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Agenda: Drivers of Startups in ICT Industries in Germany

ICT Start- ups in Germany Georg Licht Center for European Economic Research (ZEW) Mannheim, Germany VUZF University Driving Higher Levels of Innovation October 1, 2013, Sofia. Agenda: Drivers of Startups in ICT Industries in Germany . Market Entry Costs

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Agenda: Drivers of Startups in ICT Industries in Germany

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  1. ICT Start-ups in GermanyGeorg LichtCenter for European Economic Research (ZEW)Mannheim, Germany VUZF UniversityDriving Higher Levels of InnovationOctober 1, 2013, Sofia

  2. Agenda: Drivers of Startups in ICT Industries in Germany • Market Entry Costs • Importance of Knowledge and Network Infrastructure • Access to Financial Resources

  3. Startups Activity in Germany1995-2011 Source: Mannheim Enterprise Panel 2012

  4. Startups Activity in German ICT Sector1995-2011 Source: Mannheim Enterprise Panel 2012

  5. Learning from Times Series Analysesof Startup Activity in Germany • Easeof Market Entry & Market Exit iscrucial • Limited liabilityoffounders: Introductionofopportunitytoconstrainttheriskforfounde

  6. Regional Distribution of ICT Startups 2006-2011 Hardware SOFTWARE ICT Services Startup Intensity = No Startups / Workforceat County Level Source: Mannheim Enterprise Panel 2012

  7. What Explains The Regional Distribution? • Knowledge Infrastructure • R&D in the Private Sector • Regional availabilityofuniversitiesandpublicresearchfacilities • SupplyofHighlyQualifiedWorkforceespeciallywith a background in mathemathics, IT, engineering, andothertechnicaldegrees • Larger numberof potential founders • Larger workforceavailableforstartups • Network Infrastructure (onlyimportantfor Software and Services • Distribution ofproduct, aquisitionofcustomers • Exchange ofpeople, knowlegde, experience • Communication withcustomers, marketaccess • Based on analysesofpanelofcounties in German duringthe roll out of high speedtelecommunicationnetworks2000-2006

  8. Source of Finance of Start ups- Total funds used in first year (in %) - Source: ZEW Startup Panel 2012

  9. Financing of Startups • Typically: Most Startups needonlysmallamountsofmoney • Externalfundsisprovidedby private and/orpublicbanks • VC / BA isusedby a smallnumberof ICT startupsonly, whichhoweverarecharacterisedby a significantdemandforexternalfunding • Demand ofexternalfundingishighlyskewed • A soundfinancialsystemneedstoprovidesmallaswellassignificantamountofmoney i.e. banksand VCs areneeded • Early stageequityfundsareprovidedby private VC, public VC, orbusinessangels (moreorless in equalshares) • Fundinggapsarepresentatstartupaswellas in expansionstage A soundfinancialsystemshouldcomprisebankfinancingandequityfinancingproviding large aswellassmallfundsforstartup; in earlystagesgovernmentfundingis also crucial

  10. Thank You For Your Attention Georg Licht licht@zew.deCenter for European Economic Research www.zew.deZEW, Mannheim, Germany Co: Science Metrix

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