Start-ups from Germany could migrate to the USA

“The Inflation Reduction Act is now adding fuel to the fire,” says Christian Miele, CEO of the startup association. He observes that the international competition for future technologies is becoming ever fiercer – and encourages founders to consider the advantages of the USA. “Deep tech start-ups are particularly popular because they bring groundbreaking innovations to the market,” explains Miele.

Build factories in Germany – or rather not?

Germany as a location presents a problem for these companies in particular: the so-called deep-tech start-ups, which base their innovations on technologies and produce tangible applications instead of just building a website, are dependent on a lot of capital. Association leader Miele describes the problem as follows: “The challenge is that after the first testing of innovations in the laboratory, larger investments are due early on.” The costs for pilot systems and power-intensive set-ups are high.

Marvel Fusion, for example, faces exactly this challenge. The Munich start-up relies on energy production through laser-based nuclear fusion. That sounds futuristic and it still is at the moment – ​​the first power plant could go into operation in ten years at the earliest. Until then, a lot of capital is needed, for example to set up test systems. It is not yet certain when the young company will generate its own energy and thus make a profit. However, the benefit would be immense: Nuclear fusion promises a clean and practically inexhaustible source of energy.

For Marvel Fusion, the question therefore arises as to whether the first prototypes of their technology are really best kept in Germany. “We have great research and industry in this country, but we also have to look at monetary incentives and regulations,” says Managing Director Heike Freund.

>> Also read here: Success with nuclear fusion – research companies hope for new momentum

As with many tech-based companies, funding is one of the most important factors for Marvel Fusion. Freund welcomes the Department of Commerce’s Deep Tech and Climate Fund, but objects: “This fund was announced more than two years ago.”

In the rapidly developing world of technology, that is an eternity. In addition, above all those ideas that could soon generate profits are promoted, criticizes Freund. “But deep tech and short-term commercialization are quite a contradiction in terms.” Some investors would therefore urge Marvel Fusion to consider a location in the United States if necessary.

New pan-European funding pot should help

In order to prevent migration, Germany, France, Spain, Italy and Belgium want to take countermeasures with the “European Tech Champion Initiative” and set up their own funding program. European start-ups are to be funded with around 3.7 billion euros, Germany wants to make one billion euros available. Federal Finance Minister Christian Lindner (FDP) and the start-up officer in the Federal Ministry of Economics, Anna Christmann (Greens), signed the corresponding mandate agreement in Brussels on Monday.

But financing is just one of the problems facing the start-up scene in Germany. The other is over-regulation. “We are currently throwing a huge hodgepodge of regulations over innovations and nipping them in the bud,” complains Freund. This is one of the reasons why companies are increasingly migrating.

Association leader Miele also confirms what Freund reports: in addition to the low level of venture capital in this country, it is above all the bureaucracy and slow processes that slow down start-ups. A factor that also prompted the German “corona heroes”, the Mainz start-up Biontech, to build their new cancer research center not in Germany but in Great Britain.

According to her statement, the start-ups have not yet noticed anything about the “new Germany speed” that Chancellor Olaf Scholz praised after the opening of the liquid gas terminal in Wilhelmshaven in December.

So does Gideon Schwich, who founded the technology start-up Cylib with two co-founders. His company was able to announce new financing of eight million euros on Wednesday. Cylib has specialized in the recycling of lithium-ion batteries and wants to counteract the shortage of raw materials for electric cars, among other things.

Provisional approval sometimes takes two years

Schwich emphasizes that there is a wide range of financing instruments in Germany, “but it takes a long time before the projects really get going”. In some cases, it takes two years before a provisional permit is even available. “Time is a very important factor in our department.”

>> Also read here: How the federal government wants to create a technological middle class

The Inflation Reduction Act, on the other hand, works very unbureaucratically and quickly. Schwich says that the question of whether Germany is still the best place to be is often asked in the tech scene. Cylib, too, will need even more capital in the coming years to build factories and implement its recycling plans. The financing conditions in the USA could be significantly better thanks to the IRA.

But Cylib founder Schwich also sees a clear advantage for Germany as a location – and that of all things in the many rules. In any case, companies with high quality could score points and would not be pushed out of the market by worse but cheaper competitors.

In Asia, for example, there is a lot of state-subsidized competition, according to Schwich. But: “If we want to establish ourselves on the market with our technology, we have to focus on quality and be fast at the same time.”

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