Start-up report 2020: What start-ups want

During the corona pandemic, founders and start-ups whose companies have gotten into difficulties need suitable framework conditions and support offers suitable for start-ups. Bureaucratic obstacles must be removed.

The right framework for start-ups

Due to the corona pandemic, the number of start-ups in 2020 fell compared to the previous year. Founders need the right framework conditions. This includes that politicians gear their economic policy measures towards strengthening the spirit of innovation and entrepreneurial activities. The Federal Government’s bridging aid is also an important help in overcoming the crisis when it comes to setting up new companies. These bridging aids serve primarily to cover operational fixed costs. For start-ups, however, it would be important that one-off start-up investments are also taken into account in the grants. With the appropriate framework conditions, business founders, start-ups and existing companies should be able to permanently free themselves from the crisis mode on their own.

A survey by the DIHK in 2020 showed that company founders want bureaucratic hurdles to be reduced, tax law to be simplified and access to funding to be easier. What is also important is a better IT infrastructure and the expansion of broadband Internet, more understanding of entrepreneurship in society, better access to equity and outside capital, improved networking with established companies and other founders, and qualified specialists. Business start-up advice helps founders to find the right entrepreneurial ideas, to make contact with other entrepreneurs and founders and to obtain financial support that secures the financing (service tip: Find a state-sponsored consultant/coach).

Digitization plays an important role, especially in times of the pandemic. It can help with the further development of processes and procedures and facilitate business activities in many areas. In order to be able to start and survive successfully with “doing it yourself”, a change in the business model and an adjustment to the new circumstances are sometimes required. Digitization can help to open up new markets and to align the business with them.

Funding offers suitable for start-ups during the crisis

An important basis for start-ups to get off to a successful start are support offers suitable for start-ups. One-off investments are required as well as funds for ongoing business activities. Founders can take advantage of funding offers from KfW such as the KfW start-up money. These funds should be designed in such a way that they reach the target group in the right way. Access to these public funds should be made easier for start-ups. An important step in the right direction is the KfW special program (service tip: funding check). It enables founders who only need a smaller volume of funding to have a simplified test procedure. A new KfW fast loan was created. In the future, it should also be accessible to companies that employ fewer than eleven people.

In addition to public subsidies, equity capital and financing for start-ups are also becoming increasingly important. Access to equity and venture capital should be made easier, especially for innovative start-ups. A new form of financing is mezzanine capital, a mixture of equity and debt capital. State funding institutes can help start-ups in the respective federal states to obtain such forms of financing through investment companies, family offices or business angels. Venture capital funds that help start-ups with financing could be combined with KfW funding.

Equity financing as an important pillar of financing for start-ups should be strengthened by the federal and state governments. A suitable means for this is the strengthening of the own competences of investment companies. Entitled founders could be reached more quickly as a result. The federal government has set up a two billion fund for innovative start-ups. It should be accessible to founders in all federal states in order to become competitive and invest in innovations.

Removal of bureaucratic obstacles

Access to financial support and quick help on the way to successful business activity is often made more difficult for founders by bureaucratic obstacles. The processing of notifications and approvals as well as the checking of access requirements for funding often still take too much time. The focus is on digitization. It can enable the one-off and practical query of data. Online procedures save time and money and should therefore be possible throughout.

As a DIHK survey with almost 750 responses from founders revealed, bureaucracy is the biggest hurdle when starting a business. The removal of bureaucratic hurdles facilitates company succession or company takeovers. Vacant shops or restaurants could be taken over by new tenants. The reduction in bureaucracy in the catering trade could drastically simplify the bed tax, abolish registration forms and adjust the obligations for allergen labeling. These measures could make it easier for successors to restart. The dismantling of bureaucratic obstacles can also make it easier for those who start their own business as a sideline to start their own business. Due to the professional activity that is still being carried out, such founders only have little time to complete the formalities for the foundation and to apply for funding. This can be achieved by expanding digitization.