The KfW Start-up Monitor is an annual, representative survey on start-up activity in Germany. The current edition records a decline in start-ups in Germany in 2022. This development was due to a reduced economic stimulus compared to the previous year and the healthy labor market, which is characterized by a shortage of skilled workers.
There were positive developments in 2022 regarding motivation for professional self-employment: The number of founders who see self-employment as the best employment alternative for themselves almost doubled to 95,000 (+86 percent). The significant increase in these so-called dream start-ups despite the favorable labor market situation could also be related to the increased interest of many people in career reorientation during the coronavirus pandemic. The proportion of start-ups from within the workforce increased again in 2022, reaching an all-time high at 73 percent. Unemployment before starting a business is becoming increasingly rare (6 percent).
Share of female entrepreneurship declining
The number of Founded by women After increases in the two previous years, the number of female founders has fallen again and stands at 205,000 (-20 percent) in 2022. The number of founders has barely changed (345,000; -1 percent). Female founders thus account for 37 percent of all start-ups in 2022, slightly below the long-term average. It is clear that increases in the proportion of female founders have so far only been short-term fluctuations around the long-term average. Sustainably increasing the proportion of female founders, on the other hand, is a challenge that requires perseverance and must start early: for example, by breaking down gender stereotypes or by imparting entrepreneurial knowledge at an early stage.
Another finding of the KfW Start-up Monitor: In 2022, start-up activity was largely self-financed by the founders themselves. Two-thirds (65 percent) of all start-ups used exclusively the founders' capital. External capital was mobilized by 18 percent of founders.
Regarding the viability of start-ups, the KfW Start-up Monitor shows that around 30 percent of founders abandon their business within three years. After five years, almost 60 percent are still active. The reasons for abandonment can be varied. The vast majority of founders (32 percent) abandon their business within the first five years for personal reasons, without any immediate financial pressure – for example, due to family commitments, stress, illness, or dissatisfaction with the income generated. 24 percent of start-ups abandon their business within five years due to unprofitability.
Focus on salaried employment begins early – rethinking is necessary
Fritzi Köhler-Geib, Chief Economist of KfW, summarizes the key findings of the KfW Start-up Monitor:
"In the tension between the shortage of skilled workers and the coronavirus pandemic, start-up activity in Germany is declining. The development of the labor market has traditionally had a strong impact on start-up activity in this country. The focus on salaried employment in Germany is strong. It appears that the coronavirus pandemic has strengthened the desire for career reorientation and thus for starting a business; whether this will continue remains to be seen. In any case, the focus on salaried employment begins early, for example, in career counseling for schoolchildren. A rethink is urgently needed here – despite, or perhaps precisely because of, the shortage of skilled workers."
