Founding by acquisition on the rise

For years, startup activity in Germany has been stagnating. On the upside, more and more entrepreneurs are taking over businesses. Read here about the countries where startups are taking off.

This article is part of the special feature GründerNavi – for founders and young companies

The number of new business start-ups in Germany, which has been declining for years , stabilized in 2018 , according to KfW Bank . There were 547.000 new businesses founded in 2018. However, this was still 10.000 fewer than the previous year (a decrease of two percent). KfW attributes this to the strong domestic economy.

The startup rate, meaning the number of founders per 100 people of working age, remains virtually unchanged at 1,06 percent, according to the latest KfW Startup Monitor . "A short-term trend reversal towards rising startup numbers is questionable," says Dr. Georg Metzger, startup expert at KfW Research. "Therefore, the direction of startup activity in 2019 is uncertain."

New companies dominate, acquisitions catch up

In 2018, there were more new start-ups than ever before: eight out of ten new business founders built something new.

However, there was a positive development in acquisitions: According to KfW, their share has steadily increased and reached 13 percent in 2018 (previous year: 10 percent). "Given the large number of SMEs facing succession in the foreseeable future, this is good news," emphasizes Metzger, "because the search for a successor will be easier for them."

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Country hit list: Berlin is top 

• Among the German states, Berlin remains at the top. Between 2016 and 2018, an average of 193 out of 10.000 people of working age began self-employment each year.
• Hamburg ranks second with 146 founders.
• New to the top group in 2018 is the state of Brandenburg, which continues its positive development and takes third place with 134 entrepreneurs per 10.000 people of working age. "Brandenburg is likely benefiting from the above-average start-up activity in Berlin, which radiates out into the periphery of the capital," according to the authors of the KfW study.
• In fourth place is Bavaria (126 founders per 10.000 working age) and
• North Rhine-Westphalia (118 founders per 10.000 working-age people) ranks fifth.

More founders have employees

The proportion of founders with employees rose from 21 percent in 2017 to 26 percent in 2018. For full-time entrepreneurs, the proportion increased from 36 percent to 42 percent, and for part-time entrepreneurs, it increased from 9 percent to 13 percent.

Start-ups that become self-employed through acquisitions or active participations are particularly likely to have employees because the existing companies often already employ people: in 2018, the proportion was exceptionally high at 63 percent.

Nineteen percent of newly founded companies had employees; they created a total of 219.000 full-time jobs in 2018.

Proportion of women increases again

The proportion of women among all new business start-ups climbed back up to 40 percent in 2018. It had fallen in 2016 and 2017 (37 percent in 2017). The number of business start-ups founded by women rose to 216.000. In contrast, the number of start-ups by men continued its slight decline. In 2018, 331.000 men started their own businesses, five percent fewer than in the previous year.