Latest / Startup & Tech News from Germany, Austria, and Switzerland by Startuprad.io™ / Germany's 2025 Coalition Deal: What It Means for Startups & Venture Capital
Transcript
- WEBVTT 1 00:00:05.680 --> 00:00:08.580 Welcome to startuprad.io, 2 00:00:09.519 --> 00:00:13.275 your podcast and YouTube blog covering the German startup 3 00:00:13.275 --> 00:00:17.055 up scene with news, interviews, and live 4 00:00:17.195 --> 00:00:20.955 events. Hello, and welcome, 5 00:00:20.955 --> 00:00:24.634 everybody. This is Joe from Soderberghter.ai, the authority on 6 00:00:24.634 --> 00:00:28.449 German, Swiss, and Austrian start ups. Today, we take you 7 00:00:28.449 --> 00:00:32.210 inside the 2025 coalition agreement between 8 00:00:32.210 --> 00:00:36.050 Germany's Two biggest parties, the SPD, the party of 9 00:00:36.050 --> 00:00:39.570 soon to be former chancellor Olaf Scholz, and former 10 00:00:39.570 --> 00:00:43.165 chancellor Gerhard Schroder, and the CDU, the party of 11 00:00:43.165 --> 00:00:46.864 Helmut Kohl, Angela Merkel, and soon to be chancellor Friedrich 12 00:00:46.925 --> 00:00:50.364 Ma. This deal is shaping the next four 13 00:00:50.364 --> 00:00:54.149 years of start up innovation and venture policy. We 14 00:00:54.149 --> 00:00:57.750 focus on it to see growth impulses since Germany has 15 00:00:57.750 --> 00:01:00.890 recently been forecasted to have the third year 16 00:01:01.190 --> 00:01:04.709 without growth in a row. This has never happened since 17 00:01:04.709 --> 00:01:08.250 1945. But here's the catch in the contract. 18 00:01:08.635 --> 00:01:12.395 Start up, venture capital, growth companies appear only 19 00:01:12.395 --> 00:01:16.235 once. Start minus up, German spelling of start up, 20 00:01:16.235 --> 00:01:19.615 is mentioned twice. The German word for 21 00:01:19.755 --> 00:01:23.310 founding, meaning, founding a company, appears 22 00:01:23.370 --> 00:01:26.430 20 times, but not always in reference to entrepreneurship. 23 00:01:27.290 --> 00:01:31.050 For example, founding a family of local initiatives and 24 00:01:31.050 --> 00:01:34.170 so on. One should expect more in a 25 00:01:34.170 --> 00:01:37.785 185 page document laying 26 00:01:37.785 --> 00:01:41.165 out the likely future policy for Germany. Meanwhile, 27 00:01:41.625 --> 00:01:45.385 innovation is mentioned 126 times. That 28 00:01:45.385 --> 00:01:49.065 says a lot. And many of these promises come with a critical 29 00:01:49.065 --> 00:01:52.530 footnote. They're subject to a financials 30 00:01:52.909 --> 00:01:56.450 voorbeheide, wonderful german word, a funding reservation 31 00:01:56.590 --> 00:02:00.270 clause in plain english. Lots of good intentions but 32 00:02:00.270 --> 00:02:03.950 only if the money shows up. So in this episode, we'll 33 00:02:03.950 --> 00:02:07.170 go deep, how the coalition views innovation, 34 00:02:07.765 --> 00:02:11.545 what's missing for the start up scene, and why Germany risks 35 00:02:11.605 --> 00:02:14.345 falling behind unless it aligns us with execution. 36 00:02:16.405 --> 00:02:20.165 Special note, a numerical target, finally. I 37 00:02:20.165 --> 00:02:23.305 asked my assistant to make a pie chart 38 00:02:23.840 --> 00:02:26.560 of everything that's going on here in the 39 00:02:26.560 --> 00:02:30.020 185 document pages document. 40 00:02:30.480 --> 00:02:31.540 And, actually, 41 00:02:34.640 --> 00:02:38.425 social, cohesion. Work 42 00:02:38.425 --> 00:02:42.265 and social dominate by four. Social cohesion makes up 43 00:02:42.265 --> 00:02:46.025 around 21% of the document and work and 44 00:02:46.025 --> 00:02:48.985 social 19, a little bit over 45 00:02:48.985 --> 00:02:52.100 19%. Growth, innovation, and wealth, 46 00:02:54.020 --> 00:02:57.000 which includes start ups, account for just 13%. 