Mr Schnorr, Silicon Valley is ‘the’ prototype for a digital ecosystem. What can we in Germany learn from Silicon Valley? Is a comparison even useful?
Silicon Valley clearly demonstrates how important it is for science and business to network in order to make the digital economy a success. Having this all bundled together in one metropolitan region provides us with an extremely interesting showcase. In order to spur a strong, digital economy in Germany, we need to look at our existing structures which have evolved over the past few decades. Thanks to Germany’s federal structure, successful SMEs, scientific institutions and start-ups have evolved in a diverse range of sectors right across Germany.
This is why, in many different places, individual ecosystems have developed that are first-rate and successful in their particular fields. So what we have is a multitude of small valleys, rather than one big one. Our task is now to bundle the strengths of these different locations and to link them up. This is what the Digital Hub initiative is for.
In 2017, $2.6 billion of venture capital was invested in Germany – 30% more than the year before. However, in an international comparison, Germany is still lagging behind. How can Germany become more attractive for investors?
We are seeing ever larger investments being made in Germany. One example is the investment made in the aircraft start-up Lilium from Munich, which has received a total of $90 million from international investors. That’s a real vertical take-off! Delivery Hero and Auto1 have also each picked up more than €300 million.
These examples show that Germany is producing good ideas and is already attractive to investors. The most important thing is that these ideas are of a high quality and that start-ups are given support in the seed phase. That is where we need to facilitate investment.
What can government do to support the start-up scene?
There are many fields of action for government in this field, but I just want to highlight one here. Start-ups need vibrant networks so that they can engage with experts from research and business, find well-trained staff, such as software developers and, through this, can secure key expertise and partners for their business models. This is where Digital Hub comes in. If you take a look at Tel Aviv, you will see that universities are often shareholders in successful start-ups and are involved in them from day one. The network between science and the start-up scene there is very close. This becomes especially important when it comes to business models in research-intensive and highly specialized sectors, such as biotechnology and artificial intelligence. Here, government can help by creating initiatives that foster this kind of exchange and cooperation.
In the USA, different locations are currently competing to become the home of the second Amazon headquarters. Cities are offering incentives for companies to set up an operations base there. How might locations in Germany succeed in attracting digital companies to become part of their skyline?
Germany has an extremely strong SME sector featuring many world-market leaders. We have excellent research institutions, universities and universities of applied science that provide access to expert knowledge. We also have a strong start-up scene featuring young, digital talents. These are all extremely attractive reasons for companies to set up an operations base in Germany or to enter a partnership in the country. Just last year, Facebook announced that it would be working together the Munich Digital Hub – Digital Hub München – in the area of mobility. Such cooperation sends out a strong signal to others about how attractive Germany is as a location for start-up activity, and shows that we are also working to develop forward-looking innovations in our core industries.
The word “unicorn” is often used as a benchmark to describe the success of a digital ecosystem. How many unicorns do you think Germany will produce in the next few years?
Among the general public, the success of a particular start-up is often simply judged by its business rating. This indicator is not, however, meaningful for every kind of business model. After a certain time, many start-ups are no longer dependent on large investments that would drive up their rating to such high levels. When it comes to digitization among German business, the mark of success will depend much more on whether we can maintain the current market leadership our SMEs enjoy in many sectors as we move forward into the future. The key to this is marketable innovations that are inspired by digital transformation in the individual sectors and also help shape it. This means that company ratings are less important here.
