At this year’s Hinterland of Things conference in the Bielefeld City Hall, industry giants such as Verena Pausder and Brigitte Mohn discussed which startups have the best chances, how the shortage of skilled workers can be overcome and why there is renewed confidence in the scene.
The scene hasn’t had it easy in recent years, but new start-ups in Germany are on the rise again. According to the Startupdetector Report 2023/24, 17 percent more start-ups were founded across Germany in the first quarter of 2024 than in the previous quarter. The mood at this year’s Hinterland of Things conference, which took place last Thursday in the Bielefeld City Hall, is similarly future-oriented.
The chairwoman of the German Startups Association, Verena Pausder, is convinced that the right attitude will lead German founders to success. “We should have much more confidence in the future.” The founders’ scene should also send this message abroad: “The narrative ‘Germany is abolishing itself’ only drains the energy from the body […] We have to send positive messages abroad,” said Pausder.
And the scene has every reason to. At the Hinterland of Things, sustainable techs, edtechs and AI startups gathered who are working on global innovation and should be particularly interesting because the following topic is also indispensable from the hinterland to the international stage: deep tech.
The change cannot be overlooked: interest in deep tech – business ideas that aim for a technological breakthrough – is increasing. So-called “physical tech” startups in the fields of AI and climate tech now seem to be more interesting for investors than B2C software and platform products such as dating apps or delivery services. According to the data analysis platform Dealroom, a total of 18 billion US dollars in venture capital was invested in European deep tech startups in 2023.
The investors at the Hinterland of Things Conference are excited about the new generation of founders. Dr. Florian Heinemann, Founding Partner of Project A Ventures, is promoting “the creation of tech-based startups that will continue to develop”. Eva-Valérie Gfrerer, founder of the early-stage VC Morphais, also emphasizes that there is a change from “network-driven investing to data-driven investing” in the VC scene. “Nine out of ten funds we talk to are interested in data-driven topics,” says Gfrerer. In line with this, the investor sees ‘a shift towards founders with a PhD background, especially in the field of AI.’ And more founders with PhDs are being funded, according to Gfrerer.
The founding scene is shifting. Rouven Dresselhaus, Managing Director of Cavalry Ventures, believes that the founding scene has suffered from a kind of reality distortion in recent years. Since 2021, there has been a relatively large amount of money in the market, from the VC side and the customer side. Currently, customers are no longer interested in “these ‘nice to have’ products.” By this, the Managing Director (MD) could mean lifestyle and B2C products. “It’s a development towards recovery. […] Away from ‘nice to have’ and towards ‘mission critical’,” says the MD of Cavalry Ventures.
Everyone is betting on deep tech as the next stage of the industrial revolution – in which Germany is expected to play a major role.
While other industries are struggling, deep tech startups seem resilient to low valuations and waves of layoffs. They are sprouting up in different regions and impressing investors like Rouven Dresselhaus: “We see the renewed spirit of entrepreneurship. We see really good teams.” He compares the spirit of the current founders with the “hype years”: “If you start up today, you are aware of the risks and the chances of success of your venture. Today, you only go out if you are convinced, if you have the tenacity and the resilience.”
Berlin is no longer the most important location for investors when it comes to innovative startups. The current hotspots are the university regions. VC founder Eva-Valérie Gfrerer reveals that she and her colleagues see the most startups at the Technical University of Munich, followed by Aachen and Dresden. “These are locations where a lot of deep tech and AI is happening.” For Gfrerer, it is clear that investors now have to scout at universities and places that go beyond their actual start-up scene networks.
Dominik Gross, Co-Founder and CEO @ Founders Foundation
Gesa Miczaika (Auxxo), Antonia Munte, Valérie Bures (XAnge), Magdalena Oehl (Talent Rocket)
The shortage of skilled workers is a central topic that runs through all levels of the economy – and through the entire conference.
The areas of AI, deep tech and climate technologies, which depend heavily on innovative and well-trained specialists, are particularly affected, says Valerie Bures, DACH head and partner of the European venture capital firm XAnge. She does not see the biggest competition for startups as coming directly from competitors in the scene. The biggest competition, according to the investor, is finding the right talent.
To meet these cross-industry challenges, Germany needs a “Choose Germany” program to create internationally attractive working conditions, including a digital visa process, says Verena Pausder, CEO of the German Startups Association.
In addition, many in the industry believe that a healthy corporate culture will attract talent. At this point, companies need to actively work to achieve more diversity in order to reach the right candidates.
Currently, there is a particular risk that start-ups will be set up in Germany and will not make an exit in Europe – for example in the form of an IPO – because they are financed in later phases by foreign investors instead of European ones. “Then we sell off,“ says entrepreneur Verena Pausder. She regrets that ‘in Germany, little VC money is invested ’at scale‘ – that has to change” and calls for a capital market union. “If startups are ’too good to fail’, they belong to foreign investors,” Pausder fears.
Founding Partner of Project A Ventures, Dr. Florian Heinemann, cites the example of the Birkenstock company, which is known worldwide as a German brand but has made an IPO in the USA. Another reason why it harms the German market when more and more startups migrate abroad: “You need exits to recycle capital and talent in the ecosystem,” explains Carsten Gjørtler Salling, General Partner at Dreamcraft Ventures.
What distinguishes the Hinterland of Things Conference from other conferences is its close connection to German medium-sized companies. And that could existentially distinguish Germany from other markets: For Verena Pausder, this is the “core strength of our country: world-class research, coupled with industrial production, gives us the ideal basis.” She calls for ‘daring to tackle the big issues’, for which ‘the match between medium-sized companies and start-ups is ideal’. The CEO of the Founders Foundation, Dominik Gross, also appeals to the strength of the combination of start-ups and SMEs: ‘75 percent of the GDP is generated outside the ten largest cities. The world market leaders are located in the area,’ says Gross.
But how can medium-sized companies and start-ups work together successfully? Dr. Fabian Kracht, partner and founder of the medium-sized company consultancy mesakumo, recommends appointing a “champion” in the medium-sized company organization who, in a high position, organizes the collaboration with the start-up.
After countless panels and discussions, the guests and speakers at the Hinterland of Things Conference leave the city hall with a positive outlook and are optimistic that a strong base of medium-sized companies, investors and start-ups will take Germany to the next level of the industrial revolution.
© 2024 Hinterland of Things