47 00:02:57.460 --> 00:03:01.060 Digitization and media, crucial for the start up ecosystem, account 48 00:03:01.060 --> 00:03:04.495 only for 5%. Here's another 49 00:03:04.495 --> 00:03:07.875 structural insight worth noting. All startup relevant 50 00:03:08.015 --> 00:03:11.075 content only begins on page 51 00:03:11.215 --> 00:03:14.595 139 of a 185 page document. 52 00:03:15.135 --> 00:03:18.595 Within the relevant chapter, there's a focus heavy 53 00:03:18.870 --> 00:03:22.010 on digitization in in existing 54 00:03:22.310 --> 00:03:26.069 industries. Think industry four point zero, top tier 55 00:03:26.069 --> 00:03:28.569 academic research and general infrastructure. 56 00:03:29.430 --> 00:03:33.110 Germany declares it wants to become the number one digital 57 00:03:33.110 --> 00:03:36.584 growth company, but that ambition is buried deep 58 00:03:37.205 --> 00:03:40.724 after sections of industrial digitalization. Even 59 00:03:40.724 --> 00:03:44.185 crucial themes like cybersecurity, cloud, and big data 60 00:03:44.485 --> 00:03:48.310 are reduced to a single paragraph. When startups finally 61 00:03:48.310 --> 00:03:51.690 get their moment, the topics include startup networks, 62 00:03:52.390 --> 00:03:55.050 internationalization, the Grunderscheid 63 00:03:56.070 --> 00:03:59.690 proposal, more about that later, crowdfunding support, improved 64 00:03:59.965 --> 00:04:03.665 stock option models, and standardized founders contracts. 65 00:04:04.284 --> 00:04:07.745 There's also the conceptual idea of Markzweipungnoll 66 00:04:08.924 --> 00:04:12.600 market two point zero, a potential new segment to encourage 67 00:04:12.840 --> 00:04:16.680 IPOs, but only mentioned in passing and comes 68 00:04:16.680 --> 00:04:20.120 without any structural or legal details. I'm 69 00:04:20.120 --> 00:04:23.720 sure many listeners still remember the Neurmarkt, the new 70 00:04:23.720 --> 00:04:27.080 market. Maybe the policy makers have 71 00:04:27.080 --> 00:04:30.705 learned. Let's give you a short recap about that. Launched 72 00:04:30.705 --> 00:04:34.405 1996 by Deutsche Borse as a competitor of Nasdaq, 73 00:04:34.945 --> 00:04:38.465 listed at its peaks 300 companies and 74 00:04:38.465 --> 00:04:41.825 drew massive hype here in Germany, especially from retail 75 00:04:41.825 --> 00:04:45.620 investors. With the.com bubble burst, the segment 76 00:04:45.680 --> 00:04:49.520 lost massively. Many companies disappeared, and the segment 77 00:04:49.520 --> 00:04:53.120 was officially shut down in 02/2003, so it 78 00:04:53.120 --> 00:04:56.914 didn't survive the .com bubble burst. Note that 79 00:04:57.375 --> 00:05:01.215 there are partial different segments at Deutsche Boerse right 80 00:05:01.215 --> 00:05:05.055 now, but since 02/2003, a real 81 00:05:05.055 --> 00:05:08.835 one to one competitor of Nasdaq is missing. 82 00:05:10.180 --> 00:05:13.639 So what's missing? A talent strategy beyond requalification, 83 00:05:14.419 --> 00:05:18.180 no visas, no global talent attraction framework, and 84 00:05:18.180 --> 00:05:21.955 little to no detail on start up scaling mechanisms, a really 85 00:05:21.955 --> 00:05:25.555 crucial point here in Europe. A coalition of 86 00:05:25.555 --> 00:05:28.855 innovation or just a word? The SBDCDU 87 00:05:29.475 --> 00:05:33.315 coalition agreement claims to prioritize innovation, and indeed 88 00:05:33.315 --> 00:05:37.095 innovation appears more than 100 times. But the real question is, 89 00:05:37.450 --> 00:05:40.430 what does the innovation actually mean? 90 00:05:41.290 --> 00:05:44.510 