Start-ups In Germany Research Articles

Investing in people, not in products: how age, gender, ethnicity, and attractiveness of entrepreneurial teams influence the decision-making of angel investors in Germany

AbstractThe high-risk decision environment and information asymmetries associated with investing in early-stage startups in pitch competitions make angel investors prone to biased decision-making. Drawing from social perception theory, this study examines how angel investors’ decisions are influenced by observed personal characteristics of entrepreneurial teams, based on representative stereotypes. Analyzing a dataset of N = 553 startup pitches from the German televised competition Die Höhle der Löwen, this study reveals that the likelihood of securing deals with German angel investors and the resulting business valuations are linked to certain superficial team characteristics. Specifically, the age, diverse ethnicity, and physical attractiveness of the entrepreneurial team have a significant positive effect on deal probabilities. Moreover, angel investors offer lower deal valuations to teams of older and female entrepreneurs, suggesting the presence of a systematic bias. These insights contribute to understanding the role of stereotypes in entrepreneurial finance and address the challenges related to bias in access to capital for early-stage startups in Germany.

How do Startups use AI? A Q-methodology approach to understanding adoption patterns.

Artificial Intelligence (AI) can move beyond mere task automation and can actively foster the very process of innovation. As startups are the organizational entities which rely heavily on creativity and innovation, it is intriguing to evaluate the use of AI in startups and in the entrepreneurship field. As AI is already becoming increasingly pervasive and indispensable in the startup ecosystem, the question arises, how exactly startups are using AI. We used the Q-methodology to investigate this topic empirically. This methodology was chosen because it combines the strengths of both qualitative and quantitative methods. The Q-samples (i.e., set of statements) were developed from secondary sources like literature and primary sources like interviews. In this context three in-depth-interviews with entrepreneurs were conducted to comprehensively cover the topic. The concourse comprised a set of 43 statements, that each provided one aspect of “How do startups use AI?”. The collection of the Q-Samples was then followed by the Q-sorting, in which participants were asked to rank the items according to their degree of agreement. In this study 30 entrepreneurs from different startups in Germany were interviewed. The interviews were conducted online via a video chat to give participants the chance to comment on their ranking. We used the QMethod Software for data collection and analysis. The research illuminates current AI practices among startups, identifies common fields and highlights areas for further development. The findings of this study reveal the prioritization of operational efficiency as the driving force behind AI implementation. However, it is quite concerning that ethical considerations are largely ignored, posing risks of potential ethical oversights in AI utilization. Furthermore, most startups see AI as a facilitator of human creativity rather than a replacement. Overall, this paper is relevant to a diverse audience interested in understanding the current landscape, challenges, and opportunities associated with the usage of AI technologies within the startup ecosystem. This audience includes entrepreneurs, investors, researchers, educators, and policy makers.

Fintech Startups in Germany: Firm Failure, Funding Success, and Innovation Capacity

Fintech Startups in Germany: Firm Failure, Funding Success, and Innovation Capacity

The interplay of entrepreneurial personality and startup innovativeness – the mediation effect of technology adoption

PurposeIn the ever-evolving digital landscape, this study aims to explore which specific personality traits contribute to the innovativeness of startups, with a particular emphasis on understanding how technology adoption mediates this relationship. By doing so, the authors strive to unveil the nuanced dynamics of personality, technology adoption and startup innovativeness in the digital era.Design/methodology/approachThe authors conduct a quantitative empirical analysis using a sample of 1,314 German startups. This study utilizes a mediation analysis to examine the effects of personality traits on the innovativeness of startups, taking technology adoption as a mediator into account.FindingsThe empirical results show certain personality traits have direct effects on innovativeness. Also, the results show that technology adoption is a driver of startup innovativeness. In addition, these traits are (partially) mediated by technology adoption.Research limitations/implicationsThe results shed new light on the interplay of entrepreneurs' personality and technology adoption in relation to startup innovativeness and therefore underline the importance of technology in this triangular relationship. The authors employ secondary data from startups in Germany, which complicates generalization of the results to other geographical and cultural contexts.Originality/valueThis study contributes to the scientific debate on the role of personality traits in entrepreneurship by providing empirical evidence on the mediating effect of technology adoption in the relationship between personality traits and startup innovativeness. The findings offer valuable insights for researchers, entrepreneurs and policymakers interested in understanding and promoting innovativeness in the context of startups.

