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Start-ups: Germany’s deceptive high for top start-ups

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Start-ups: Germany’s deceptive high for top start-ups

economy start-up scene

Germany’s deceptive high for top start-ups

Status: 04.08.2023 | Reading time: 3 minutes

Other regions have long since caught up with the start-up stronghold of Berlin

Quelle: Getty Images/RICOWde

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When it comes to the number of particularly successful start-ups, Germany is in a surprisingly good position. A recent study lists almost forty start-ups valued at billions. But the data hide a crucial development.

Counting unicorns was a popular activity in the start-up scene until the interest rate hike by central banks. In the financial market, young companies that are valued at at least one billion dollars by their venture capitalists are referred to as “unicorns”. This extrapolated goodwill is considered a prestigious mark of a startup’s success. After all, the consultancy GP Bullhound, which specializes in the technology sector, currently lists 39 such mythical creatures in Germany.

This view of the unicorns has an advantage for the image of the start-up landscape and its financiers: the herd seems to be growing continuously, so the situation is good.

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In the current period of high interest rates, the fresh money for young companies worldwide is significantly less than during the start-up hype of 2020/21. After all, it has become more expensive for lenders to raise funds in view of the rise in key interest rates. Nevertheless, in most European countries, new billion-dollar companies have been added steadily.

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According to a recent study by GP Bullhound with a focus on Europe, Germany is not in a bad position in comparison: the Federal Republic has recorded seven new unicorns since June 2022 alone.

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Choco, for example, is quite new. The Berlin company enables restaurateurs to order via chat at the wholesale market. The youngest unicorn, the Hamburg company 1Komma5°, which helps with the planning of energy-efficient conversions of private houses, meets the zeitgeist. The translation software of the Cologne unicorn DeepL is based on artificial intelligence. Grover from Berlin rents out electronics such as laptops, e-scooters and game consoles.

Source: Infographic WORLD

The selection shows the breadth of start-ups that are currently receiving money. Superficially, the cumulative value of the German unicorns is growing: At 107 billion euros, German companies are among the leaders in a European comparison. However, this sum is deceptive – and probably so is the number of unicorns.

Source: Infographic WORLD

Because the statisticians of GP Bullhound are dependent on the evaluation at the time of the most recent publicly known financing rounds. And this money usually flowed before the interest rate turnaround, i.e. at more generous times.

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If companies were faced with the task of raising fresh money today, the situation would be different. A look at the index of listed tech companies that are not making a profit gives an idea of ​​how much actual valuations have plummeted since 2021: share prices have fallen by well over half.

Source: Infographic WORLD

Start-ups are currently getting less money in all federal states. Above all, there are no larger rounds of financing for unicorns. The level drops particularly clearly in Berlin. Bavaria and Hamburg are catching up, and financing activity there did not decline as much. With some unicorns it is also questionable whether they can ever be worth a billion dollars again. The Berlin-based operator of intelligent greenhouses Infarm, for example, has given up large parts of its business.

Realistically, the herd of unicorns is also likely to shrink worldwide. A return to the start-up hype is not in sight. And that should soon be reflected in the statistics – when the first unicorns have to borrow fresh money at lower valuations.

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