What Founders and Investors Can Expect from the New German Government

ABOUT THIS EPISODE

The Subject Matter Expert

Tara is a political analyst from PANALIS. PANALIS is Germany’s and likely also Europe’s No 1 software tool for policy analysis for associations and industry groups. You can find the interview with the two founders dating to April 2019 on our blog post here: www.medium.com/startuprad-io

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First 100 days

All governments have 100 days before the press hikes up their scrutiny. Since Mr. Scholz was sworn in on December 8th, 2021 as the 9th chancellor of Germany, the first 100 days will be over on March 18th, 2022. So we took the opportunity to have a look at what is potentially on the cards for

The interview was recorded before the outbreak of hostilities in Ukraine, so there is no mention. We focus on what to expect from the German Government in very broad terms. Note that the current situation, with Ukraine and Corona, may totally derail the coalition contract, which is what we discuss right now. But for now, we can only discuss what we know. So let’s dive in.

Welcome to start up bread that I own, your podcast and Youtube blog covering the German startup scene with News, interviews and live evins. Hello and welcome everybody. This is Joe from start operator. I owe your startup podcast and you to block from Germany, again bringing you a subject better expert interview as a frequently this interview is sponsored by start up Raven, the easiest way for startups to find investors and corporation partners, meaning corporates. Go down here in the show notes or go to DUB DUB DUB START UP RAVEN DOT UM. This time I have Kara here, who is a political analyst. I'll solve pretty soon why she is here, but first I would like to welcome her. Hey hiding, hi, Joe, I'm happy to be here. Hoddly, my pleasure. We have to tell that you are an employee and political analyst of the company called Panalis. That has been a guest of startup writer, I owe in the past, so I'll link the interview with you two bosses down here in the show notes. The reason why you are here is that it on March eighteen, the one hundred days of the new coalition of the all of Charles government are over and that's usually time the press takes off the gloves and looks back what they've achieved. And we thought we take this my stone the first one hundred days and have a look into what is going on in the German political system relevant to the startups. But first let us...

...talk a little bit about what the German parliamentary system is. Yes, sure, so, it's always good to look at a political system of Germany before doing an analysis. So first of all, Germany is a federal republic and a parliamentary democracy and, like in any democracy, the power always stems from the people. So the German people alect the representatives and the Germans are able to participate in two elections, one every five years and one every four years. Every five years to people can elect the state parliaments, which then elect the state governments, which thens and delegates to the socalled woundscrat. The BUDDESSCRAT is one of the German legislative bodies and and in the Bundess Krat every state of Germany is represented and has a say in matter of like a slations and stuff like that. and well, it's something like the US Senate. So basically that's where the state have their voice. But compared to the US, it's not like two senators from each state, but well, it's kind of proportional, yeah, representation of the state. So the biggest states have more representatives in the Bundess Harat, and it differs to the Senate because it's not like a second chamber, it's its own constitutional body. So that you have to keep in mind when talking about the German Bundeskrat. And well, it's main tasks include approving and vetoing active legislation to that, which also means that they don't bring forward any bills. They just have to decide what Bundestag,...

...the German parliament, did, and they can say thumbs up, thumbs down, or a guys, let's do it again. Yes, exactly. That's how it works. So it's the Bundesstag that actually comes up with the bills and the act of legislation, and the German people are able to vote for the Bondestag every four years in the parliamentary elections, and currently that the bonus tack consists of seven hundred and thirty six members and it was just very recently elected in September two thousand and twenty one. And Yeah, it's main tasks include electing the Federal Chancellor of Germany and well, as we already said, the lawmaking, as it is the main body of legislation. Exactly on on December, eight day elected all of Chow so that means not like in the US, you directly die or elect the chancellor. We learned from from our past mistakes and now you first have to elect the politicians, who are hopefully a little bit senior than the public, and they have to elect the chancellor. That brings us a little bit to the electoral system. I would I think we could spend like a complete podcast just on this, but let's cut it short and say you have two votes. One of them is like proportionately for the party you elect, and the second one is, like for the direct candidate of your county, your electoral area, housing core, probably in English by Chuy's. Oh, what's it called? I just know it's the plurality vote. Here, election a district. Yeah, electoral district exactly.

