Six theses for the future

Never before have there been so many vacancies as in the first quarter of this year: 1.7 million. There is not only a lack of skilled workers, but employees in all sectors. Without net immigration, the number of people of working age in Germany will fall from 47 to around 40 million by 2035. Scientists warned of this scenario years ago, says Laguna, but “their warnings had no consequences.” “The shortage of skilled workers is a system failure with an announcement,” he says. This has an impact on the innovative power in Germany. “Because even innovators lack employees.”

The positive news: Unemployment also increases the pressure to innovate. Laguna says: “There’s something good about that.” Traditional industrial companies in particular are being forced to use new technology to make work more efficient. “The degree of automation will increase dramatically,” he predicts.

Politicians and corporate leaders must also create incentives to “tie smart, well-trained talent to Germany,” believes Celonis founder Rinke. His software company employs around 3000 people, the largest location is Munich. Jobs are attractive when they are associated with an appropriate salary and offer opportunities for advancement and personal freedom. A survey conducted by the recruiting provider Softgarden among almost 2,200 applicants in Germany, Austria and Switzerland came to similar conclusions. The top reasons for termination are therefore low salary, few career prospects and bad behavior on the part of managers.

2. Link the education system with entrepreneurship

The discussion participants agree: the German education system is better than its reputation. Even in small towns, people “can get a great education without paying tuition,” says Rinke. In the US or other European countries, education is expensive and only accessible to smaller groups.

According to the OECD, the education fees at public institutions in Germany are among the lowest of all. In 2018, students in Germany had to pay an average of 148 US dollars per year for a bachelor’s, master’s or doctoral degree. It’s over $12,000 in England, over $9000 in the US and over $5000 in Japan.

Now, academic research only needs to be linked to entrepreneurship, says Rinke. A McKinsey analysis shows that Germany is currently far behind the USA in terms of spin-offs. Although Germany is strong in basic research, the results are rarely translated into concrete applications. The number of US technology companies with a valuation of more than one billion dollars per million inhabitants exceeds that of German companies by a factor of 4.5.

The spending on research and development in Germany is significantly higher in relation to GDP. Entrepreneurial activity in the early stages is also more than twice as high. Sprind boss Laguna explains how politics can take countermeasures: Entrepreneurship must be integrated “into the curriculum” of educational institutions and tried out directly. “Why shouldn’t students try to be entrepreneurs themselves?” he asks. “That would be an exciting school program.” Initiatives such as “Girls” Day” and “Boys” Day” are good starting points.

3. The biggest obstacle to innovation is bureaucracy

According to Laguna, Germany has the potential to shape the megatrends of the future. But to do that, bureaucracy would have to be reduced and more risk taken: “We try to avoid mistakes, and in doing so we create processes that become so fragmented, require so much micromanagement and freeze us up,” says Laguna. “Our bureaucracy monsters are deadly for innovators.”

Investor Fabian adds: “In Germany there is a tendency towards administration.” The impression of the discussion participants corresponds to the mood in the entrepreneurial camp. The majority of the “Young Entrepreneurs” and the association “The Family Entrepreneurs” consider bureaucracy costs and over-regulation to be the greatest obstacles to investment, according to a member survey.

Laguna makes a suggestion on how bureaucracy can be reduced: Germany must “create permeability between the systems” by promoting university spin-offs of start-ups and creating incentives for entrepreneurs to get involved politically. He calls on universities to employ more lecturers with experience in the private sector.

4. Ideas are there, but there is not enough money

Very few start-ups can get by without funding. But many founders, especially in the more capital-intensive growth phase or in fundamentally more capital-intensive areas such as deep tech, take on more foreign than German growth capital because there is still relatively little venture capital in Germany, says Fabian: “That is a structural disadvantage and should change. Otherwise we will make ourselves dependent on foreign capital, especially US capital.”

The figures show that Germany’s venture capital market is small in relation to economic power. At 0.06 percent of gross domestic product (GDP), Germany is below the EU average. The world’s leading venture capital countries are the USA (0.63 percent) and Israel (0.27 percent).

Fabian believes that the European Tech Champions Initiative (ETCI) of the Federal Ministry of Finance and Economics is an important first step. EU states are planning to make ten billion euros available for financing European technology companies. Germany and France are each contributing one billion euros. The initiative helps to pool more institutional capital and invest in funds, helping to create more European funds of relevant size, says Fabian.

Rinke certainly sees progress: When he founded Celonis eleven years ago, the German “venture capital infrastructure was even smaller than today and consumer-focused”. In the first five years, he and his co-founders received no money from investors. A software for business processes, “developed by people in their early 20s, didn’t convince anyone at the time”.

5. Successful entrepreneurs “put a notepad by the bed at night”

The software start-up Celonis was recently valued at 13 billion US dollars, making it the most valuable start-up in Germany – and more valuable than many large corporations. For comparison: Commerzbank is worth seven billion euros. Founder Rinke considers the “fight against incrementalism” to be his strategy for success. Instead of thinking in small steps, he tries to keep an eye on what is possible in the long term. “It starts with big dreams and ambitions,” he says, quoting Tesla founder Elon Musk: “Normal companies that develop products are guided by the status quo,” the influential entrepreneur said at a congress. Success comes to “those who orient themselves to the limits of physics”.

To be passionate about the cause, to be effect-oriented and to be unwavering in the matter, these are also prerequisites for success for Laguna. Successful entrepreneurs “keep a notepad by the bed at night,” he says. According to his observation, founders are rarely good students because they are usually only interested in one topic. From this passion comes the ability not to be unsettled by unconstructive criticism – and with it resilience.

6. Many founders don’t think long-term enough

Around 50 years ago, the SAP founders began to write programs that enabled financial accounting via mainframe. Today the software group is a heavyweight in the Dax. Many large companies and hidden champions from medium-sized companies were founded with a “long-term, sustainable claim”, says Rinke. This claim is missing in the start-up culture. Many founders only plan their business for a few years or plan to set up several companies in a row.

“It can’t work. Starting a business is a full-time job,” he says. Also because it requires a lot of “mental strength and ambition to build up a company,” adds Fabian. She recognizes successful founder personalities “by their ability to learn and their focus on a differentiated product and strong technology”. The willingness to learn and to constantly develop is necessary if only because “founding never goes according to plan”.

The discussion showed: Europe has good prerequisites for developing into an international technology hotspot. The implementation requires a founder-friendly policy, more venture capital, incentives to start up in universities and companies – and the right mindset.

More: Ten strategies that will bring Germany back to the top of the world