Even, anyone who does not follow the morning newspaper or the evening news on a regular basis will have noticed the current tension in terms of the economic and social challenges in Germany. Intuitively, some will confirm that currently the challenges are multiplying faster than appropriate solutions can be discovered.
Both, on a private and on a corporate level, the developments of energy shortage, inflation, raw material shortages and the war in Ukraine are observed with concern. Further ongoing challenges like the Corona pandemic, climate change and the shortage of specified employees are still in place.
The Startup Monitor 2022, presented on September 29 by the Bundesverband Deutsche Startups e.V. (German Startup Association), also clearly shows how the well-known topics are reflected in the startup scene. A total of 1,976 startups in Germany were surveyed.
The current business situation continues to be assessed as positive by 48.3% of respondents. With regards to the future development, 54.2% have positive expectations - a decrease of 17.9% compared with the previous year. This shows that the economic challenges have also arrived in the world of early-stage companies.
65.1% of the startups surveyed have a digital business model, whereby software-as-a-service (28.7%) companies having the greatest relative importance.
Almost one in five startups is engaged in technology development/production (hybrid business model), in which hardware and software are merged.
Environmental impact (78.9%) in combination with increasing profitability (67.9%), gaining market shares (61.5%) and rapid growth (60.8%) are the main strategic ambitions of German startups.
At 43.8%, almost one in two companies stated that business financing is currently the biggest challenge by realizing their corporate strategy. Startups particularly prefer business angels (46.2%), venture capital investors (44.4%) and strategic investors (42.6%). However, the actual usage of these financing resources is significantly lower, which could indicate that the funding process is too extensive and time-consuming for startups. Furthermore, the network with investors could be limited developed. In the case of funding by business angels and venture capital investors, approximately. 80% of the startups rated the collaboration as (very) satisfied.
When it comes to the question of the proper timing for external startup funding, for Ingo Weber, active business angel, it all depends on the business model. While young companies from the project and services sectors can often finance themselves; technology-driven startups are more likely to need external financial support.
"In some cases, startups intend to secure the know-how of a business angel through an equity investment" - says Ingo Weber.
Regarding the question, how relevant a structured finance department for the success of a startup is, Mr. Weber notes that it depends on which stage the young company is at. "A Pre-Revenue phase is predominantly about sales. However, as soon as the first revenues are generated, it makes sense to set up a structured finance department."
Innovative and creative startups in the fields of cyber security, circular economy, new materials or even artificial intelligence will be able or even required, to make a significant contribution to the development of unbureaucratic and effective solutions to current and future economic and social challenges in Germany and across national borders.
The PAS Financial Advisory AG is the partner of the start-up scene. When it comes to optimizing processes in the finance department through digitalized solution approaches, providing support in funding and transaction processes, as well as planning key financial figures and the financial reporting required for this or securing skilled employees through employee stock option programs – you can do it with us!
With our experts we support startup CFOs in operational as well as strategic topics. Instead of being a temporary problem solver for individual issues, we are a constant discussion partner who keeps startups on track for growth in the financial area and accompanies them.
The aim is to enable young companies to make decisions quickly on financial questions and quantify potential risks - in order to prepare them for the changing economic and social circumstances.
We just need an answer to the question: Where can we help?
Author: Marvin Zimber