Yeah, yeah, now that we have figured that out. So basically, and if you get more direct candidates through the district, you get more mandates meaning the the the Bundestag is growing. But we won't get into this topic because it's a little bit strange. It's hard to understand. Plus there are steady initiatives to limit that and it may change over time. Yeah, it's really complicated. You're right about that. What might be good to know is about the five percent turtle. You have to get into the bondest tack as a party. So it's quite difficult. If your party doesn't get a total of five percent of all of the votes, your party might not at all be admitted into the Bondesstack, which makes it quite difficult for just one party to get the absolute majority of votes. So usually a coalition of parties is needed to form the government. And speaking about parties, we do you have the okay, now they're kind of come a lot of names, abbreviations, three letter acronyms, Tlas, but just take it. will explain a little bit. But basically that means the political parties. The SPD, its middle left, I would say. You may remember. You shoulda all of charts. They're from SPD. Then the FDP, the Liberals. They have the vice chancellor, Christian Lindna, who may play a role later on. The Green Party, obvious reason for the name, CDU SSU. It's Middle Right, I would say. You may remember hand would call and at La mercle...

...chancellors by them, the AFD, the very right wing party, and the Linka, the left in the Bundestaga. Think we have them now all sorted out, at least mentioned here. Yes, I think so too. So those are the most important parties right now, and I guess that's it. Don't don't get US wrong. They're like a Sillian, more parties around here, but they're the one currently presents. Plus SPD, FDP and the Greens are forming a coalition government. So they wrote a big contract. That is what we want to do and that's why we are talking here right yes, exactly. So this coalition paper, it took quite some time to be debated about, and this coalition of Parties is actually quite major, because I don't think it has been like this before. So SPD with FTP is just kind of historical for Germany. But yes, they did come up with some really good ideas. You do have to talk about that. Yes, exactly. Plus, we may add, for the time frame. So the election was going on on September twenty six, and if you have in mind that all of shows was elected chancellor on December eight, you can guess that they have been negotiating for almost two and a half months there to found a coalition government. So there's a lot of thought that went into that. We also linked the coalition contract two thousand and Twenty One till two thousand and twenty five here in the in the show notes, or if you're consuming this on some mobile device, that will be linked to our blog post and they will be linked...

...to the PDF. But please keep in mind it's German only. That said, you are here today because you can tell us a lot about the German parties and their position on startups. And we're talking about here what we were referred to as the coalition government, as we said, SPD, FDP and the Greens, or just the chat's government. Yes, exactly. That is kind of my job at Panalis. I do political analysis and I've taken really good look at the positions of the call coalition government and the coalition contract and their position to startups and start up politics in general. Great and what did you fight for us? So I guess it's really good to start prior to the parliamentary elections, because if you take a look at the election programs of the governing parties, you kind of see that, well, contrary to the beliefs, they did have very similar ideas and approaches in terms of startup politics. So I think it would be of more value to kind of highlighted differences between the parties, and you have to say, they there are really not that many differences. So, starting with D SPD as well, the former party of the working class, you can say that they're really big on creating jobs and, of course, making Germany like leading startup location, as well as highlighting the importance of diversity and social justice for startups. And with that...

...they wanted to try to create a culture of second chances, so meaning that people who try to create startups that failed well get a second chance and going in that direction. But as well as supporting women or companies of common interest, social interests and FTP. Well, one thing that stands out with the FTP is their ambition to create the socalled Deutsche transkiag and mind shaft in English, German transferer community, as an institution, a self governing institution, supporting technology and social innovations that is supposed to be a connection point for universities and businesses. And also, this differs quite a lot from the other points, is they wanted to create digital freedom zones where startups could work in peace, with fewer rage regulations from the government and so on. And then, of course we have the Greens, who really well, of course, keeping up with the environmental aspect of the party, wanted to support the ecological aspect of start up politics with funding of green text with building up the ecological potential of technologies, but also, and with this kind of keeping in frame with the SPD reducing disadvantages. But here they also took a closer look at supporting people...

