Where are the best places for start-ups in Germany?

After the coronavirus pandemic caused the number of new start-ups to dwindle, Germany experienced a significant increase in entrepreneurs starting new businesses in 2021. A number of federal states have experienced a significant increase in new start-ups, although Berlin remains Germany’s start-up capital.

Germany sees increase in number of start-ups

A study by German start-up information service “startupdetector” has revealed that, in 2021, a total of 3.348 start-ups were founded in Germany. This is an increase of 11 percent compared to 2020, which saw the number of new start-ups fall significantly due to the coronavirus pandemic. “The numbers also seem to be stabilising at a strong level of just over 800 start-ups per quarter," the study reported.

The development has drawn praise from the German Startups Association, with managing director Christoph J. Stresing saying, “Start-ups are the economic power of the future.”

The number of companies that managed to secure external investment also rose last year; by 27 percent to 2.087. However, this is still far behind other global business hubs. "Despite the positive development of the investment figures in recent years, we in Germany are still very well behind not only the USA, but also countries like Sweden and the United Kingdom in terms of investments per capita," Stresing explained.

Berlin remains Germany’s start-up capital

Germany’s federal capital has also remained its start-up capital, with 747 companies being formed in Berlin in 2021 - this amounts to around 22 percent of all new start-ups in Germany. "Especially in Berlin we see a mature start-up ecosystem in many parts," Stresing said, referring to the abundance of founders, investors, highly-skilled workers, and universities and colleges found in the capital.

The state of Saxony has emerged as a surprise leader amongst the eastern states for the number of new start-ups, with 108 start-ups formed in the state in 2021. Several federal states experienced increases in the number of start-ups founded last year, including Baden-Württemberg (plus 21 percent), Lower Saxony (plus 30 percent), Saxony (plus 54 percent) and Saxony-Anhalt (plus 166 percent).

The study also revealed that the district of Starnberg, in southern Bavaria, had the highest start-up density in the whole of Germany. With 20,5 new start-ups per 100.000 people, Starnberg is even ahead of Berlin. "The companies from the Starnberg district are diverse: from the regional fresh food courier Regioluzzer, to Servail, whose robots are supposed to maintain train tracks during operation, to The Exploration Company, whose founder Hélène Huby wants to build a spaceship," said researchers. "According to Wikipedia, the district will have both the highest per capita income and the highest life expectancy in Germany in 2021. This could be due to the high average income in the region."

More diversity in German start-ups

Despite start-ups in Germany still mainly being founded by men, the proportion of start-ups with at least one woman exceeded 20 percent for the first time in 2021. The study also revealed that 14 percent of start-ups have doctors or professors on their teams; doctors and professors only make up 1,2 percent of the population. "The comparison shows that a high academic degree clearly favours founding a start-up."

Start-ups are mainly founded in the medicine and e-commerce sectors. “However, the presumably pandemic-driven e-commerce boom of 2020 seems to be slowly subsiding, as this industry is showing a slight decline," the study explained. There was a significant number of start-ups being founded in the gaming, media and environmental technology sectors in 2021; start-ups aimed at combatting the climate crisis increased by 144 percent.