Chile

15.395 Fall 2014, SF15, Ming Qiao

Write-up of Financing to New Ventures in Germany

1. What are the main features of the entrepreneurial environment in Germany?

People started to get more and more, maybe over, optimism regarding entrepreneurial environment in Germany. The major signals that led people to that conclusion are several folds:

- Significantly increasing international funds were flowing into Berlin in recent years.

- Several outstanding acquisition cases happened during the past couple of years.

- There are well-known highly educated and skilled talents available, contributing to Germen’s innovation capability

- Berlin’s lower cost of labor, rent and infrastructure compared to other Eurozones.

- Convenient access to emerging markets, Russia and Eastern Europe.

- Government efforts to help banks lend to new ventures.

Benefited from the above movements, Berlin has rapidly grown to a high tech incubation center that covers various industries including IT, biotech, new energy, environment, etc. Although no icon success has been achieved, analysts believe it is in the visible future.

2. What are some of the challenges that explain why, despite strong human capital and rule of law, startups in Germany often struggle?

Germen has positive entrepreneurial environment, however it has to face a variety challenges that hold back the growth of startups. Majorly the challenges come from two resources: financing system, and people’s incentive.

- Although significant amount of funds flew into Germany, the entire entrepreneurial system is short of finance. Similar number of VCs as in America (11-12/million inhabitants) but significantly less investment ($1M vs. $7.7M).

- Investors in Germany are extremely cautious. They invest high proportion to few projects and expect break even in 18 months, compared to American investors’ diverse portfolios and expect one will grow.

- Germen people overall have non-positive attitude towards entrepreneurship, and...