Where funding leaves gaps

Older founders and succession

Gap

Older people rarely start businesses.³ At the same time, more and more owners are looking for a successor, and KfW sees a “succession gap” that is widening as the baby boomers retire.¹⁴

Cause

There aren’t enough successors: 69 per cent of SMEs see finding a suitable candidate as an obstacle.¹⁴ When older people do start a business, they take over an existing one less often than younger people.¹⁵ Yet professional and industry experience makes starting a business more likely.¹⁶

Consequence

For the first time, more owners plan to close their business than to hand it on.¹⁷ KfW recommends making successful takeovers more visible and providing better information on how to finance them.¹⁵

11%

of new businesses in 2025 were started by people aged 50 to 64. The average founder was 34.2 years old.^{3KfW-Gründungsmonitor 2026, KfW Research, 2025.}

Over 54

was the average age of SME owners in 2025. In 2003 it was 45.^{17Nachfolge-Monitoring Mittelstand 2025: Pläne für Geschäftsaufgaben wachsen erneut – Kaufpreisvorstellungen deutlich gestiegen, KfW Research, Fokus Volkswirtschaft Nr. 526, Michael Schwartz, 2025.}

545,000

SMEs said in 2025 that they wanted to find a successor by the end of 2029, about 109,000 a year. 569,000 owners planned not to carry on their business by then.^{17Nachfolge-Monitoring Mittelstand 2025: Pläne für Geschäftsaufgaben wachsen erneut – Kaufpreisvorstellungen deutlich gestiegen, KfW Research, Fokus Volkswirtschaft Nr. 526, Michael Schwartz, 2025.}

10%

of new businesses in 2025 were takeovers of an existing firm, roughly the long-term average. Another 4 per cent were active stakes.^{3KfW-Gründungsmonitor 2026, KfW Research, 2025.}

Regions

Gap

Far more businesses are started in cities than in the countryside, and fewer in the east than in the west.^16,18

Cause

Above all, cities have more people with what makes starting a business more likely: professional and industry experience, a high level of formal education, an above-average income. But the place matters too: big cities offer more business services, more workers and bigger markets.¹⁶

Consequence

Anyone who wants to start a business in the countryside has less of that environment. The GEM recommends investing in schools, universities and further training there too, and keeping or bringing back people who are more likely to start a business.¹⁶

13.2%

of 18 to 64-year-olds in Berlin were starting a business or running a young one in 2020 to 2024. In Saarland it was 3.7 per cent, and all five eastern states outside Berlin were among the six with the lowest rates.^{18Wo in Deutschland wird am meisten gegründet?, RKW Kompetenzzentrum und Thünen-Institut für Innovation und Wertschöpfung in ländlichen Räumen, Pressemitteilung vom 3. Juli 2025 mit der Tabelle „GEM-Gründungsquote in den 16 deutschen Bundesländern“, 2020–2024.}

7.5%

was the early-stage entrepreneurship rate in urban areas from 2015 to 2024, against 5.4 per cent in rural ones.^{16Global Entrepreneurship Monitor: Unternehmensgründungen im weltweiten Vergleich – Länderbericht Deutschland 2024/25, RKW Kompetenzzentrum, in Kooperation mit dem Thünen-Institut, 2024.}

Growing after the start

Gap

For large funding rounds, German startups increasingly depend on capital from abroad.⁸

Cause

Domestic funds are often too small to take part in rounds of that size.⁸ The European Commission sees two funding gaps: at the early stage and later, when a company scales up.⁶

Consequence

When a startup like that goes public or is sold, much of the value it creates moves to the US.⁸

39%

of the money invested in German startups up to September 2026 came from US investors, as much as at the peak of the 2021 boom. German investors put in 23 per cent, European ones 28 per cent.^{8Deutscher Startup Monitor 2026, Startup-Verband, Alexander Hirschfeld, Jannis Gilde und Vanusch Walk, 2026.}