Decoupling Frankfurt — PwC study 2020 German Startup Monitor highlights
73% of Frankfurt startups pursue digital business models.
2 of 3 Entrepreneurs report negative effects of the pandemic on their business.
Only 12% have access to venture capital.
Only every 2nd Young entrepreneur is satisfied with the startup ecosystem in Frankfurt.
Frankfurt startups are struggling with the consequences of the corona crisis
Online platforms, software as a service or online trading — Frankfurt startups are becoming more and more digital: 73 percent of young entrepreneurs from the Main metropolis rely on a digital business model — that’s plus 15 percentage points compared to the previous year and 6 percentage points more than the national average. In addition, the proportion of founders who assign themselves to information and communication technology has risen from 24 to 42 percent — ten percentage points more than nationwide. This focus could help them cope with the effects of the crisis. Because the pandemic has made life more difficult for entrepreneurs, and financing, in particular, has become more demanding.
Digitization is influencing business models more and more
“The startups have recognized that the continued focus on digitization makes their business models more resilient. More and more of their customers have been ‘forced’ to digitize themselves further during the crisis, so that the demand for corresponding products and services increases. “
Michael Burkhart, Managing Partner Central Region and Frankfurt Office Manager at PwC Germany -Tel .: +49 69 9585–1268
Digitization has a major influence on the development of business models in the startup scene, say 92 percent of founders in the Frankfurt area. That is 11 percentage points more than in the previous year and 7 percentage points more than the national average. Artificial intelligence in particular is gaining in importance as a technology of the future: every second young entrepreneur in Frankfurt (2019: 42 percent; nationwide: 43 percent) is of the opinion that AI has far-reaching implications for his business model.
Corona and the consequences for startups
Two thirds of Frankfurt startups report that the pandemic has negatively impacted their business. Nationwide, even three quarters of startups had to cope with negative effects. The failure of events, the delay in orders, the short-term decline in sales and the reduced liquidity are particularly troubling for the startups.
In response to the crisis, the Frankfurt founders are focusing on their product development (60 percent) or postponing planned investments (47 percent). Only 14 percent say they have cut staff to cut costs.
Nonetheless, the average number of employees has dropped significantly year-on-year. While the Frankfurt start-ups employed an average of 17 people in the previous year, there are only 13 today.
Raising capital is one of the biggest hurdles
The biggest hurdle that young entrepreneurs face is — besides sales and customer acquisition — raising capital. 48 percent (2019: 40 percent) find it difficult to make money in the current environment. The Frankfurt startup decision-makers have clear ideas of where this should come from: They want a financial injection from state subsidies and better access to risk capital. The reality is different, however: only 12 percent of Frankfurt residents — 19 percent nationwide — have access to venture capital, while 42 percent would like to use this funding.
Seven out of ten startups want to go abroad
Frankfurt startups are strong when it comes to diversity and internationalization. You are pursuing ambitious expansion plans: 70 percent of Frankfurt startup decision-makers are planning to expand their international activities. Their high level of internationality could help them when jumping abroad. The proportion of founders with a migration background is well above the national average: almost every third startup founder in Frankfurt has a migration background, nationwide it is only every fifth. English is spoken in 36 percent of Frankfurt startups; nationwide, English is the dominant working language in 30 percent of startups.
The strengths and weaknesses of the Frankfurt startup ecosystem
The Frankfurt startup decision-makers rate the local startup eco system significantly worse this year than last year: Only 51 percent are satisfied with the startup conditions in the Frankfurt area — nine percentage points less than in 2019. Nationwide, satisfaction is 61 Percent significantly higher. The greatest weaknesses are the difficult access to capital and investments as well as the tense situation on the real estate market: 37 percent describe the access to capital and investments as bad; 39 percent are dissatisfied with the availability of affordable office properties in the Main metropolis.
Nonetheless, the greater Frankfurt area has a lot to offer entrepreneurs: One of the main strengths of the Main metropolis is its proximity and access to universities, startup networks, mentors and consultants. The economic policy initiatives and the availability of qualified local staff also rate 53 percent of the Frankfurt founders as good.
Last but not least, Frankfurt scores points when it comes to cooperation: Hessian startups often work together with established companies (78 percent vs. 72 percent nationwide).
Complete Study here:
“In Germany’s largest financial center, of all places, young entrepreneurs find it particularly difficult to get hold of capital. The corona crisis has exacerbated this problem as venture capital houses have initially concentrated on their existing portfolio. In addition, the exchange with potential donors has become much more complicated as there are hardly any events. “
Daniel Spengemann,Head of the PwC startup initiative NextLevel in the Rhine-Main region
Decoupling Frankfurt — PwC study 2020 German Startup Monitor highlights was originally published in FrankfurtValley on Medium, where people are continuing the conversation by highlighting and responding to this story.