You'll find it linked to everything, climate, education, 91 00:05:44.730 --> 00:05:48.570 transportation, health tech, public administration, but 92 00:05:48.570 --> 00:05:52.090 you won't find a corresponding framework, timeline, or 93 00:05:52.090 --> 00:05:55.385 KPIs. The term is used as a strategic umbrella 94 00:05:55.925 --> 00:05:59.305 without a strategic spine. There's talk of innovation 95 00:05:59.445 --> 00:06:03.285 districts and a push to establish new regional clusters, but 96 00:06:03.285 --> 00:06:06.905 we've heard that before. The absence of targeted mechanisms 97 00:06:07.125 --> 00:06:10.790 like procurement reforms to favor new tech solutions or 98 00:06:10.790 --> 00:06:14.550 government backed test beds for start ups shows lack of 99 00:06:14.550 --> 00:06:17.750 operational muscle. Compare it to the 100 00:06:17.750 --> 00:06:21.350 2021 coalition agreement, which had an 101 00:06:21.350 --> 00:06:25.135 explicit start up strategy. This 2021 caught 102 00:06:25.135 --> 00:06:28.575 for regulatory sandboxes and even committed to 103 00:06:28.575 --> 00:06:32.095 better stock option taxation. That earlier 104 00:06:32.095 --> 00:06:35.935 document also helped catalyze the launch of Zukunft for a 105 00:06:35.935 --> 00:06:39.710 10,000,000,000 vehicle to back growth stage funding in 106 00:06:39.710 --> 00:06:43.310 Germany. The government also stated that the now delayed win 107 00:06:43.310 --> 00:06:46.910 initiative channeling €12,000,000,000 into the start up 108 00:06:46.910 --> 00:06:50.510 scene until 2030. In contrast, the 109 00:06:50.510 --> 00:06:54.155 2025 agreement gives us a wish list, not a strategy. 110 00:06:54.935 --> 00:06:58.315 For founders and innovators, this makes a big difference. 111 00:06:58.455 --> 00:07:02.155 Innovation talk is good, but innovation funding, even better. 112 00:07:02.215 --> 00:07:05.670 Startups in the shadow. Is this a policy downgrade? Let's 113 00:07:05.670 --> 00:07:09.430 address the elephant in the room, the near invisibility of 114 00:07:09.430 --> 00:07:13.110 startups in this deal. Despite Germany's growing role as a 115 00:07:13.110 --> 00:07:16.570 European startup hub, especially in tech sectors like 116 00:07:16.790 --> 00:07:20.635 enterprise SaaS, climate tech, and industrial IoT. 117 00:07:21.015 --> 00:07:24.375 The term start up is not used frequently. Venture 118 00:07:24.375 --> 00:07:27.895 capital, just once. Growth companies, only one. That's 119 00:07:27.895 --> 00:07:31.415 it. And yet, during the pandemic, the start up 120 00:07:31.415 --> 00:07:35.260 BioNTech gave Germany's GDP a massive boost 121 00:07:35.560 --> 00:07:39.020 up to 0.5% in 2021 alone 122 00:07:39.160 --> 00:07:42.460 according to Reuters. Germany, the world's 123 00:07:42.680 --> 00:07:46.215 third largest economy at the time, benefited more from a 124 00:07:46.215 --> 00:07:49.675 single start up than from many traditional stimulus tools. Still, 125 00:07:49.895 --> 00:07:53.735 that kind of impact doesn't seem to have inspired great attention. The 126 00:07:53.735 --> 00:07:57.335 only tangible mention, a vague nod towards the potential 127 00:07:57.335 --> 00:08:00.870 introduction of a venture capital law, which, while potentially 128 00:08:00.930 --> 00:08:04.390 valuable, lacks substance deadlines or funding commitments. 129 00:08:05.330 --> 00:08:09.170 This omission stands in stark contrast to the initiatives in other EU 130 00:08:09.170 --> 00:08:12.870 countries. France's TB initiatives has mobilized 131 00:08:12.930 --> 00:08:15.995 over 30,000,000,000 for late stage VC funding. 