World-class research, motivated talent, tons of capital – Germany already has all of that to offer. But in practice, little of it comes to fruition. The Startup Association has now presented an innovation agenda that is intended to serve as a springboard for future success. In this article, you will learn which measures startups will soon be able to benefit from and which demands offer completely new potential.
With the Innovation Agenda 2030, the German Startups Association is making various demands of politicians. The aim is to strengthen Germany as a location for start-ups. As the association’s chairwoman Verena Pausder emphasizes, all the ingredients are there – but they have not yet been mixed into a recipe for the future. To this end, more than 100 experts have now developed proposals that are aimed not only at the current government, but also at future ones. The paper contains various levers that German startups can use to take the next step. While some demands are still new, other measures are already being planned.
Startups are fighting for good personnel – not only locally, but also abroad. In the international war for talent, however, German startups often lose out. The reason: the integration of skilled workers is complicated, too bureaucratic and takes too long. According to the startup association, this urgently needs to change so that the shortage of skilled workers does not further slow down the growth of startups. The following measures should make it possible:
Digitizing the visa process: The process for issuing residence permits is largely analog. This results in long waiting times during which applicants cannot yet work. Digital processes should speed up the process. The federal government wants to implement this plan with the “Auslandsportal” (foreign portal) starting in 2025.
Ministry of Migration: There are currently more than 500 immigration authorities in Germany – and thus more than 500 individual administrations with sometimes different procedures. A new Ministry of Migration will combine expertise and take care of the entire naturalization process.
English as an official language: Not only bureaucratic hurdles, but also language barriers stand in the way of attracting talented individuals. To make it easier to communicate with authorities, English should therefore be introduced as a second official language. Although this demand has been raised time and again, there are still no concrete plans.
Deduct income tax: Countries such as Spain and the Netherlands are already attracting foreign talent with tax incentives. These should also be available in Germany in the future. It has already been decided that skilled workers will receive 30, then 20 and finally 10 percent of their gross wages tax-free for the first three years.
Recognition of qualifications made easier: The recognition of foreign qualifications should also be faster and easier. The startup association demands that startups play a central role in this. If a qualification is sufficient for them, they could certify this and employ talent immediately.
Startups are also – or especially – suffering from the weakening German economy. However, adequate financing is a basic requirement for the startup association to continue to drive innovation. In particular, a comparison with pioneers such as the USA makes it clear that Germany urgently needs to catch up. Both private and public capital could be put to better use by taking the following steps:
Mobilizing institutional capital: In countries like the US, it is already common practice for pension funds to invest some of their money in the startup market. In Germany, on the other hand, this capital tends to flow into stocks or real estate. According to the German Startups Association, there is therefore a huge amount of untapped capital. Insurance companies have a total of two trillion euros at their disposal, while pension funds have 700 billion euros. If a larger share of this were to flow into growth capital, it could provide a huge boost for startup financing. The German federal government is now taking a first step in this direction with the WIN initiative.
Involving retail investors: Contributing to growth and profiting from growth – according to this principle, private individuals should be able to participate more in the financing of startups. According to the startup association, the first requirement for this is to make venture capital more transparent as an investment form. To better understand how it works and how returns are generated, data from the European Investment Fund (EIF), for example, could be published. To this end, the agenda proposes new financial products with a clear focus on venture capital that are also accessible to small investors.
Strengthening exit channels: Too often, startups decide to carry out their exit abroad. According to the German Startups Association, 400 billion euros in added value have been lost since 2015 as a result of European companies going public in the US alone. One reason for this may be complexity: while there are 35 stock exchanges in Europe, there are only three in the US. The agenda therefore calls for the much-discussed Capital Markets Union in Europe to finally be implemented.
No matter how innovative founders are, if the state slows them down with regulations and cumbersome procedures, their business model will not be able to take off. The German Startups Association is therefore calling on the state to stop lagging behind innovations and instead set the pace itself. This can be achieved in a number of ways:
Awarding public contracts: start-ups offer a spirit of innovation and agility – two qualities that are currently lacking in many German public authorities. In order to advance the digitalization of public administration, for example, the state should work more closely with start-ups. According to the agenda, at least five percent of public contracts should go to start-ups by 2030. This would also require a reform of public procurement law.
Hire a Chief Digital Officer: Similar to companies, the state should also have a Chief Digital Officer (CDO). This person could centrally coordinate and accelerate digitalization projects. The European Union has already gone a step further in this regard: for the first time, there will now be a startup commissioner who will be responsible for investments in innovative technologies.
AI, robotics, energy – deep tech and climate tech include technologies that can transform entire industries and solve urgent problems such as climate change and energy shortages. The German Startups Association has ambitious goals: it wants Germany to become a leading deep tech location by 2030 and to produce 30 unicorns in this field. To achieve this, the number of climate tech unicorns is to at least double. The agenda calls for
Expand financing: With the Deep Tech & Climate Fund (DTCF), the German government has already launched a multi-billion dollar fund. According to the startup association, however, more volume is needed here to provide more support for capital-intensive business models. To this end, deep techs should receive more incentives through success-based funding programs. The state would provide a funding guarantee that would be activated when defined milestones were reached.
Strengthening technology transfer: The German Startups Association believes that research at German universities is already world-class – but in practice, little of it is being put into practice. According to the agenda, the transfer into business models should therefore be anchored as a third pillar alongside research and teaching. Universities should therefore commit to providing at least one percent of their budget for start-ups.
More financing, less bureaucracy, faster procedures: the 2030 innovation agenda shows a path that can lead German startups to the top of the international league in the long term. Although the paper primarily contains demands, there is currently a lot of movement on some of the measures: the influx of foreign talent could soon be made easier by digital visa procedures and tax breaks. In addition, the federal government recently presented a plan with the WIN initiative that could revolutionize the financing of German startups. Insurance companies, banks and corporations have already agreed to provide a large amount of venture capital. Legislative changes are planned to make it even easier for institutional investors to invest in venture capital in the future. With these steps, the German startup ecosystem could soon reduce the gap between it and pioneers like the USA.
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