What is working and what is holding them back

The German startup ecosystem is gaining momentum, with 3053 startups founded in 2026, the highest number since 2019. With the right policies — both at the national and the EU level — the upturn could be amplified many times over.

This article was authored by Jens Teutrine, DACH representative (Germany, Austria and Switzerland) at the Consumer Choice Center, and a former Member of Germany’s Federal Parliament. The views expressed in this article are those of the author and do not necessarily reflect the official policy or positions of EU Tech Loop or Euronews.

For years, the message in many German news reports was the same: a start-up slump in the land of inventors and thinkers. Young people would rather join the public sector. Burdensome bureaucracy holds businesses back, as though the quest for the legendary Permit A38 in the animated film The Twelve Tasks of Asterix had become reality.

On top of that, Germany lacks a culture that celebrates success, avoids stigmatising failure and encourages risk-taking.

Yet despite Germany’s far from healthy economy, there has recently been some encouraging news: the German start-up sector is gaining momentum.

In the first half of 2026, 3,053 start-ups were founded, the highest number since records began in 2019. Around a third of these new businesses had a clear connection to AI, according to a report by the German Startup Association and Startupdetector.

Is this a consequence of the weak labor market? Is AI accelerating start-up formation? What role does the dual-use sector, with its civilian and military applications, play? Or is this merely a short-term trend? The causes of the upturn and whether it will last remain open to speculation.

The picture becomes more mixed regarding growth. According to the EY Start-up Barometer, German start-ups attracted around €5.3 billion in venture capital over the same period, 14 percent more than a year earlier.

At the same time, the number of funding rounds fell by 11 percent. Large deals accounted for two-thirds of the capital invested. EY therefore warns that young and small companies often lose out in accessing capital.

What Germany and Europe should change

With the right policies, the still-fragile upturn in new business formation could be amplified many times over. This would likely lead to many more such success stories.

To make that happen, new competitors must be able to set up businesses, raise capital and reach customers across the single market more easily.

First, Germany needs a simple, fully digital process for starting a business. Before selling their first product, founders have to visit a notary, complete tax office forms and, depending on their business, arrange further registrations and supporting documents.

Before they have earned their first euro, they are already spending time and money on paperwork — resources they then lack for product development and finding customers.

EU Tech Loop recently published an article on the bureaucratic madness surrounding business formation in Germany: “Permit A38 in real life.”

An online form does little good if the process behind it still requires that documents be submitted repeatedly and that public authorities be dealt with one by one. Short, binding processing deadlines are needed. Data already held by the relevant authorities must be available for them to share and use. And, overall, there simply need to be fewer such requirements.

Germany remains miles away from the goal of allowing a business to be set up within 48 hours. Whether a start-up policy works must be judged by the actual time, costs and administrative effort involved.

Second, private growth capital must become more readily available. This requires reliable investment rules and workable employee equity schemes that help young companies attract skilled staff. Public programmes should be assessed on whether they mobilise additional private capital.

A rising total investment figure alone is not enough to demonstrate success: what also matters is how widely funding is distributed across companies and stages of development. A deeper capital markets union could make it easier for young businesses to attract investors from across Europe.

Third, the single market must become easier for young companies to navigate. The Commission’s EU Inc. proposal takes a sensible starting point: an optional European company form intended to enable digital incorporation within 48 hours and simplify corporate legal procedures.

Germany and the EU should take this approach forward. The proposal, however, does not replace sector-specific rules and still maintains national notarial control, which has been highlighted as one of the biggest administrative burdens for German startups until now.

The decisive question will be whether companies can actually expand across borders with less administrative effort. For that to happen, strengthening the European market must once again become a priority in EU lawmaking.

Consumers benefit when new providers challenge established companies with better services and more attractive prices. We need a voice for the bold, the risk-takers, and the underdogs: those who are still trying to build something and are not yet established enough to influence the regulations that will shape their future.

This story was originally published onEU Tech Loopand has been republished on Euronews as part of a syndication agreement.

Source: www.euronews.com