Success factors of organizational resilience: a qualitative investigation of four types of sustainable digital entrepreneurs

PurposeThe purpose of this paper is to distinguish different types of sustainable digital entrepreneurs (SDEs) and explore their approaches toward enhancing organizational resilience.Design/methodology/approachInvestigation of entrepreneur characteristics using Grounded Theory methodology; 12 semi-structured telephone interviews with (owner-)managers of digital-resilient small and medium-sized enterprises (SMEs) and start-ups in Germany; adaptation of a sustainability-digitalization-matrix for initial clustering; investigation of reoccurring patterns (within and between clusters) through variable-oriented content analysis; application of the capability-based conceptualization of organizational resilience for synthesis and extension.FindingsFirst, the authors present a new typology of SDEs, including descriptions of the four main types (Process-Oriented System Thinker, Unconventional Strategist, Dynamic Visionary and Success-Oriented Opportunist). Second, the authors propose a conceptual framework with six success factors of organizational resilience. The framework accentuates the influence of SDEs on organizational culture and the macro-environment.Practical implicationsDigital sustainability and resilience are emerging management principles. The insights gained will allow (future) entrepreneurs to perform a self-assessment and replicate approaches toward enhancing SME resilience; for example, governing the co-creation of an organizational culture with a strong integrative view on sustainability and digitalization.Originality/valueSMEs are characterized by high vulnerability and a reactive response to the disruptions caused by sustainability crises and digitalization. Blending sustainable and digital entrepreneurship at a micro-level, the authors identified the success factors underpinning organizational resilience that are associated with the characteristics of four types of SDEs.

Fintech Startups in Germany: Firm Failure, Funding Success, and Innovation Capacity

Fintech Startups in Germany: Firm Failure, Funding Success, and Innovation Capacity

Success Determinants of Open Innovation Partnerships between Car Manufacturers and Start-Ups in Germany

In a context of saturated markets, increasing price pressure, growing competition, changing preferences and consumption patterns, the automotive industry is evolving into a diversified mobility industry. This disruptive transformation challenges German car manufacturers to reinvent themselves and innovate in diverse directions. Since loose open-innovation (OI) partnerships with start-ups offer manufacturers not only flexibility but, more importantly, cutting-edge expertise from outside the traditional industry, they have become the partner of choice since 2010. Although incumbent-start-up partnerships are on the rise, the current literature scarcely addresses the challenges that arise from innovation cooperation with such disparate partners. Therefore, this study attempts to identify the success determinants to provide practitioners with guidance and contribute to close current gaps in literature. Based on a qualitative research design, in form of semi-structured expert interviews, key barriers and drivers concerning leadership, work methods, culture and intellectual property were identified. Considering the start-up´s, the incumbent´s and the interface´s perspectives, the paper provides a conceptual framework that illustrates the interrelations and challenges in open innovation partnerships. The start-up´s group expertise and maturity turned out to be a major driver for initiating collaboration. The key collaborative success drivers are agile work methods, the group´s internal cultural transformation, the interface´s autonomy, and a solid level of trust and openness between the involved parties. Besides practical recommendations, derived by the identified success factors, the paper constitutes a theoretical basis for further research.

