In the startup strongholds of Berlin and Munich, the number of new companies founded in 2023 fell sharply due to the lack of financing. But a report shows which other cities are becoming hotspots.
Heidelberg: Known for its Renaissance castle and the venerable Ruprecht Karls University – and soon also a hotspot for German tech startups? Getty Images/Atlantide Phototravel
The hype surrounding the language model from AI startup Aleph Alpha, which is based in Heidelberg, Baden-Württemberg, has long indicated that things are not only happening in Berlin, Munich or Hamburg. A new survey carried out by the Startup Association together with the Startupdetector database shows that large cities outside of the start-up metropolises are increasingly becoming startup magnets. To do this, the analysis company evaluated data on new businesses from the commercial register, whereby only German cities with at least 150,000 inhabitants were taken into account. The result: Start-up activity is increasing significantly in research-intensive locations around large universities.
In addition to Heidelberg, this affects the cities of Karlsruhe and Darmstadt. They are in third to fifth place after Berlin and Munich among the top 10 major cities that recorded the most startups per capita in 2023. For comparison: Last year, Darmstadt was in 13th place. Another example of the innovative strength in the outlier regions is the Hessian startup Wingcopter, which delivers medicine and food to remote places in pilot projects and works with the University of Frankfurt and Rewe works together. In the report, the authors state that the advantage of the outlier regions is that scientific breakthroughs can quickly be put into practice in business. “Further strengthening this development is particularly important in view of Germany’s role as a deep-tech location.”
Compared to the record year of 2021: the number of new start-ups will fall by a fifth in 2023
However, the report also confirms that overall fewer startups were created in Germany in 2023 amid tough financing conditions. The number of new start-ups fell by five percent compared to the previous year to just under 2,500. The strongholds of Berlin and Munich were particularly affected. Compared to the record year 2021, when 3,196 startups were founded nationwide, the decline is a good fifth (22 percent). Even though the metropolises of Berlin, Munich and Hamburg still account for a third of all German start-ups, their share has been falling continuously since 2019. In contrast, regional states such as Baden-Württemberg, Lower Saxony and Saxony would have recorded broad growth in 2023. “This underlines the increasing importance of regions beyond the established startup hotspots,” say the experts.
Read too
New tech study sure: These are Germany’s next unicorns
The upward trend from the first half of 2023 is over, the startup association reported on Friday. The decline in start-ups is affecting almost all industries, with the software sector alone increasing by around a fifth. The experts cite the reasons for this as digitalization boosts and efficiency gains that companies and customers hope for from startup technologies. Things went particularly downhill for start-ups in online retail and food – the weak consumer climate was having an impact here, it was said. In the energy sector, however, a strong increase can be observed.
With 468 start-ups in 2023, Berlin remained unchallenged in first place, ahead of Munich (187). However, the two startup strongholds recorded declines of seven and 13 percent respectively compared to the previous year, while Hamburg increased by ten percent with 158 start-ups. “The start-up engine in the central hotspots is stuttering,” stated the startup association in Berlin. Deputy chairwoman Magdalena Oehl spoke of overall robust figures despite global crises. However, the decline shows “how difficult the financing environment currently is,” especially in the capital-intensive start-up strongholds.
Read too
From the Flix founder to the AI expert: This is Verena Pausder’s management team