Comparing the German and American Start-up Scenes

© Nathalie Schueller

Young and innovative entrepreneurs are pushing into the markets in the US and Germany alike. How do the start-up scenes in the two countries differ?

In this guest contribution, Dr. Kurt Becker, Vice Dean for Research, Innovation and Entrepreneurship at NYU’s Tandon School of Engineering and Chairman of the DWIH New York Board, finds our answers.

The most successful innovation and entrepreneurship ecosystems have emerged in areas that are also home to research universities, such as Munich and Berlin in Germany and Silicon Valley, New York City and Boston in the US. While there are many similarities between the ecosystems in Germany and the US, there are also some notable differences, which are rooted in the different cultures of the two countries.

  • In contrast to Germany, failure of a start-up in the US is not a stigma as long as entrepreneurs learn from their mistakes.
  • Forming a start-up in the US is comparatively easy and tax laws are very founder-friendly, which is not true to the same extent in Germany. What is more, there are not as many investors and funding sources for pre-seed start-ups in Germany as there are in the US.
  • German founders and investors are generally very risk-aware – even risk-averse in many cases – while a high degree of risk tolerance can be found in the venture capital and investor scene in the US. However, this higher risk tolerance and easier access to capital often encourages the premature formation of a start-up based for example on technologies that have not yet been fully developed. This results in many more failed start-ups and bankruptcies in the US than in Germany.
  • Start-ups in the US profit from a particularly extensive support structure of investors, mentor and adviser networks, incubators and accelerators. In addition, American start-ups can take advantage of training programs for entrepreneurs at an early stage in the process. This multi-faceted support environment can certainly serve as a role model for Germany.

Finally, I would like to point out that entrepreneurs in the US have recognized that clear go-to-market strategies, marketing/sales competence, the ability to pitch to investors and having the right team are more important for start-up success than mere technical competence and a fully developed product. By contrast, German entrepreneurs place a great deal of emphasis on technology and underestimate the importance of non-technical factors for a successful start-up.

(This essay first appeared in the 2017 DWIH Annual Report, which can be downloaded below)

Download: GCRI-Annual-Report-2017 [pdf, 6.01 MB]