Making Energy-transition headway: A Data driven assessment of German energy startups

This paper explores the linkage between ongoing clean energy-transition, technology and business model emergence in the German energy sector. The speed of energy-transition is often led by innovative startups. Startups with innovative products, services, or value propositions are a key indicator, supporting successful energy-transition. Though, commercial databases cover comprehensive details to understand startup’s financial activity and stakeholder relation, but without considering their innovation and business activity. Measuring the actual activities of energy startups is pivotal to capture the impact of energy-transition. To put this into perspective, a hybrid approach of data collection combining structured and unstructured data has been proposed in the following work. A list of 240 innovative startups belonging to different categories and technology focus are examined. Furthermore, data-driven analysis is performed over the data collected from multiple sources. Renewable technologies are yet the most preferred technology focus among German entrepreneurs and stakeholders. 24.6% startups are identified in this category followed by 17.5% in energy management and 16.2% in energy storage. The evidence from this study suggests a clear shift in technology and the value proposition of successful innovative startups in Germany. Digitalisation of the energy sector is fostering the development of multi-sided digital platform driven business models. The result suggested that 8.0% of startups have implemented purely platform based services while 15.7% are experimenting with platform business models along with traditional business to business (B2B) and business to customer (B2C) business models. Findings could guide policymakers and federal agencies to provide a vision for future technology and business model adaptation in the German energy sector.

How entrepreneurs build brands and reputation with social media PR: empirical insights from start-ups in Germany

Social media networks such as Facebook offer a promising way of fast, cost-effective and direct communication between enterprises and stakeholders. Employing this technology in entrepreneurial Public Relations (PR) may increase the success of new ventures. Yet, the adoption of social media for PR by start-ups remains under-studied. To fill this gap, we conceptualize entrepreneurial PR within the framework of communication management theory and entrepreneurial marketing. We developed three success factors for PR communication out of the literature and tested them empirically using a sample of 453 German start-ups. Results indicate that social media PR positively contributes to communication outcomes in terms of building up brand and reputation. Perceived relevance, long-term planning and understanding-oriented PR were all relevant for communication success. This means that entrepreneurs benefit from social media, when they initiate dialogues with stakeholders, conduct environmental scanning processes, and build up PR planning skills. Moreover, findings indicate that social media PR is practiced differently depending on the start-ups’ age. Hence, it is crucial for future research to integrate a dynamic perspective on entrepreneurial PR studies.

Communication management of start-ups - An empirical analysis of entrepreneurs’ communication and networking success on Facebook

Social networks attract increasing attention from practice and academia, yet social media networks as part of a start-up's strategic communication efforts remain under-studied. To fill this gap, we conceptualise start-up social media communication within the framework of communication management theory. We set up five hypotheses regarding the influence of different communication activities on start-ups' communication success and the moderating role of firm age. We collected data through structured questionnaires using a sample size of 244 start-ups in Germany and ran ordinary least squares (OLS) regression analyses. Results indicate that social media communication management is a significant driver of communication success. Two main factors, environmental scanning and networking, are revealed. Furthermore, we find different communication and networking practices depending on the start-up's age: In early phases, ad hoc monitoring, personal networks and business-to-consumer networking are key elements. In contrast, a long-term communication plan, professional networks and business-to-business networking are crucial in later stage start-ups.

Investment in German start-ups drops off

Germany has fallen behind the rest of Europe in investing in chemistry-related start-ups, according to a soon-to-be-published study by the Leibniz Centre for European Economic Research and the Center for Economic Policy Studies of Leibniz University. VCI, Germany’s main chemical industry association, commissioned the study. Although venture capital firms invested $62 million in chemistry start-ups across Europe in 2018, German ones accounted for less than $3 million of that. This is despite Germany having Europe’s biggest chemical industry and largest economy. In 2011, German chemistry start-ups attracted almost $40 million in venture capital funding. From 2015 to 2018, though, only 0.3% of venture capital invested in Germany flowed into the chemical sector. This compares with 46% going into the digital economy and 19% into biotech and health care. The study’s authors identified 281 chemistry start-ups in Germany. The findings are a concern, VCI says, because chemistry start-ups supply the German

Organizational design choices of high‐tech startups: How middle management drives innovation performance

