Most people have probably heard of the term “Silicon Valley”. It refers to one of the most important locations for the tech industry in southern San Francisco, where companies such as Apple, Google and Facebook are based. The success of Silicon Valley also inspires many cities and regions in Europe that are striving to establish themselves as a new paradise for founders and develop groundbreaking ideas, such as the latest app that makes life easier or the office chairs of the future. In Germany, Berlin in particular is a contender for this title, thanks to various financing options such as business angels or crowdfunding – but the rest of Germany is catching up. The Federal Association of German Startups e.V. has been dealing with the startup scene for several years and publishes the German Startup Monitor every year – a study that comprehensively addresses and analyzes the startup ecosystem in Germany. We have compiled and examined the data from the startup monitors of the last 5 years to find out how the startup scene in Germany has developed and which German regions actually have the potential to become the next Silicon Valley.

Where can you find German startups?

It is not a big surprise that the most start-up companies on average can be found in Berlin over the past 5 years. In recent years, however, the start-up potential has spread across the country, so that only just under one in four (23.9%) startups are now based in Berlin. North Rhine-Westphalia, on the other hand, has been the region with the second most startups for some time and fights annually for first place. In contrast to Berlin, around a sixth (15.3%) of the startups can be found in North Rhine-Westphalia these days, although these numbers are getting closer and closer.

Other strong start-up regions in Germany in the last 5 years are Bavaria (13%), Baden-Württemberg (11.9%) and Lower Saxony (7.8%). The worst performers in startup locations since 2014 are Saarland (0.7%), Mecklenburg-Western Pomerania (1.3%) and Brandenburg (1.6%). However, this does not mean that residents of these regions are less innovative.

The most innovative minds in Germany

It makes sense that a correspondingly large number of startups can be found in densely populated federal states such as North Rhine-Westphalia and Bavaria. But that doesn’t necessarily mean that residents of these federal states have more courage or potential than founders. Therefore, we also compared the number of existing startups with the population of the respective federal states – with interesting results.

In fact, Berlin is still the front runner. With a high number of startups and a relatively small population, there is an average of 81.7 startups for every million inhabitants in Berlin, which were recorded in the official Startup Monitor. Other regions with many startups are falling sharply here, because NRW and Bavaria also have most of the residents. This means that NRW only has 11.6 and Bavaria 13.4 startups / million, which puts both federal states in the middle of the field.

A relatively large number of founders can be found in Hamburg (50.5) and Bremen (40.2). There are relatively few startup founders in Rhineland-Palatinate (6.7), Brandenburg (7.8) and Schleswig-Holstein (9.3). But could federal states such as Hamburg, Bremen, or another small state prevail against the capital and establish themselves as German Silicon Valley?

Developments in recent years

As already mentioned, Berlin is not necessarily the stronghold for startups, because in recent years more and more startups have been found in other regions of Germany. If you take the population figures into account, Berlin is still the front runner, but a negative trend can also be observed in this regard: Since 2014, there have been an average of 20% fewer start-up founders in Berlin.

In some federal states, on the other hand, there is a strong upward trend. Above all, Bremen has established itself strongly in recent years and in 2018 even had relatively the largest proportion of founders in the population (100.2). If this trend continues, Bremen would probably be another contender for the title of startup stronghold – even as a state with the fewest inhabitants.

The state with the second smallest population, Saarland, is also showing a positive trend when it comes to startups. With a relatively small number of local start-up companies, the trend towards founding is still steadily increasing and has quadrupled on average in the last 2 years. It is unlikely that Saarland will become the ultimate start-up location, but the development in this area is still noteworthy.

The upward trend in Hamburg, however, is very stable, with only slight fluctuations. Since the startup scene is already well established here, Hamburg definitely has the potential to overtake Berlin and North Rhine-Westphalia in just a few years.

Rhineland-Palatinate and Schleswig-Holstein have not done too well so far, but a weak upward trend can also be observed for them. Unfortunately, this is not the case for Brandenburg. Similar to Berlin, the start-up trend in Brandenburg is also falling steadily and threatens to permanently bring up the rear in the German startup scene.

Is there a German Silicon Valley?

Even if the previous startup mecca Berlin is home to most of the state’s startups on average, the numbers are on the decline and the rest of Germany is catching up. In Berlin in particular, there are primarily two problems: Due to the high level of competition from startups and other companies, there is not only a lack of available, affordable office space, but also a lack of qualified employees with experience in software development and the like. In addition, a study by Ernst & Young from March 2019 that the number of financing rounds in Berlin is high, but the investment volume has decreased. Munich and Hamburg have grown relatively strongly in this regard and are thus seriously competing with the capital.

In summary, it can be said that Germany currently still has Berlin as a figurehead for a healthy startup scene, but it is also developing rapidly in many parts of Germany. North Rhine-Westphalia and Bavaria already offer a considerable number of start-up companies that will continue to develop positively in the future, while Bremen, Saarland and Hamburg are still behind in terms of quantity, but have strong start-up potential. So it remains exciting to see which of the various regions of Germany can one day assert itself as Silicon Valley.