How to Build a Stronger Startup Ecosystem in Germany

Takeaways from BCG Digital Ventures Global Managing Partner Stefan Gross-Selbeck at #Bits20

While employee share ownership and equity are the status quo in the US and China, Germany is still lacking behind. What can we do to improve this and strengthen the German startup ecosystem? Under the motto #ESOPasap, The Federal Association of German Startups (Startup Association), the Boston Consulting Group (BCG), BCG Digital Ventures, the Internet Economy Foundation (IE.F), and the law firm Hengeler Mueller have identified the problems with employee ownership — and suggested better conditions to promote innovation and growth in Germany.

At the recent 2020 Bits and Pretzels event, DV Global Managing Partner Stefan Gross-Selbeck led an interactive session alongside Christian Miele, President of the German Startups Association, and Dr. Sophie Chung, CEO and Founder of Qunomedical GmbH. They talked about what can be done to make the German startup environment more amenable to growth and innovation, and the recent #ESOPasap report.

We’ve highlighted three key takeaways from the session, and you can see the full video below.

1. It’s critical for Germany to step up its performance in innovation
   US and Chinese platforms are eating market share, with the tech giants having a clear monopoly on innovation. This must be addressed by innovation from Europe, and Germany must play a big part here to ensure influence and benefit in the future.
2. Startups need to make it worthwhile for employees
   German companies must offer employees competitive reimbursement in order to attract the best talent from all over the world, and also to prevent Germany talent from going elsewhere. This must come in the form of competitive stock option offers, which has been a key part of the success of US companies, specifically those in Silicon Valley, ensuring not only that employees are attracted to the area but also that money is invested back into the ecosystem by those who have benefited from the appreciation of their options.
3. Companies must go further than ‘virtual’ stock options
   Although ‘virtual’ stock options are offered by quite a few German startups, they must go further and offer real equity. Virtual options are those which come in the form of financial bonuses to employees when the company performs well, but fall short of real equity. German lawmakers must work towards liberalizing legislation around ESOP, and companies themselves must begin to offer these options.

Read the key takeaways from the #ESOPasap study by BCG Digital Ventures and the Bundesverband Deutsche Startups e.V. here, and the full study here (German only).

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