In the first half of 2024, Germany saw a record 160 start-ups declare bankruptcy, highlighting the challenges faced by young companies in a difficult economic environment.
In the first half of 2024, Germany experienced an unprecedented number of start-up bankruptcies. A total of 160 start-ups declared insolvency, as determined exclusively for the Handelsblatt by the data service Startupdetector. This represents a 14% increase compared to the first six months of the previous year and an astounding 88% increase compared to the same period in 2022.
The financial difficulties faced by start-ups can be attributed to persistently high interest rates, the challenging economic situation in Germany, and the reluctance of many investors to provide funding.
Comparison with overall economic impact
Despite the rise in bankruptcies, the start-up sector performed better than the broader economy, where the increase in bankruptcies was even more significant. According to an analysis by the restructuring consultancy Falkensteg, 162 companies with over 10 million euros in revenue faced financial difficulties in the first half of the year—a 41% increase compared to the previous year. Among the notable companies that went bankrupt were travel operator FTI, department store chain Galeria, and fashion company Esprit.
Notable start-up bankruptcies
Among the start-ups that declared insolvency between January and June in Germany were the moving company Movinga, the fintech Elinvar, and the medication delivery service Mayd. Felix Engelmann, co-founder and managing director of Startupdetector, commented, “The difficult economic situation and cautious investments particularly affect start-ups focused on rapid growth.” Currently, the most bankruptcies are occurring in the pandemic boom sectors of e-commerce and food, while the largest sector, software, is hardly affected.
Movinga stands out due to its high-profile investors, having raised almost $100 million in venture capital. The company has a turbulent history and was taken over in 2015 by the Hexal founders Andreas and Thomas Strüngmann. A little over a year ago, the British competitor Shift acquired the Berlin-based company, but even this could not prevent its downfall. Currently, the website is no longer accessible.
Pandemic-driven sectors hit hard
Another casualty from a pandemic-boosted sector is the now-insolvent pharmacy delivery service Mayd, funded by venture capitalists such as Earlybird, Target Global, and 468 Capital. Daniel Breitinger, the start-up representative of the industry association Bitkom, pointed out that start-ups have a different genesis than other companies: “Failure is part of the process.” Such companies start with an idea of how a problem might be solved and must later determine if there is a market for their product or service.
“This does not always succeed and is also dependent on external factors such as competitors or general economic conditions,” Breitinger explained. These factors are a concern for many founders: according to a Bitkom study, about one in ten start-ups currently fears bankruptcy in the coming twelve months due to economic developments.
Signs of recovery and optimism
Despite the negative trends, there are also positive signs. According to the data service Pitchbook, the phase of declining company valuations and decreasing funding is slowly ending in the start-up sector worldwide.
This view is supported by the latest figures from the consulting firm EY, which showed that investments in young companies in Germany increased by 12% in the first half of 2024 compared to the same period the previous year, reaching approximately 3.4 billion euros. This was the third-highest amount for a first half-year since 2015. In contrast, investments had significantly decreased in the comparable periods of 2022 and 2023. Notably, the capital was distributed among fewer start-ups, with the number of financing rounds decreasing by 87 to 367 deals.
Increase in new start-ups
Another indication of a potential recovery in the start-up sector is the increase in new start-ups. The number of new companies founded in the first half of 2024 rose by 15% compared to the second half of 2023, according to a survey by the Start-up Association in collaboration with Startupdetector. From January to June, almost 1,400 new companies were registered.
Many founders are undeterred by failure and are willing to try again. Kai Kuljurgis, who founded Coindex, a robo-advisor for cryptocurrencies, saw his company go bankrupt but is now working on new plans. “There is a saying, ‘Once a founder, always a founder,’ and I believe there is some truth to it, even for me,” he said.
