The state of North-Rhine Westphalia (NRW) has been well-known for its dynamic, innovative and well-structured start-up ecosystem. With supra-local cooperation focusing primarily on digitization, start-ups contribute to one of the most important challenges of recent times while offering expertise in fields such as IT, health and energy. Moreover, NRW is a lucrative market for investors linked with its population size, geographic location, purchasing power and the presence of international companies. This article will explore in more depth what NRW has to offer for investors and start-ups.
Start-Ups in NRW at a Glance
Currently, 1,636 Start-ups are listed as members of the NRW Startup Ecosystem, an initiative and a network, where start-ups can easily be found by investors and a collaboration with the various digital hubs across NRW is enabled. In a nutshell, it is estimated that every fifth start-up was founded in NRW with the largest sectors including InsurTech, AI, IoT, Industry 4.0, Gaming and HealthTech. In a Germany-wide comparison, it was found that NRW hosts the largest number of start-ups followed by Baden-Wuerttemberg and Bavaria. Being home to very well-known start-ups such as Trivago, a hotel metasearch website, the start-up scene in NRW has built a solid reputation and attracts numerous young visionaries and entrepreneurs.
According to the 2020 NRW Start-up Monitor, in the first two quarters of 2020 and during the COVID-19-crisis, the number of start-ups in NRW increased by 15.6%, which amounts to a share of 19.7% of all start-ups in Germany. Thereby, common characteristics of entrepreneurs and visionaries were found to be their young age and diverse backgrounds. Unsurprisingly, most start-ups in NRW are still in their initial phase and younger than 10 years. Especially, because the regional start-up ecosystem is very active, whereby universities possess a further networking and advisory role, there are also a few challenges when it comes to founding a start-up in NRW.
Challenges for Start-Ups in NRW
While the NRW Startup Ecosystem might offer a suitable and free platform to gain publicity as a start-up, it lists only 39 investors for the 1,636 registered start-ups. Similarly, although many universities, such as the RWTH Aachen offer assistance with founding a start-up, the educational background of 85.2 % of founders relates to business/economics, engineering, informatics/mathematics and natural sciences. While the latter might resonate with a need for more experts from STEM fields, these developments could also indicate that the start-up scene in NRW is less open to founders from other fields.
For start-up centres at universities in NRW the latter could mean that there is a need to offer training to professionals from other fields to optimally take their know-how on board. Especially, because various disciplines will undergo a transformation in the upcoming years such training could be useful if combined with efforts to increase the collaboration between start-ups and SMEs for optimal funding. Currently, only 22.5% of start-ups in NRW were satisfied with the access to capital and only 26% were happy about their international networking efforts and success.
While the NRW Start-up Stipend (NRW Gründerstipendium) is one of the rather well-known financing tools for start-ups in the region, it only supports a limited number of start-ups. Formal application criteria state that up to a maximum of three applicants can receive funding for a non-listed microenterprise, which is younger than one year and has not yet distributed any profits to its shareholders through the NRW Gründerstipendium. The latter being said, due to the increasing number of start-ups in NRW, there might be a need to both diversify funding and training opportunities such as incubator programs.
Specifically, because exit strategies constitute another major challenge for NRWs start-ups, alternative legal service providers (ALSPs) could become important cooperational partners in the NRW start-up scene. Since ALSPs offer their expertise and legal services digitally at a more affordable cost than traditional law firms, they might optimally cater the needs of young founders. Moreover, NewLaw and LegalTech themselves constitute fields, which could attract founders from the legal domain and neighbouring fields.
Exploring NRW’s Start-Up Cities
Having emphasized that NRW is both a region, which offers many benefits to founders and investors, and a region crowded with innovative start-ups who seek long-term funding opportunities, the following short portraits of the three major start-up cities in NRW will serve to inspire founders and investors alike.
- Out of 10 cities in NRW, Cologne was ranked highest with its number of registered start-ups within the NRW Startup Ecosystem amounting to 382. Beyond that, start-ups in Cologne might benefit from the presence of international companies. Among 10,000 international companies in Cologne are for instance the AMB Generali Insurance Group, UPS and RTL Television.
- Since the most prominent industries in Cologne are the automotive and chemical industries followed by the engineering industry, the metal-processing and metal-producing industries, and the food industry, start-ups could contribute specific value to NRW’s business scene by diversifying regional production and services.
- With 83% of all employees in Cologne working in the service sector, the digitalization of services through start-ups could lead to the creation of further employment opportunities provided that start-ups received sustainable funding to increase their size, for instance, through the cooperation with SMEs or local municipal governments.
- Similar to other cities, founders can apply to the NRW Start-up Stipend (NRW Gründerstipendium) in Cologne, which restarted their bi-monthly roundtable in August 2021. Beyond, CologneInvest, Capnamic Ventures, ColoniaPrivateEquity and STS Ventures are among the many investors in Cologne. Thereby, the digitalhub cologne does not only connect start-ups and investors, but also gives an overview of existing networks for start-ups such as the Gateway Accelerator at the University of Cologne.
- Düsseldorf is not only the state capital of NRW, but was also ranked second-highest by the NRW Startup Ecosystem with the number of registered start-ups amounting to 336. Next to a large presence of international companies in Düsseldorf, which is regarded as one of the major business centres in Europe, 45,000 companies are located in Düsseldorf’s urban area.
- Similar to Cologne, Düsseldorf possesses proximity to multiple international airports and border regions. Its most important sectors are the advertising-, telecommunications- and fashion industries. Moreover, Düsseldorf was listed first for leading the consulting industry in Germany.
- While the digihub Düsseldorf Rheinland offers start-ups a connection with at least 150 investors and 25 co-operational partners, its grants amount to 1,350,000 euros. Having admitted 60 start-up teams out of 500 to its accelerator, start-ups benefit from extensive strategizing before submitting their application.
- Support can, among others, be obtained through the Center for Entrepreneurship Düsseldorf (CEDUS) at the Heinrich Heine University. Both, through their speedback sessions and their more extensive support programme In-Cube-Bator strategies can be worked on and presented to investors.
- Through its closeness to scientific excellence centres such as the RWTH Aachen University and the Research Centre Jülich (FZJ)Aachen offers an inspiring and lucrative location for start-ups and investors. By the NRW Startup Ecosystem it was ranked third with 162 start-ups being located in Aachen.
- Even more so than Cologne and Düsseldorf, Aachen is located at the borders between Germany, Belgium, The Netherlands and France. With some of the most prominent sectors being the food-, engineering-, paper-, chemical-, metal-producing-and metal-processing industries, the region Aachen achieved an export share of 42.4 % in 2020 and a total turnover of 17.9 billion euros.
- Next to the considerate strength of the services sector in Aachen, the working environment for start-ups in the digitalHUB Aachen, which is located in the digitalChurch, speaks for the city’s involvement in the innovation and digitalization of services.
- Start-ups in the digitalChurch do not only profit from co-working spaces and a direct connection to other start-ups, but also from the regular offer of workshops by and events in the digitalHUB. With both, the RWTH Aachen University and the FH Aachen – University of Applied Sciences offering incubation or coaching programs, Aachen offers a small-scale start-up community with many interconnections.
Whether you are an entrepreneur or an investor with an interest in the NRW region, our team can help you with the (next) big scale-or start-up by providing you with advice regarding the choice of the right legal form, questions about intellectual property protection, advice on equity investments and partnerships. Thereby, our pool of legal experts is competent in the fields of international cooperation and will do its best to support you in bringing innovation to the NRW region.
Contact Centurion Plus today for an initial consultation.