Start-ups in Germany: Bavaria is ahead of Berlin, medicine is the second strongest start-up sector, regions beyond the hotspots are catching up

In 2023, almost 2,500 start-ups were founded in Germany despite the sluggish economy and many uncertainties. Compared to the previous year, however, this is a decline of just under 5 per cent. With the report series „Next Generation – Startup-Neugründungen in Deutschland” Startup-Verband and startupdetector record the start-up dynamics in Germany.

To the report: "Next generation startups in Germany

January – December 2023" (link: https://startupverband.de/fileadmin/startupverband/mediaarchiv/research/Next_Generation_Report/Next_Generation_Startup-Neugruendungen_in_Deutschland_2023.pdf)

A look at the dynamics of new start-ups in Germany in 2023 shows:

Start-ups in 2023 will be frequent and at a pre-coronavirus level

In 2023, 2,489 start-ups were founded in Germany, almost 5% fewer than in 2022. This means that this important indicator has fallen to the level of the pre-coronavirus year of 2019, with a decline of 22% compared to 2021. The decline in the second half of 2023 thus halted the hoped-for positive trend in the first half of the year. Since August, the rate of growth has been significantly lower than in previous years. This means that the positive trend between 2019 and 2021 has been broken: 16 of the last 24 months were below the average of monthly new start-ups from 2019 to 2021.

Berlin again ahead of Munich in terms of start-ups per capita

In absolute figures, Bavaria (477), Berlin (468) and North Rhine-Westphalia (413) are ahead in terms of new start-ups - but are losing momentum. Berlin is once again ahead of Munich in terms of start-ups per capita, but at the same time activity in both hotspots is falling more sharply than the national average (-7% and -13% respectively). Among the federal states, Saxony, Baden Württemberg and Lower Saxony were among the winners in 2023, bucking the negative trend.

Smaller locations and regions beyond the hotspots are catching up

Much more startups are founded per capita in Berlin and Hamburg than in the other federal states

but their share has fallen from 33% in 2019 to 25% in 2023. The strength of federal states is often driven by individual, particularly relevant hotspots: Examples include Munich in Bavaria or Dresden and Leipzig in Saxony.

However, the regions beyond the hotspots are becoming more important: since 2019, the share of new registrations from Berlin, Munich and Hamburg has fallen from 41% to 33% - smaller locations have been able to catch up. Space, on the other hand, is becoming increasingly important. Countries such as Baden-Württemberg, Lower Saxony and Saxony recorded broad-based growth in 2023. This underlines the increasing importance of regions beyond the established startup hotspots.  Rural regions are finding it difficult to establish startup ecosystems, but are tempting with a lower cost of living. It is important to strengthen the breadth and adequately network existing start-ups.

The decline in new start-ups affected almost all sectors, with eCommerce (-18%) and food (-16%) being the main losers due to the weak consumer climate. However, the software sector was able to make significant gains (+21%). The medical sector remains at the top of the list of sectors with the most new start-ups in second place. Behind the top 10, the number of start-ups in the energy sector increased significantly (+69% to 88 start-ups). The field of blockchain and crypto is the strong loser: only 33 start-ups were founded here in 2023 (- 64%).

The startupdetector records new startups in Germany using commercial register data and derives trends in the early phase through continuous monitoring.

Article from "Bio M" from 18 January 2024