In 2007, the journalist Alexander Hüsing started the blog “Deutsche-Startups.de”. Ever since, he’s observed topical trends and economic developments. In 2016, Hüsing argues, things become more differentiated, more mature. He’s also not always happy about politicians interfering.
iRights.Media: What is your definition of a startup?
Alexander Hüsing: For me, a startup is a rapidly growing young company with a digital business model. It’s a startup as long as the founder and investors are still on board. As a rule, that spans a period of three to five years. There are also other companies that, even after ten years, I would characterize as a startup.
How many would you guess there are in Germany?
I would estimate there are maybe 5,000 to 7,000 startups. If we only consider those of real significance, we’re talking about a mid-range three-figure number.
What were the most important sectors in 2016?
A few sectors really became significant last year. Startups dealing with finance and banking have been talked about for a while now. However, a few FinTech representatives have thoroughly professionalized—sometimes even getting their own banking license. An independent section emerged with InsureTech. In future, such startups will not only act as an agent, but also position themselves deliberately as separate “special insurers”, particularly in the field of pensions and retirement provisions. PropTech (property technology) completely detached itself, and became big as a result. Politics was the instigator: in 2015, the “bestseller principle” was repealed. Now it was no longer flat-hunters who had to pay the estate agent, but rather the landlord. Around 50 startups emerged within the rubric of renting/purchasing/occupancy alone—though roughly half of these failed. And LegalTech also became a name.
What do they do?
LegalTech continually process standardized legal queries through one platform. Additional costs related to renting, for example, delays to train journeys or flights. If you have a receipt for additional costs, you can send it through their platform. When it’s a case that appears to be worthwhile, you immediately get a certain sum paid out, and they take it from there.
FinTech, PropTech, LegalTech… Who comes up with all these labels?
They simply develop over time. That is characteristic of the startup landscape today: five years ago something was just a startup. Now the scene is more differentiated. Today, every startup has a particular kind of stamp.
Are there also certain kinds of startups that have disappeared?
Not exactly disappeared, but recently we’ve seen a noticeable decline in the gaming business. Bigpoint was sold this year for a bargain basement price. Gameforge has let people go, as have Wooga and Gameduell. The gold rush times are over. The app stores are overflowing with clones of successful games. It’s now not as easy to get pole position in these stores.
If we look at PropTech, it was a political change that brought about a development of startups. Debates about the influence of politics are ever-present. Just how much help or hindrance are the general political conditions in this country?
The basic conditions in Germany are agreeable. You can always point towards reducing bureaucracy. It can be made easier for startups to fill their teams internationally. You can make it easier for foreign investors to invest, and also make life insurance possible. This is matter-of-fact stuff in other countries; here in Germany, as a “high-risk asset”, it’s not allowed. At the end of the day, all of this won’t be vital to win the war so to say. And generally speaking, I’m no friend of politicians wading in too much. They should at least not try to improve thing but in reality make them worse.
The startup scene was established in Berlin without politics bothering about it at all. Then Berlin discovered it as a political topic. There is really no other branch of the economy that is anywhere near as booming as startups. However, my impression is that since politics threw its arms around the startup scene, there have been more obstacles to overcome.
The minimum wage is a problem. Startups are often founded with many interns and students. In most cases, they’re now required to pay them up to 1,500 Euros per month. You can see this as good or bad. For founders, who really are exploiting themselves the most, this has massive disadvantages. Bureaucracy has made things worse. And then there was the plan to intensify the taxation of investments (the so-called “Anti-Angel” law). Fortunately this was stopped.
Are there not positives too?
Of course there are also good things coming out of state or semi-state organizations. A promotional program for founders, for example. But in many cases, politics has succeeded only in creating unrest and insecurity.
For a long time, there was an accusation of too little money being available to the startup ecosystem. That’s changed now, right?
For very young startups, it was never a problem to get starting capital from “family, friends and fools”. There were also enough ‘Business-Angels’ too—they invest up to mid-term six-figure sums. With anything over and above one million, it becomes difficult. Fortunately this has changed. There are ever-more two-figure million amounts available for mature startups. This year, even the Berlin travel portal GoEuro received the sum of 70 million US-Dollars. Often this comes from abroad, but it’s increasingly likely to come from within Germany. There’s a flood of risk capital providers who’ve emerged. In the last few years, many successful former founders have managed to get a lot of money together for new endowment funds. That shows the scene’s maturity. There have been positive changes.
Startup lobbyists often like pointing to the national economic significance of startups. Just how significant is it though?
If we take the very largest startups together, we see an interesting profit margin. Admittedly, there are actually very few real success stories like Zalando, active throughout Europe or even worldwide. The startup scene isn’t the car industry. At least where Berlin is concerned though, it provides jobs. It has brought many people into the city and given them new career opportunities.
The question is, what kinds of positions? Recently we’ve seen a lot of young people transporting food from A to B with crates far too large for them on their backs—sometimes at night, or in the pouring rain. These new jobs aren’t exactly multifaceted, creative and well paid, but seem more in keeping with a human drone. Do startups generally not just produce horrible jobs?
That could be the case for some delivery services, logistical and e-commerce businesses, and for Amazon. However, just because you employ hundreds or thousands of people in a warehouse or in logistics, you still need well-paid people with know-how and creativity at the management level. In the last 15 years, startups have created many jobs that simply didn’t exist before. At present we need experts for Facebook and search machine optimization, and we need online product managers and logisticians with completely new capabilities. In addition, there are careers—formerly unthinkable careers—to be made. Young people begin as an intern at a startup. When the business grows, they quickly become active as a team leader, or even at director level. Despite all their creativity, they would formerly have been swallowed up by some corporate group or other.
Interview by Stefan May.