In which areas are there currently no startups?

Freelancer & Founder

According to a study by management consultancy McKinsey, the German economy uses only ten percent of its digital potential. The consultants found that the degree of digitization is surprisingly low, especially in industry, and see this as a great danger: Germany could lose its digital connection to the top. Numerous young ICT companies are resisting this negative trend with innovative ideas, products and services, but they are facing major challenges.

The financing hurdles are high

First of all, the high financing requirements of the IT startups with the simultaneous reluctance of investors should be mentioned here. Establishments in the ICT sector that rely on innovative technologies such as 3D printing or the contactless control of electrical devices using gestures and language, that develop complex big data and cloud solutions, and that make a contribution to autonomous driving with their products or realizing innovations for diagnostics and therapy in medicine require more resources than pure online platforms, for example. The acquisition of machines and materials, but also the involvement of specialists for technology and the market, as well as the challenges of opening up the target market, often eat up the entire start-up capital of the young companies. Their business models and product ideas are also often complex and not primarily tailored to the consumer market - instead, they are aimed at companies and industry.

The demand is definitely there: In view of the challenges in the context of Industry 4.0 and the merging of industrial production with digital services, there is even an urgent interest of German industry in ICT startups being able to pursue their ideas. For example, the startup Dynamic Components, a former winner of the start-up competition, offers a plug-and-play software solution for production systems. The software is connected to the sensors of the machines and recognizes the structure of the system and the individual production steps, so that processes can be automated and machine data from existing systems can be used. The startup can thus help companies in production to cut the development costs for the control software by half when setting up and changing production systems.

  1. IT professionals and founders need CFO skills for projects
    IT professionals also have to be a bit of a CFO or controller. At least basic knowledge of business administration (BWL) should be part of the tools of every CIO or IT project manager when negotiating the benefits of a project and the budget with CFO and controlling. The same applies to founders and startups who need money from a bank to finance a business idea. Here we explain the most important terms in finance.
  2. ABC analysis
    Procedure for analyzing operational processes and arranging their importance.
  3. Balanced Scorecard
    A concept that, based on a corporate vision, condenses goals, indicators and measures. In addition to the financial perspective (such as sales, profit, return on equity), customers, processes and employees are recorded in the balanced scorecard approach. Connections are established and described with goals and key figures. The approach promises a better implementation of the strategy in operational practice.
  4. Break even
    An analysis that tries to determine the breakeven point. The sales volume is determined, if it is exceeded, money is earned.
  5. Cash flow
    The cash flow represents the financial surplus for a period. It is usually calculated as follows: Annual surplus + depreciation + changes in long-term provisions = cash flow.
  6. contribution margin
    Also known as gross profit, the contribution margin is the difference between the revenues generated and the variable costs. The contribution margin determines the extent to which a product contributes to covering fixed costs, i.e. to operating profit.
  7. EBIT
    EBIT means adjusted profit. Abbreviation for "Earnings before Interest and Taxes". One-time expenses as well as interest and taxes are ignored because none of these items were created by the actual business activity.
  8. financial plan
    As a dynamic calculation, the finance plan takes into account all future payments in and out, usually over a period of the next twelve months. Instrument to control and manage the means of payment.
  9. Forecast
    The forecast is an extrapolation of earnings items in the current financial year. This is based on the results of the previous months, which - compared with current information - are updated for the remainder of the financial year.
  10. Annual financial statements
    The annual financial statements are a legally prescribed instrument for providing information to external persons and institutions. It must be drawn up in accordance with the German Commercial Code and the principles of proper accounting (GoB) at the end of each financial year. The annual financial statements consist of the balance sheet and the income statement.
  11. Return on investment
    The RoI describes the return on the capital employed. A key figure that sets the (operating) result achieved in relation to the capital (investment) used for it. The RoI can also be calculated by multiplying the two key figures return on sales (EBIT / sales) and capital turnover (sales / total capital).
  12. Variable costs
    Variable costs only arise when there is production. So you need apples in the production of apple compote. When production is idle, no apples are needed. The apples represent variable costs. The machines generate costs (for example depreciation, financing) regardless of whether or not apple compote is produced. This is known as fixed costs.

