are young companies that are established because the founder believes that they have found a gap in the market for which they can provide an innovative service or product that is not already available. A common characteristic of startups is that they are expected to have planned rapid employee and sales growth. They are also often associated with being innovative in the product or service they offer, their business model and/or technology they use.
Overview of startups
In 2022,
Germany was ranked seventh in the world among leading countries for startups. Startups are founded in different types of industries, but in Germany the
most popular that same year was information and communication technology, accounting for over 30 percent of new businesses. Although founders start companies because they have a good business idea, there are also other motivating factors. As of 2022, the driving reason was actually achieving independence. Although there may be advantages such as more independence and ultimately a higher income, there is also a lot of risk. Most startup founders have to find someone who can invest in their idea because a lot of capital is needed upfront in order to start a company and this is no guarantee that the company will succeed.
Financing startups
Financing is a big part of founding a startup as they are reliant on funding from external sources to launch the company and/or product before it starts producing a profit. In 2023, around 45 percent of startups in Germany
received state subsidies. The least common form of funding, unsurprisingly, was bank loans, likely due to the uncertainty of success when starting a company. Another popular way in which startups are financed, is often through external investors will put money into startups in the hope of gaining high returns. 625 German companies were
financed through venture capital in 2022. This is not just popular method of financing in Germany but throughout Europe. In Europe, there was around 90 billion euros invested in startups through venture capital investments.
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