Entrepreneurial Business Models in the German Software Industry: Companies, Venture Capital, and Stock Market Based Growth Strategies on the 'Neuer Markt'

Abstract

Young, radically innovative, growth oriented, and publicly listed high-tech companies in Silicon Valley together with venture capital financiers gave birth to the concept of the 'Entrepreneurial Business Model' (EBM). This concept has become central to the debate about the innovative capacity of nations in information technology and its promotion became an important policy objective in Germany during the 1990s. This paper addresses the question of whether German software companies on the former 'Neuer Markt' of the Frankfurt stock exchange were able to successfully implement business models similar to that of the typical entrepreneurial company in the United States. The paper focuses on the performance of software companies and venture capital investments on the 'Neuer Markt'. A number of findings emerge from this effort. First, successful German software companies implement traditional business models. The most successful German software companies specialize in IT- and software services. Such firms do not specialize in standardized software products which require little service and customization. Second, German venture capital for the most part was not able to establish successful entrepreneurial companies on the Silicon Valley model. Nor were they able to create a successful German variant of venture capital involvement in more traditional companies.