Bringing medium-sized businesses on board

Germany's prominent position in the global economy can only be maintained if it is possible to keep pace with developments in digital, automated, intelligent and networked production. Nonetheless, growth-oriented ICT companies with a B2B customer focus repeatedly have difficulties in obtaining growth capital on the scale they need. This is mainly due to the fact that in Germany - in an international comparison - only small amounts of venture capital have been made available to date. Therefore, new instruments are required for effective growth financing of young ICT companies, which include both comprehensive monitoring and close cooperation with medium-sized companies and industry. In 2015, for example, a feasibility study for a "medium-sized business growth fund" for young ICT companies was carried out, which came to a positive result - the implementation of such an instrument would have great advantages for both sides.

We urgently need qualified employees

But not only the greater need for financial resources is a challenge for the ICT start-ups, also the required, higher degree of specialization and qualification of the employees makes some in founding companies to create. In phases of rapid growth, many startups can fall back on career changers here, and young university graduates are also often hired. For ICT companies that work on highly complex technologies, however, this is not so easy, since often not only a technical degree, but also a specific specialization is required - not to mention useful work experience. Employees with industry experience and excellent contacts are also required for the sales that is to be established. Such are rare and mostly not available (at short notice); in addition, their salaries are much higher than those of young professionals.

This is also confirmed by the trend barometer "Young ITK-Wirtschaft 2016": More than half, namely 53 percent of the entrepreneurs surveyed stated that it was difficult to find suitable employees. That is six percent more than in the previous year, when the situation seemed to ease slightly. Unfortunately, it is now clear that the search for employees remains a challenge for ICT startups.

There can be no talk of information superhighways

Numerous studies also make it clear that Germany is lagging behind in terms of digitization. This is not only suggested by the current annual report of the Federal Government's Expert Commission for Research and Innovation, which confirms that German SMEs are not willing to innovate. Business models are only adapted very late, often too late, to the changing requirements of the (international) markets and customers. When it comes to developing the necessary infrastructures, Germany is always lagging behind. The availability of fast data networks is still unsatisfactory, and the expansion of fiber optics is only progressing slowly. Germany has meanwhile been included in the European ranking list for fiber optic supply, as more than one percent of all households can theoretically be connected to the fiber optic network, but it only ranks 28th there. In many regions of the country, the capacity of the available data networks is simply not sufficient for the requirements of ICT companies.

  1. Startups at the turn of the year 2016/2017
    Startups want to grow in the coming year. From a technical point of view, they see topics as diverse as artificial intelligence and 3D printing, brand experience and employee qualification on the agenda in 2017.
  2. Catharina van Delden, Innosabi
    “In 2017, Innosabi's growth is expected to continue. But it should still be controlled and possible on your own. To do this, we have to build structures in the new year that not only work with 30 employees as before, but in the future maybe also with 50 ", says the CEO of crowdsourcing specialist Innosabi.
  3. Manfred Tropper, mantro
    "We support many different business incubators and innovation projects in a wide variety of industries. What preoccupied them all in 2016 was the question of how to build their teams. Fortunately, almost everyone has now reached the point that ideas are worth nothing - but the team that is supposed to get the idea up and running, "said Mantro founder Manfred Tropper.
  4. Stephan Kühr, 3yourmind
    Stephan Kühr from 3yourmind, a Berlin startup that provides the right 3D printing provider, says: "In 2016, 3D Printing became an indispensable part of production cycles and major players are all planning for larger integrations of the technologies. In 2017, we will look to expand our offering to Asian and further develop our partnerships in the US. "
  5. Nicolas Dittberner, Udacity
    "Two thirds of companies in Germany now use digital learning opportunities for their employees, but only 36 percent rely on flexible, web-based learning programs. As soon as companies recognize the in-house training of their existing skilled workers as a strategy to avoid a shortage of skilled workers, digital change can come," says Nicolas Dittberner, Country Manager DACH from the virtual education platform Udacity (California)
  6. Felix van de Sand, Cobe
    Felix van de Sand and his agency Cobe have specialized in user experience. As far as the Internet of Things (IoT) is concerned, the following is planned for 2017: “In the interests of a seamless brand experience, companies now have to think about the way in which their products interact with consumers. If you think, for example, of an internet-enabled refrigerator or a smart home system, questions arise such as: In which tone does the device speak? "
  7. Marko Müller, Innovation Radicals
    "This year was a leap year in the truest sense of the word - up a gear. For me and Innovation-Radicals, it was about trying new things and experimenting with prototypes. We wanted to find out what we're good at and what drives us," says Marko Müller , Founder of the Innovation Radicals.

So there has to be a rethink. Germany needs a better digital infrastructure. Small and medium-sized enterprises must open up and innovative ICT start-ups must be given greater support. For this, the founders need financial support, advice and coaching as well as open ears and strong partners in the industry. (pg)