Twice a year, I visit my family in Berlin and have seen the German startup ecosystem evolve over time. I used this Christmas trip to meet up with VCs and founders and one thing that became clear is that we’re in a new era of entrepreneurial activity in Germany. Here is a quick review on how we got here, what has changed and what it means.

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The Beginnings — Der Neue Markt (1990s)

The “Neuer Market” was fueled by the Dotcom boom in Silicon Valley. Startups went public prematurely, created a lot of hype with no substance and lit a lot of capital on fire. Most VCs didn’t survive the fallout and Germans turned sour on starting and backing high-risk ventures for a while.

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Rise of the Copycats (2000s & 2010s)

Many successful German startups in this phase were copies of what founders saw working in the US. These entrepreneurs were world-class at copying a business idea faster than the US companies could expand to Europe. Alando copied and was later bought by eBay for $43M (just 4 months after launch!). StudiVZ copied Facebook and later sold for $100M. CityDeal copied and was bought by Groupon for $170M just 5 months after launch. Zalando was a copy of Zappos and is a public company with a 5B Euro market cap today.

Many in the US looked down at this approach for its lack of originality — or maybe used that argument to complain about competition. For the German startup scene, these successes became the foundation for what was to come. The proceeds from those exits were reinvested into new companies. VCs were started by successful founders and startups execs. And most importantly, it inspired a new generation of ambitious founders who saw the rapid success of those companies and the millions seemingly made overnight.

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A New Age (2020s)

Germany is well know for its Mittelstand, the backbone of the German economy made up of family-owned businesses built over decades. The alternative approach of scaling companies fast, and taking venture capital to do so, has become more popular and attainable than ever. The German venture industry is healthy and well capitalized to fund the best ideas and founders. And there are plenty of highly educated and talented people to help build successful companies.

Philip Schroeder from 1KOMMA5° (we at G2 Venture Partners are investors) or Hendrik Kramer at Fernride are great examples of ambitious founders who are looking to build large and lasting companies. They are working on novel business models and new technologies, a markedly different approach from the copycats of the prior era. Sustainability and energy independence is more important than even in Europe and is driving significant innovation in sectors like energy, mobility, industrial tech and deep tech. While we have historically seen fewer and smaller exits in Europe compared to the US, this New Age of German and European startups has the promise to yield more huge successes that will surely inspire the next generation of founders.

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