Take a dive into the startup report for 2020 which has, without question, been an eventful year for everyone – individuals, startups, corporates, institutions, and society at large. Especially in this year, startups and technologies have had a central role. Not least in the health sector, due to companies such as BioNtech, or in the sectors artificial intelligence and robotics.
So, how have founders, companies, and tech ecosystems tackled this year’s global challenges? How has the corona pandemic affected startups and what are the resulting perspectives for 2021? Where can we find hotspots and which technologies are affecting which sectors? What kind of role has the topic of “responsibility“? What has happend in startup financing?
In a two-part series we adress each of these questions, separately for Northrine-Westfalia, Germany, Europe and the World.
Let’s start with a national perspective:
B2B STARTUP ECOSYSTEM NORTHRHINE-WESTFALIA
In spite of the pandemic and the resulting crisis, company launches have increased, which the Federal Association of German Startup’s Startup Monitor 2020 for Northrhine-Westfalia shows. The number of startup launches in Northrhine-Westfalia during the first half of 2020 showed a 17% increase compared to the same period in 2019. Generally, political support measures succeeded in helping many startups affected by the crisis (NRW Startup Monitor, 2020).
HOTSPOTS, SECTORS & TECHNOLOGIES
Compared with other federal states and their place in the innovation ecosystem and according to the DSM 2020, Northrine-Westfalia has with 19.1% the highest percentage of startup activity in Germany. Important factors are the traditionally strong industrial sector or the B2B sector and innovations in mechanical engineering, logistics, in the health sector, or in information or communication technology for companies (Haucap et al, 2020).
The decisive factor however, is the synergistic cooperation between startup founders, established Hidden Champions, and research institutions. 65% of startups in Northrine-Westfalia generate more than 50% of their revenue with B2B business models (DSM 20202). The thriving ecosystem is especially sustained by organizations and initiatives which promote networking between the various actors. Specifically, formats like our own Hinterland of Things Conference or the Hinterland Hack contribute to the ongoing success.
The ecosystem in Northrhine-Westfalia is characterized by its openness: More than ¼ of founders come from migrant families (NRW Startup Monitor 2020). An enormous success story are, without a doubt, the tje story of founders Uğur Şahin, born in Cologne, and his wife Özlem Türeci. With their pharmaceutical company BioNTech, the two of them enabled important breakthroughs in the global fight against the Covid-19 pandemic.
The two topics financing and growth pose large challenges for startups in Northrhine-Westfalia. Only 57% of startups were able to raise external capital until the third quarter of 2020; only 18% employ more than 10 persons. Despite the increase in external financing, especially compared with the year before, business angel and venture capital investments are the reason why dream and reality collide so often (NRW Startup Monitor 2020). Tim Schumacher, serial founder (Eyeo, Sedo, SaaS.group) and investor, told the Startup Monitor why the role of business angels is an essential one for aspiring startups:
“Business Angels, especially those who successfully launched a company of their own, are invaluable to a startup ecosystem. This also applies to NRW. Apart from providing capital in the early startup phase, they also offer their network contacts and their expertise. But especially, they help founders by mentoring them and fostering the right mindset for succeeding with a launched startup.”
STARTUP ECOSYSTEM GERMANY
The crisis caused by the pandemic has hit the German startup ecosystem hard. Almost ¾ of all startups interviewed by DSM 2020 were affected negatively. Still, the startup scene remains optimistic and sees opportunties in the midst of the crisis. 56% of all participants consequently focused on product development and 50% did not reduce their staff although investments were postponed. The opposite actually, around 90% are planning to increase staff. In total, especially online networks, ecommerce, and online platforms exhibited a high crisis resistance (DSM, 2020).
HOTSPOTS, SECTORS & TECHNOLOGIES
The highest percentage of startups can be found in two federal states: Northrhine-Westfalia (19.1%) and Berlin (17.7%). Combined, this amounts to a third of all startups in Germany.
Startup location by federal states and startup hotspots:
Artifical Intelligence is on the rise. AI is one of the key technologies for the digital future and also has become more important in Germany: The share of startups whose business models are strongly influenced by AI is at 40%. This has two distinct advantages. The technology can spark innovation in the whole ecosystem but also provide an enormous competitive edge in terms of digitization. (“Künstliche Intelligenz”, 2020).
Sustainability has become more important. Green Economy and Social Entrepreneurship have become stronger motivators against the backdrop of this year’s global challenges. According to a Bitkom survey, 90% of all interviewed founders want the work in their startup to be sustainable.
Migration has been and still is very important for the entrepreneurial spirit and the startup ecoystem in Germany. More than 1/5 of all interviewed founders have an immigration background. The percentage of people with an immigration background working in startups is 26% (DSM, 2020). Also, the number of female founders shows a slight increase and is now at 16%. Even despite that development, women are still strongly underrepresented in the startup world (DSM, 2020). In sum, startup demographics fit the insight of the newest McKinsey study on diversity and inclusion:
“The most diverse companies are now more likely than ever to outperform less diverse peers on profitability.” (McKinsey, 2020)
On a national level, more startups have raised external capital, compared to the last year. VC and Business Angel investments are becoming more important:
In sum, there were some record-worthy rounds of financing again:
- Lilium: In 2020, the company that is developing air mobility (“flying taxis”) received funds worth more than 250 million euros.
- Tier Mobility: A 211 million euro investment has made the e-scooter startup from Berlin the second highest ranking scooter startup, beating Lime but still lagging behindBird.
- BioNtech: This company, working with US pharmaceutical corporation Pfizer, received around 342 million euros in 2020.
- Curevac: Both “Mr. Microsoft” Bill Gates and SAP founder Dietmar Hopff have invested into the company that received a total of 560 million euros this year.
- Auxmoney: With a total of 150 million euros, the credit broker finishes this year with one of the largest financing rounds in fintech.
Startups in Europe and Beyond?
In this article, we talked about how founders and companies tackled global challenges in the startup ecosystem Northrine-Westfalia and in Germany, with a clear focus on hotspots, technology, and funding.
In short, most parts of the startup scene are showing themselves to be resilient when it comes to this year’s challenges.
But how are startups faring in Europe and the world? That’s a question that the second part of our report deals with.
- Bitcom (2020): Bitcom Startup Report 2020.
- Bundesverband Deutsche Startups (2020a): NRW Startup Monitor 2020.
- Bundesverband Deutsche Startups (2020b): Deutscher Startup Monitor 2020.
- Bundesverband Deutsche Startups (2020c): Künstliche Intelligenz: Wo Stehen Deutsche Startups?
- Haucap, Justus; Kehder, Christiane und Loebert Ina (2020): B2B-Plattformen in Nordrhein-Westfalen: Potenziale, Hemmnisse und Handlungsoptionen.
You want more?
In the second part of our startup report, we show how startups are faring in Europe and beyond.