KfW-Start-up-Report 2021: Coronavirus crisis weighs on start-up numbers

• Number of young, innovative or growth-oriented enterprises fell to 47,000 in 2020
• Number of start-ups that welcome VC remains reasonably steady
• Women are clearly underrepresented: with 20% of start-ups on a long-term average, they make up just half the overall share of entrepreneurs

The coronavirus crisis weighed on start-up numbers in Germany in 2020. The number of innovation- or growth-driven young enterprises dropped to 47,000 after rising sharply to as much as 70,000 in previous years. In an environment characterised by great uncertainty, the number of newly founded start-ups was therefore unable to offset the generally high number of closures in this segment. Furthermore, the pandemic situation has likely discouraged some business founders from pursuing their growth plans, so that they no longer fall under the start-up definition. Not all start-ups were equally affected, however. In comparison with the overall decline, the number of young start-ups that would be willing to finance their future growth using external equity capital remained reasonably steady at 8,600 (2019: 9,400). The quick decision to provide start-up assistance to alleviate the situation may have contributed to this. These are the findings of the KfW Start-up Report 2021, which is based on the KfW Entrepreneurship Monitor. Dr Fritzi Köhler-Geib, Chief Economist of KfW, commented on this development as follows: “The coronavirus crisis made an imprint on start-ups in 2020, to be sure, but after this exceptional year we expect the start-up scene to develop just as fast as it did in previous years.”

Women are clearly underrepresented in the start-up ecosystem. Female entrepreneurs make up 20% of start-ups on average throughout the years, which is only about half their share in overall entrepreneurial activity. On the basis of all business start-ups, the more start-up characteristics are considered, the more the proportion of female entrepreneurs decreases. Since women are more likely to start a business as self-employed professionals, on a part-time basis, on their own and without any employees, and as they are less likely to seek strong growth, conduct technological research and development or offer a supra-regional new-to-market innovation, only three of 100 businesses founded by women have start-up characteristics compared with nine in 100 for men. “Female entrepreneurial activity continues to be influenced by gender stereotypes. These ultimately lead to a smaller share of female start-up entrepreneurs”, explained Dr Fritzi Köhler-Geib. “It would be good for the German start-up ecosystem and VC industry to become more female. After all, Germany cannot afford to squander away innovation potential. Role models that keep women from starting a business are an obstacle. It is important that highly qualified start-up teams emerge irrespective of gender and origin and find the best possible conditions for financing, growth and success. In order for this to happen, gender stereotypes must be overcome and role models strengthened as multipliers.”

The database of the KfW-Start-up-Report is the KfW Entrepreneurship Monitor, which is carried out in the form of an annual telephone survey of around 50,000 randomly selected persons domiciled in Germany. The design of the survey allows the evaluation of representative results that can be projected to the working age population in Germany. It broadly captures male and female entrepreneurs irrespective of whether they started their self-employment on a full-time or part-time basis, as self-employed professionals or business owners or as a new business, takeover or participation ( www.kfw.de/gruendungsmonitor). Start-up entrepreneurs are defined as all persons who founded their business not more than five years ago, run them commercially on a full-time basis, have a start-up team or employees and are innovation- or growth-driven.

The Start-up Report 2021 by KfW Research is available for download (in German only) at:
KfW-Gründungsmonitor und KfW-Start-up-Report