in the context of employee participation.
- Simplify accessibility of “remote work”.
In addition, simplified “founding” is to be ensured with a digital (notarial) founding act for the founding of German limited liability companies (GmbH).
In order to increase diversity, female founders are to receive targeted support, for example through a new funding line “EXIST Women” or the targeted financing of diverse and female venture capital funds.
Furthermore, numerous priority measures are intended to (i) facilitate spin-offs from science and universities, (ii) improve framework conditions for public benefit-oriented start-ups, (iii) mobilize start-up competencies for public contracts, (iv) facilitate start-ups’ access to data, (v) strengthen real-labs, including by creating (new) experimenta-tion clauses, and (vi) centralize the start-up ecosystem through targeted networking.
The general naming of the goals shows that many measures will still be characterized by great dynamism and that there is still a lot “in flux” here.
It remains to be seen whether the start-up-strategy – still intended for this summer – will be finally adopted by the traffic light government. Then there should be more clarity about the exact legislative implementation.
Overall, the federal government is pursuing a holistic approach and will implement the strategy – as of now – in bundled measures within the current legislative period. Annual monitoring of the development of Germany as a start-up location is also planned.
We will continue to observe the development of the start-up-strategy with interest and look forward to its implementation with anticipation.