132 00:08:16.295 --> 00:08:19.835 Spain's startup law two point zero includes tax reliefs, 133 00:08:19.975 --> 00:08:23.275 fast track visa for tech talent, and simplified regulatory 134 00:08:23.495 --> 00:08:27.275 procedures. Portugal introduced co investment vehicles 135 00:08:27.560 --> 00:08:31.000 and is actively targeting international founders. VC 136 00:08:31.000 --> 00:08:34.679 reactions, several leading German VCs have expressed 137 00:08:34.679 --> 00:08:38.360 frustration. Some call it a step backwards. One went as 138 00:08:38.360 --> 00:08:42.125 far as to say Germany is becoming the garage of Europe where 139 00:08:42.125 --> 00:08:44.945 start ups are born, but scale elsewhere. 140 00:08:45.805 --> 00:08:49.485 Let's compare the coalition contract 2021 between 141 00:08:49.485 --> 00:08:53.165 SPD, the the green party, and the f t p, and the 142 00:08:53.165 --> 00:08:57.010 2025. '20 '20 '1 had a start up strategy, 143 00:08:57.230 --> 00:09:00.590 expansion of High-tech Hoonifang exists, stop auction 144 00:09:00.590 --> 00:09:03.010 reforms, pension fund VC investments. 145 00:09:03.550 --> 00:09:06.930 2025, no current extension of High-tech Hoonifang, 146 00:09:07.485 --> 00:09:11.005 no founder incentives, no stock option clarity, and no 147 00:09:11.005 --> 00:09:14.605 mention of excess at all. The real 148 00:09:14.605 --> 00:09:18.205 power player. Let's talk about a recurring red 149 00:09:18.205 --> 00:09:22.019 flag. It means subject to 150 00:09:22.019 --> 00:09:25.800 budget availability. In practice, it means maybe 151 00:09:26.420 --> 00:09:30.100 nearly every initiative, no matter how visionary, whether it's 152 00:09:30.100 --> 00:09:33.560 around quantum computing, green hydrogen, or AI clusters, 153 00:09:34.165 --> 00:09:37.785 comes with a budgetary disclaimer. This is a big issue 154 00:09:37.925 --> 00:09:41.685 for start ups and VCs. Timing matters. Launching product 155 00:09:41.685 --> 00:09:45.225 fundraising, scaling international. These are all processes 156 00:09:45.365 --> 00:09:48.905 that depend on predictable timelines and stable policy environment. 157 00:09:49.500 --> 00:09:53.260 The presence of so many conditional clauses signals to 158 00:09:53.260 --> 00:09:56.860 founders and investors that a government is unsure of its own 159 00:09:56.860 --> 00:10:00.700 financial priorities. And in a time when countries 160 00:10:00.700 --> 00:10:03.760 like France and Denmark are pre funding innovation programs, 161 00:10:04.274 --> 00:10:07.795 Germany's approach feels risky. The 162 00:10:07.795 --> 00:10:11.014 strategic implication, expect capital, especially 163 00:10:11.154 --> 00:10:14.915 international capital, to flow toward jurisdictions where the 164 00:10:14.915 --> 00:10:18.470 rules and resources are already locked in. Germany 165 00:10:18.690 --> 00:10:22.230 might have top universities and talent, but without committed 166 00:10:22.529 --> 00:10:26.370 follow through, founders will increasingly look elsewhere. Europe 167 00:10:26.370 --> 00:10:29.970 moves ahead. Germany hangs back. Step back and 168 00:10:29.970 --> 00:10:33.685 zoom out across Europe. We're in a continental race to foster 169 00:10:33.685 --> 00:10:37.365 innovation economies. Governments aren't just encouraging start ups. 170 00:10:37.365 --> 00:10:41.125 They're competing for them. France is actively scaling France 171 00:10:41.125 --> 00:10:44.964 Twenty Thirty with 54,000,000,000 committed to transforming the French 172 00:10:44.964 --> 00:10:48.710 economy through innovations. Spain has earmarked 4,000,000,000 173 00:10:48.930 --> 00:10:52.770 for AI, data, and entrepreneurship support through 174 00:10:52.770 --> 00:10:56.450 its next gen EU deployment. The Netherlands has 175 00:10:56.450 --> 00:10:59.750 introduced sovereign tech funds focused on strategic 176 00:10:59.810 --> 00:11:03.525 autonomy, offering co investments to deep tech start ups. 177 00:11:03.585 --> 00:11:07.365 Germany, it's still thinking about its next steps. 