AbstractResearch SummaryInnovative products and services are the inspiration for many startups. However, founders find that the management of existing operations competes with the attention that they can devote to innovation. We investigate whether and how establishing a middle management level frees up attention for innovation when firms are newly started. We argue that middle management is positively related to introducing product innovations and that the effect is stronger when founders have larger stocks of pre‐existing knowledge and when the startup's industry provides more innovation opportunities. These hypotheses are supported by an analysis of 2,431 German high‐tech startups founded between 2005 and 2012. Managerial SummaryMost high‐tech entrepreneurs acknowledge that an overload of managerial tasks keeps them from advancing innovation in their startups. However, they are often times reluctant to introduce middle management because of a fear that the resulting bureaucratization will stifle innovation. Our study shows that these fears are not justified. Instead, we find for 2,431 high‐tech startups in Germany that startups with middle managers are significantly more innovative than those without. While middle managers might be a roadblock for innovation in large firms, startups benefit from having them. Founders are the central decision makers in startups and can easily be overburdened with management tasks. Middle managers can alleviate parts of this workload and allow founders to focus on creating innovative products and services.

Cross-Country Differences in Entrepreneurial Internationalization Tendencies: Evidence from Germany and Pakistan

Previous research has emphasized the importance of entrepreneurial characteristics for international entrepreneurship, hence the application of concepts such as entrepreneurial orientation and global mindset to the study of entrepreneurial internationalization tendencies (EIT). However, literature does not adequately address how EIT differ between countries or manifest in fragile country settings. We address this gap through a quantitative study to investigate EIT in two national settings that largely differ in terms of development, institutional stability, and culture. Through the lens of the institutional theory and the mindset theory, we therefore piloted the study on 112 high-growth startups in Germany and Pakistan. Our findings show, that while entrepreneurs in Germany and Pakistan show comparable levels of innovativeness and proactiveness, they significantly differ in other EIT measures. German entrepreneurs appear to have higher levels of risk-taking, which when explained through the institutional theory lens can be attributed to the higher institutional stability and support as well as social security in Germany. This potentially makes engagement in risky activities, such as business internationalization, more appealing than in Pakistan. However, despite having lower international cognition and international knowledge compared to Germany, Pakistani entrepreneurs appear to exhibit higher degrees of international behavior.

Regional Emergence of Start-Ups in Information Technologies: The Role of Knowledge, Skills and Opportunities

We investigate the regional emergence of new information technology start-ups in Germany. The largest share of these start-ups is located in cities or densely populated regions that are well equipped with institutions of higher education and research. The empirical analysis clearly indicates the critical role of industry-specific knowledge plays for new. Hence, strengthening the regional knowledge base should be a key policy that aims at stimulating entrepreneurship in this sector.

Searching for Autonomy in Digital News Entrepreneurism Projects

Digital entrepreneurism is often depicted as a positive disruption in the news ecosystem; it initiates new business models, fosters new ways of storytelling, and enables closer interaction with audiences. The extent to which entrepreneurial journalism entails a disruption of journalistic norms, roles, and procedures remains a matter of debate. Against this background, our study aims to explore how news entrepreneurism impacts journalistic autonomy on an organizational as well as an individual level. Conceptually, we define four dimensions of journalistic autonomy, namely organizational and procedural autonomy, as well as autonomy regarding professional norms and external influences such as funding and audiences. Empirically, we conducted interviews with founders of and journalists at 12 news startups in Germany. Our results indicate that both groups perceive a high level of autonomy in relation to professional norms and working procedures, and experience only little pressure from external influences. Still, the struggle for solid financing as well as the duality of economic and editorial duties limit both founders’ and journalists’ autonomy.

Serving people in crisis to make the world a better place

Carolin Silbernagl, who leads betterplace lab, the research arm of betterplace.org in Berlin, Germany, is a social technologist, as well as co-founder of dotHIV. Here, she shares what it takes to make betterplace, the first mover in the area of digital social startups in Germany.

