KfW Analysis: Term ‘Start-Up’ Becoming Broadly Applied in Germany, Extending Beyond Traditional Definitions

KfW Analysis: Term ‘Start-Up’ Becoming Broadly Applied in Germany, Extending Beyond Traditional Definitions

(IN BRIEF) In Germany, a significant portion of business founders, including freelancers and sole traders, describe their ventures as start-ups, a term that has become increasingly broad in its usage. While traditional definitions of a start-up, such as those outlined by the KfW Entrepreneurship Monitor, apply only to newly founded, innovative, growth-oriented businesses, many entrepreneurs, including those who take over existing companies, self-identify as leading start-ups. The rising media attention since 2010 has contributed to this shift in how the term is used, with mentions of “start-up” surging dramatically in the press.

(PRESS RELEASE) FRANKFURT, 20-Jan-2024 — /EuropaWire/ — The use of the term “start-up” has become increasingly widespread, especially in Germany, where 27% of founders describe their business as a start-up—far surpassing the narrower definitions typically associated with the term. According to the KfW Entrepreneurship Monitor, only 6% of newly established companies align with the common characteristics of a start-up, a figure echoed by other sources that place start-ups in the single digits.

A recent analysis by KfW Research also reveals that 28% of entrepreneurs who took over an existing business consider it a start-up, though the traditional definition typically excludes such businesses. Moreover, 16% of freelancers and 23% of sole traders self-identify as leading a start-up, even though these categories are generally not classified as start-ups. While no official definition exists, from an industry and policy standpoint, a start-up is generally understood to be a young, innovative, and growth-driven company.

Dr. Georg Metzger, economist at KfW Research, noted that the term “start-up” has evolved over the past decade, becoming increasingly ambiguous and less precise. He suggested that the growing media focus on start-ups may have contributed to the broader use of the term. Before 2010, references to start-ups in the media averaged around 2,000 to 3,000 mentions per year, mostly in trade publications. However, by 2019, mentions of “start-up” in the press surged to nearly 30,000.

Media Contact:

Ms. Nina Luttmer
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nina.luttmer@kfw.de

SOURCE: KfW Entwicklungsbank GmbH