Culture of start-ups in Germany: opportunities and challenges

An interview with Markus Sauerhammer, Startnext



How can start-ups best use platforms for crowdfunding?
In addition to organising financing of the venture in question, crowdfunding offers start-ups a broad range of other benefits. Especially during the founding phase of a company, it is one of the major challenges to assess if there is a market for the product and to find out whether or not the relevant target group is willing to spend any money on it. In addition, crowdfunding campaigns represent an effective and authentic means of communication. In many cases, the value added in terms of communication is much higher than the amount raised in funding. Ideally, a crowdfunding project should be undertaken on the occasion of the launch of the company or new product/project.

Is Startnext seen as an addition to or a replacement of banks or other investors?
It is actually a good complementary addition! Many of the ventures financed via crowdfunding are of no interest to traditional financing institutions and are not taken into consideration by public financing. In ventures with higher volumes of equity, various financial instruments can be combined for best effect. As a result of reward-based crowdfunding, banks or investors will receive direct feedback regarding market acceptance of the idea as well as the marketing skills of the founders. In its country of origin, the USA, crowdfunding continues to merge with other forms of financing. And in Europe, there are to date several countries in which the strengths of the various financial instruments are combined.

What are the differences between the start-up scenes in Germany and the USA?The start-up scene in the USA is more visionary, and this applies to founders and investors alike. People have realised that, driven by digitalization, many markets are being redistributed. And founders are currently claiming one future market after another. We Germans are rather conservative. Especially established financing institutions usually want to see proof of the viability of any business model up front. With regard to demand-driven politics of innovation, crowdfunding continues to offer major opportunities. Which means that programmes such as the Bavarian vouchers for innovation, to name but one, should be combined with reward-based crowdfunding – as most innovations are killed by a lack of demand. And who better than a target group to judge if an idea should really be launched on the market?

Are American founders more creative and innovative than German start-ups? There are major differences regarding the culture of starting a business. In the USA, entrepreneurship is an integral part of schools and universities. Young talents learn at an early age how to use the tools necessary to implement ideas. Germany is making progress in this area but there is still a lot to learn overall. And this can naturally be seen among founders as well. Also, we are more reserved with regards to communication. Many of the innovative founders in Germany act in a B2B environment and as a result are less visible than start-ups developing solutions for end consumers.

What is the most important challenge for founders?
The most important challenge for founders is the question if there is any market for their product at all and if they will be able to reach relevant target groups. In addition to providing early contact to and exchange with key target groups, crowdfunding provides important insight when assessing whether or not interested parties will be converted into paying supporters, in other words, customers. Another, complementary, possibility is to approach target groups early to discuss the individual venture.

What is a good/innovative/creative business idea in Germany today?
I believe that this applies to all countries: is there a demand for my product and does it create an added value compared to existing alternatives? Can my idea be transformed into a viable business model? Many good business ideas reflect changes in technology and/or society.

What are the areas in which a lot of founding activities are currently taking place?In Germany, the majority of founders is active in the service sector (link only in German). However, this should not be read as a recommendation. Instead, founders should always ask themselves what their “unique advantage” is: in which areas did they gain a lot of experience; in which sectors did they build up a good network? What are my personal strengths and what do I enjoy? 

Start-ups in the field of design – long-term success story?
That depends on many different and highly individual factors. There are major opportunities in the field of design that are currently not fully explored. And this does not always have to be a long-term build-up of a company. It can also be about the creation or implementation of individual projects or products, which is where the enormous marketing potential of the internet comes into play. On Startnext, for example, there are a many serial crowd funders, who again and again bring to life new projects in cooperation with relevant target groups.

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