178 00:11:07.505 --> 00:11:11.205 Despite being Europe's economic engine, it lacks the structural 179 00:11:11.265 --> 00:11:14.885 boldness that the move demands. 180 00:11:15.600 --> 00:11:19.360 This creates a start up migration risk. Berlick and Munich might 181 00:11:19.360 --> 00:11:23.060 continue birthing start ups, but growth, talent, and capital 182 00:11:23.360 --> 00:11:27.140 could increasingly concentrate in other places. More critical, 183 00:11:27.600 --> 00:11:31.295 in an area where innovation is linked to sovereignty, Germany's 184 00:11:31.435 --> 00:11:35.274 absence from the start up fast lane could become a geopolitical blind 185 00:11:35.274 --> 00:11:38.975 spot. What founders and VCs should do now? 186 00:11:39.515 --> 00:11:43.035 So what now? What should you do if you're a founder, angel, or 187 00:11:43.035 --> 00:11:46.740 VC in the DACH region? Leverage EU funding. Don't wait 188 00:11:46.740 --> 00:11:50.340 for Berlin. Apply to the Horizon Europe, the ESC 189 00:11:50.340 --> 00:11:54.180 accelerator, and the cross border programs for Invest EU. Align 190 00:11:54.180 --> 00:11:57.885 with policy buzzwords. Frame your start up to fit 191 00:11:57.885 --> 00:12:01.185 in infrastructure innovation, energy, climate, 192 00:12:01.245 --> 00:12:05.005 health, AI, mobility. These get attention and potentially 193 00:12:05.005 --> 00:12:08.765 resources. Find funding diversity, cross 194 00:12:08.765 --> 00:12:12.530 border syndicates, family office networks, European fund of funds. 195 00:12:12.590 --> 00:12:16.350 Don't wait for the German government to fix VC access. Look 196 00:12:16.350 --> 00:12:19.890 for city level or lender, meaning state funding. 197 00:12:20.030 --> 00:12:23.490 Municipalities like Berlin, Hamburg, or Nordgren Westfalen 198 00:12:23.630 --> 00:12:27.185 often have faster moving programs than the federal level. 199 00:12:27.644 --> 00:12:31.485 Get loud and organized. Joanna found a coalition. Write up ads. 200 00:12:31.485 --> 00:12:35.264 Post on LinkedIn, governments do respond to coordinated pushback 201 00:12:35.324 --> 00:12:38.305 and especially if it comes to high performing ecosystems. 202 00:12:39.370 --> 00:12:43.129 VC tactic, reduce exposure to start ups heavily reliant 203 00:12:43.129 --> 00:12:46.829 on public funding in Germany. Look towards scalable sectors 204 00:12:46.889 --> 00:12:50.430 and diversify your follow ons to regions with firmer 205 00:12:50.490 --> 00:12:54.009 start up policies. The lesson, plan around the 206 00:12:54.009 --> 00:12:57.445 coalition, not with it. Finally, an idea we 207 00:12:57.445 --> 00:13:00.745 love, paid time to found. 208 00:13:02.565 --> 00:13:05.945 Also, on page, well, 140, 209 00:13:06.805 --> 00:13:10.345 there's one proposal that genuinely caught our attention, 210 00:13:11.820 --> 00:13:15.580 It's the idea of offering paid leave, not unlike paternal 211 00:13:15.580 --> 00:13:19.040 leave, for individuals looking to found a company. 