The Relevance of Financial versus Non-Financial Information for the Valuation of Venture Capital-Backed Firms

This study examines the relevance of financial and non-financial information for the valuation of venture capital (VC) investments. Based on a hand-collected data set on venture-backed start-ups in Germany, we investigate the internal due diligence documents of over 200 investment rounds. We document that balance sheet and income statement items capture as much economic content as verifiable non-financial information (e.g. team experience or the number of patents) while controlling for several deal characteristics (e.g. industry, investment round, or yearly VC fund inflows). In addition, we show that valuations based on accounting and non-accounting information yield a level of valuation accuracy that is comparable to that of publicly traded firms. Further analyses show that the industry-specific total asset multiples outperform the popular revenue multiples but lead to significantly less accurate results than those obtained from the more comprehensive valuation models. Overall, our findings might inform researchers and standard-setters of the usefulness of accounting information for investment companies and provide additional evidence to gauge the overall valuation accuracy in VC settings.

The Relevance of Biases in Management Forecasts for Failure Prediction in Venture Capital Investments

This study shows how venture capital investors can identify potential biases in multi-year management forecasts before an investment decision and derive significantly more accurate failure predictions. By advancing a cross-sectional projection method developed by prior research and using firm-specific information in financial statements and business plans, we derive benchmarks for management revenue forecasts. With these benchmarks, we estimate forecast errors as an a priori measure of biased expectations. Using this measure for our proprietary dataset on venture-backed start-ups in Germany, we find evidence of substantial upward forecast biases. We uncover that firms with large forecast errors fail significantly more often than do less biased entrepreneurs in years following the investment. Overall, our results highlight the implications of excessive optimism and overconfidence in entrepreneurial environments and emphasize the relevance of accounting information and business plans for venture capital investment decisions.

Biases in Management Forecasts of Venture-Backed Start-Ups Revisited: Evidence From Internal Due Diligence Documents of VC Investors

This study provides evidence of significant biases in multi-year management forecasts by analyzing a proprietary dataset on venture-backed start-ups in Germany. We find that revenues and expenses are highly overestimated in each of the investigated one- to five-year-ahead planning periods. Furthermore, entrepreneurs underestimate one-year-ahead profit forecasts but clearly overestimate their profit forecasts for all longer-term forecast horizons. Additional analyses reveal that teams with prior management experience issue even more overestimated forecasts and misrepresent their forward-looking information. In contrast, greater asset verifiability and corporate lead investors are associated with lower levels of forecast errors. All key results hold if bias is either measured by traditionally comparing forecasts to ex-post realizations or by using a cross-sectional projection approach based on historical accounting data developed by prior research.

The Power of Alumni Networks - Success of Startup Companies Correlates with Online Social Network Structure of its Founders

In this paper we analyze the success of startups in Germany by looking at the social network structure of their founders on the German-language business-networking site XING. We address two related research questions. First we examine university-wide networks, constructing alumni networks of 12 German universities, with the goal of identifying the most successful founder networks among the 12 universities. Second, we also look at individual actor network structure, to find the social network attributes of the most successful founders. We automatically collected the publicly accessible portion of XING, filtering people by attributes indicative of their university, and roles as founders, entrepreneurs, and CEOs. We identified 51,976 alumni, out of which 14,854 have entrepreneurship attributes. We also manually evaluated the financial success of a subsample of 80 entrepreneurs for each university. We found that universities, which are more central in the German university network, provide a better environment for students to found more and more successful startups. University networks whose alumni have a stronger “old-boys-network”, i.e. a larger share of their links with other alumni of their alma mater, are more successful as founders of startups. On the individual level the same holds true: the more links founders have with alumni of their university, the more successful their startup is. Finally, the absolute amount of networking matters, i.e. the more links entrepreneurs have, and the higher their betweenness in the online network of university alumni, the more successful they are.