Fed from a growing pool of venture capital, high-tech firms are sprouting across Germany at a much faster rate than expected.
Last year the number of new companies in the technology sector was up 5% on the year before. This year, analysts expect that growth to continue, despite only a tentative recovery in the wider economy.
`Germany is becoming a Mecca for high-tech pioneers,’ one analyst said, citing some of the increasing research aimed at tracking the growth of the technology sector.
Undepinning the growth is a marked increase in the amount of venture capital that new companies can tap into for support during the high-risk start-up phase. Venture capital, a US invention which made its way to the UK decades ago, is relatively new to Germany, an economy that shuns risk.
But times are changing and Germany’s venture capital base could become the biggest in Europe early in the new millennium, according to analysts.
The Neue Markt, a section of the German stock market dedicated to high-tech companies, is essential to the new venture capital movement.
The market’s performance has been mixed in recent months with one or two attempted share issues running into trouble. But overall it is succeeding in raising capital to start companies in a way that was unheard of only a few years ago.
Traditionally, German companies, and particularly small and medium-sized firms, have relied heavily on banks for funding. Germans have shied away from other forms of investment – the legacy in part of economic trauma at various times this century.
However, with the privatisations of the 1990s, share ownership has become much more widespread. Now, it seems, a new generation of investors is even prepared to put money into the high-tech sector.
Research published this week shows that about a third of high-tech start-ups are in the software sector, with information and communications technology close behind, with a share of about 30%. In third place are biotechnology projects. On average, new high-tech companies are attracting investment of about DM6m (£2m).
A new entrepreneurial spirit is evident in schools, universities and research organisations, partly as a result of additional government funding for start-up projects. A survey of new technology companies shows that of 100 new projects, 84 drew on government aid at one stage or another of their early development.