Effects and chances of the corona crisis for the German startup ecosystem

Olaf Jacobi
Apr 27, 2020 · 7 min read

There are already countless articles and presentations with advice for startups in the corona crisis. According to the motto “Everything has been said — just not by everyone yet” I will not give any further advice to startups. However, the exciting question is what long-term effects the corona crisis will have on the German startup ecosystem. For this purpose, I will compare the two past economic crises in 2000 and 2008 with the current one. Based on the experience gained, is it already possible to estimate whether the corona crisis will have exclusively negative effects, or will there also be opportunities that young technology companies can take advantage of?

Personal context

Thus, the following explanations are neither scientifically founded nor empirically substantiated. I expect criticism and am open to other arguments.

What actually is an economic crisis?

Dotcom bubble (2000)

The entire German startup ecosystem was still very new and inexperienced at the time. This was one of the main reasons for the hype in Germany and thus the bursting of the bubble being much bigger, more intense and more lasting than, for example, in the USA.

As a result, the effects were hard and intense. Planned financing rounds were canceled, startups went bankrupt by the dozen because there was no follow-up financing, valuations fell drastically, countless VCs disappeared, fund investors stopped investing in new German funds — the party was over. These were only the short-term effects.

Source InvestEurope

One must not forget that the DAX was on a downward trend from 2000 to 2003. The entire economy slowed down over a period of three years. There were very few investors and capital left in the market. One speaks of the “nuclear winter” after 2000, and from 2004 onwards, one could see a noticeable recovery and reconstruction among German VCs. The first new VC funds were launched in 2004. In 2006 the HTGF became active.

Real estate bubble (2008)

Overall, we can now say that the impact on our startup ecosystem was relatively moderate. Many companies reacted swiftly at that time, together with investors. Startups adjusted to the fact that it may become more difficult to obtain initial or follow-up financing. In fact, some investors were more cautious for about two years and valuations decreased somewhat. However, the impact has not been as dramatic as eight years ago. This was also due to the fact that everyone involved was more experienced and that the crisis was not “home-made”. Everyone felt the economic impact. For young startups, however, they were not as serious as for large companies or the medium-sized sector.

Source InvestEurope

In retrospect, the crisis in 2008 and the following years opened up many opportunities for young technology startups, as established companies were hit much harder and had to react accordingly on the cost side.

Examples of startups that were founded shortly before or during the crisis and became successful because of and/or despite the crisis include AirBnB, Uber, Zalando, Babbel, Soundcloud, GetYourGuide, Smava, MisterSpex, Signavio, MyTaxi (now FreeNow), Fyber, ResearchGate.

It is certainly interesting for entrepreneurs and investors to look for parallels to the current situation and, if possible, to use the insights, patterns, and lessons learned from the period 2008 to 2010 for our actions today.

Corona Pandemic (2020)

All of us have already registered the short-term effects. Purchasing power (depending on the various sectors) is declining. As a partner of Capnamic Ventures, it was interesting to observe that the companies, together with their investors, learned from past crises and reacted immediately. Companies have carried out stress tests, reduced costs, and thus extended their cash reach. Investors became generally more cautious and somewhat more restrained. They have focused on securing and supporting their own portfolio companies.

What is exciting is the long-term view of this crisis. What risks and, in particular, what opportunities are concealed? No one can say for sure, yet, how the Corona crisis will affect our society and economy in the long term.

However, I believe that this crisis will also bring opportunities for startups and investors and that the German startup ecosystem will emerge from the crisis stronger than before compared to other industries.

At present, it is not clear how long the recession will last and how quickly the economy will recover. It may be short-lived, but it could well turn into a recession that is far more severe than the global financial crisis in 2008. Such a recession would certainly have a huge impact on our startup ecosystem. Companies will fail and investors will resign. But — as in 2008 — these will be times when successful and sustainable companies will be built.


Business models

Innovation in Germany

Competition and Fundraising

Most startups have already prepared themselves for the storm and will survive the short-term effects. Declining demand, the resulting drop in sales or growth and the challenges in financing will be hard, but hopefully short-lived. One thing is certain and 2008 has shown this: the surviving companies will be stronger, face less competition, grow faster and be more valuable at the end of the recession.


The German startup ecosystem will not disappear into oblivion as it did after the Dotcom bubble. We (startup entrepreneurs and investors) will emerge from the crisis stronger and faster than other sectors of the economy. I hope that young technology companies will become even more relevant for the economy as a whole after the crisis because they stand for innovation and change and are more adaptable than other sectors of the economy.

The article was published in a German version on Gründerszene (Link)

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