Blog // Digitalization

need more founders & start-ups?

The CDU, CSU and SPD decided in the coalition agreement to pass a venture capital act. Their intention is to improve the conditions for raising risk capital, which is needed by start-ups especially in the growth phase. However, the finance minister doubts whether it really is possible to stimulate the underdeveloped start-up sector with tax measures. But that doesn't mean the issues are resolved, says Jens Spahn (CDU), Parliamentary State Secretary at the Federal Finance Ministry.

Following Spahn´s statement the Finance Ministry is now negotiating with the EU Commission tax privileges for start-ups where losses are carried forward. “We need an above-board state aid solution. The idea is that where there is a change of equity interest in young companies we should get the benefit of losses carried forward as an incentive for risk capital investors. We are determined to limit this to start-ups."1

Mrs Nahles wants to force all self-employed people into the state pension scheme because they themselves don't want to make provision for old age which means that the state has to finance them.

How can we make sense of this contradictory political discourse?

The facts:

In the USA start-ups have approximately 3 times more risk capital than in Germany. At the same time the start-up rate in the USA is declining despite the Silicon Valley hype.2 And yet in Germany the number of self-employed people doubled between 1999 and 2015 (668,000 to 1,309.000).3

The acclaimed authors on the subject of the digital economy, McAfee and Brynjolfsson, explain that making work flexible is the key factor for success in managing digitalisation. They say more creativity would mean that co-operation between people and machines would create more value. However, they criticise the decline of entrepreneurial dynamism and flexibility in all economies.

Whilst there is ongoing discussion in Germany about digitalisation being impeded by a lack of venture capital, Germans have been having a rethink for a long time and are becoming independent. This requires courage, the willingness to take risks and in particular good skills. Because these missions will go wrong in the absence of good products and offers for the market. Companies are desperately seeking creative, self-confident and highly motivated people who are willing to accept risk and with whom they can manage the digital revolution. However, many members of this rare species feel the urge to become self-employed. In our current book we explain what makes this group of knowledge workers so successful.4 They are eager to learn and good at networking. And they don't need a lobby for this.

The debate started by Wolfgang Schäuble is of fundamental importance. We don't need a clientele policy for founders even though this is demanded by start-up associations, which are springing up everywhere. Politics should be limited to developing the digital infrastructure in Germany. What we really need is faster digital networks. People have been organising for a long time and become independent. Self-employed people and civil servants always come top in analyses of the most financially successful social groups. In the next few rungs below them we find employees, depending on their qualifications. What Mrs Nahles is planning relates to approximately 300,000 self-employed people who actually earn less than €8.50 per hour. However, this group on this scale existed already before 1999. No one in the political world was worried about that.

The reason why self-employed people are to be forced into the state pension scheme at the present time is that approximately 1 million self-employed people are earning well and are supposed to safeguard the pension scheme in the long term. The future strength of the digital German economy will include a broad group of well-qualified self-employed people who are self-organised and who don't need any handouts from the state. And what they really don't need is political nannies with flimsy arguments.


Literature:

1 http://www.finanznachrichten.de/nachrichten-2016-05/37293626-schaeuble-blockiert-gesetz-zur-foerderung-von-risikokapital-003.htm

2 McAfee and Brynjolfsson, Harvard Business Manager, 9/2015

3 brand eins, May 2016. p.70, Freie Kräfte

4 Geschwill, Roland & Nieswandt, Martina, Laterales Management, Das Erfolgsprinzip für Unternehmen im digitalen Zeitalter, Springer 2016 (The Principle of Success for Entrepreneurs in the Digital Age)