212 00:13:19.740 --> 00:13:23.115 The aim is to give aspiring entrepreneurs time and 213 00:13:23.115 --> 00:13:26.255 financial breathing room to develop their business ideas, 214 00:13:26.555 --> 00:13:30.315 validate the market, and build initial tracking before 215 00:13:30.315 --> 00:13:34.095 jumping into full time founding mode. If implemented well, 216 00:13:34.155 --> 00:13:37.775 this could remove a key psychological and financial barrier 217 00:13:38.050 --> 00:13:41.890 to entrepreneurship, especially for people without existing 218 00:13:41.890 --> 00:13:45.570 capital or networks. It's a small mention with a big 219 00:13:45.570 --> 00:13:49.330 potential. Note, there's currently a way for unemployed people 220 00:13:49.330 --> 00:13:53.155 to get support to start a company, Konatsushos, but it is 221 00:13:53.155 --> 00:13:56.755 minimal and only for six month, where first time founders 222 00:13:56.755 --> 00:14:00.515 need much longer for the first fund to raise if 223 00:14:00.515 --> 00:14:04.275 ever. Therefore, we are afraid the new program 224 00:14:04.275 --> 00:14:07.980 will just copy the old insufficient program. Let's see if 225 00:14:07.980 --> 00:14:11.820 the government has a good surprise for us up their sleeves here. To 226 00:14:11.820 --> 00:14:14.720 sum it all up, innovation is everywhere, 227 00:14:14.940 --> 00:14:18.560 126 mentions, but action is scarce. 228 00:14:18.700 --> 00:14:22.285 Startup venture capital growth companies just appear once. 229 00:14:22.345 --> 00:14:25.945 Start minus up just twice. The only 230 00:14:25.945 --> 00:14:29.565 numeric start up related goal is buried 231 00:14:30.024 --> 00:14:33.625 again on page 140. Grow new company 232 00:14:33.625 --> 00:14:37.420 foundations from 10,000 to 15,000 per 233 00:14:37.640 --> 00:14:40.920 year. Note in 2024, Germany saw a 234 00:14:40.920 --> 00:14:44.140 20,000 plus companies founded 235 00:14:44.760 --> 00:14:48.440 overall according to the status. Also, the German startup 236 00:14:48.440 --> 00:14:51.955 association tracked only slightly below 3,000 new 237 00:14:51.955 --> 00:14:55.415 startups founded in 2024. We're not sure 238 00:14:55.635 --> 00:14:58.995 what this refers to, but if it's startups and tech 239 00:14:58.995 --> 00:15:02.535 companies, count us in. Many initiatives 240 00:15:03.075 --> 00:15:06.779 are stalled behind vague finance financing clauses. The 241 00:15:06.779 --> 00:15:10.460 reform of stock options of the outgoing government was 242 00:15:10.460 --> 00:15:13.040 not due to liking of Germany's start up association. 243 00:15:14.140 --> 00:15:17.839 Some promising ideas like Koenigseid get a single paragraph 244 00:15:17.980 --> 00:15:21.605 without clear implementation plans. Germany has a 245 00:15:21.605 --> 00:15:25.365 world class technical talent, strong institutions, and a 246 00:15:25.365 --> 00:15:28.665 respected academic base. But until 247 00:15:28.805 --> 00:15:32.245 solar policy reflects that foundation with real 248 00:15:32.245 --> 00:15:36.089 capital, real strategy, and real urgency, It 249 00:15:36.089 --> 00:15:38.990 risks watching the future happen elsewhere. 250 00:15:40.570 --> 00:15:44.410 If this episode resonated, please subscribe wherever you get 251 00:15:44.410 --> 00:15:48.250 your podcast. Cheers with a founder, policymaker, or 252 00:15:48.250 --> 00:15:51.125 investor who needs to know what's at stake, and visit 253 00:15:51.125 --> 00:15:54.584 startuprate.a0 for the full write up pie charts and expert 254 00:15:54.644 --> 00:15:58.404 analysis. Until next time, stay sharp, stay 255 00:15:58.404 --> 00:16:02.165 bold, and keep building smart. This has been Joe from startuprate.ao, 256 00:16:02.165 --> 00:16:05.545 your insider pass to what matters in DACH, tech, 257 00:16:05.769 --> 00:16:06.990 venture, and start 258 00:16:09.690 --> 00:16:13.070 ups. That's all, folks. 259 00:16:13.290 --> 00:16:16.730 Find more news, streams, events, and 260 00:16:16.730 --> 00:16:17.930 interviews at 261 00:16:17.930 --> 00:16:21.455 www.startuprad.io. 262 00:16:21.455 --> 00:16:23.635 Remember, sharing is caring.