...with the migration background and they also wanted to stand in for and well kind of also like an innovation agency with by the name of D Nova. So yeah, those are the major points that differ from the other points of the parties. But in general you can say they do have quite a lot in common. And I also have a common day coalition contract. So what they are planning for the next five years until the next general election? How was wondering what is in the part of the coalition contract that may concern to startups. Yeah, so there are some major points, some major focus points, about start up politics in the coalition contract, and one thing that stands out is the supporting of pioneering business fields. So with modernization and well, everything that has to come for the future, the new government of course wants to support business businesses like artificial intelligence or feels, with quantum technology, cyber security, robotics, hydrogen, everything that has to do with the ecological aspect, like sustainable mobility, bioeconomy or circular economy. So that's a big, big topic for the coalition. But also planned for the next year's are so called one stop shops, and these are supposed to be sort of contact points for...

...startups, for startup advice, for general support, for help in matters of registration, with the intention to minimize minimize, sorry, bureroxcy and the the real aim is to kind of make it possible for startups to be a will to found a start up within twenty four hours. So that is a really ambitious and we'll have to see how that works out because currently, well, founding a startup takes many months. And Yeah, that's twenty four hours. That's it's really ambitious and then we also have yet may tell our audience that basically you have to go to notary. Either get the standard contract or like a individualized contract prepared by a notary or lawyer, and then you go to the notary. There's an official act. You'll read it to all the co founders, the complete contract. If you have a really complex company, you may want to bring snacks. Usually, if there's a big contract, there will be some some sect German sparkling wine around and then you can sit there, sometimes for hours and listen to the notary when he reads everything, everybody understands, then everybody signs and then it goes to the public registry, and then at the public registry you also have to wait for quite some time and then at one point you get an invoice because you have been registered. But personal experience that can take somewhere between one, two three month, depending on...

...where you are right now. Meaning there are some the public rigid street are always part of the local court, depending if they're very busy, plus if people are on vacation, and there has been a specific situation during the times of Corona. I'm sure they could not work full power there. So it was a little bit specific for me, but it took two, two three months just for me to set up the companies here. Yeah, so that's one thing that new coalition definitely wants to change. So, yeah, making that process faster than it is right now. But also with coming back to the point of social justice. This is the thing that all parties really seem to want to change, is the support for women in start up politics, as well as people with the migration background, but also supporting social startups, and this they want to achieve with special scholarships or funding programs especially for females, or making a special quota for females in investment committees, things like that, just to kind of make everything a little bit more equal, because if you look at the quota right now for women in a start and startup field, it's really quite low, at fifteen to sixteen percent, I think. So, yeah, a lot can be done here. And also they want to are the new government wants to give startups better access, for to data and for research results to enable new innovative business models and social innovations, because,...

I mean, you have to keep up with the times, and did just that. Digitization, I'm sorry, and modernization are really coming in the floor right now, so you have to keep up with that. And then, of course, finance is always a big plus. When you're working with artificial intelligence machine learning, you need a lot of data and if you just make up data, your ai never learns the right thing. So that's basically we need a lot of data, the more the better. Sorry for the interruption. Go ahead, no problem. So, as I was saying, also finance is also a big topic and which is also really important for both sides. So the new government wants to mobilize private capital for financing and they want to use institutional investors like insurance companies or the pension funds to be able to create better funding for startups, because if you just well think about it, there's just a lot of money sitting there in these insurance pots that could be used for well, start up funding, for example. And then also connecting to the financing topic, is the KFW. The KF W is the Germans state owned investment and Development Bank and the coalition wants to thrend, strengthen and develop the KF w. So they kind of want to make the kvew...

...the important innovation and Investment Agency in Germany. It is already quite important. You have to say that as well, but make it even more important and well, give it more money to be able to create more funds. Yeah, and then a last point we may add for our audience that KFW is really a big organization. That means they're most of what they're doing is dishing out loans, very low interest loans, for many, many different things. So basically, if you're building a house, you do low energy, you put some solar power on top of it, you can get a little low interest loan from them. If you are form of buying a big tractor, you contact KFW. Businesses can specialized can get specialized loans, export financing. Germany has a very large export, export driven industry. All that stuff is done either by KFW or another bank within this group. So they're very important in many, many different aspects. Go ahead, yes, exactly. Then I wanted to add, as a last point, the relevance of the government, because the government has decided to step in as a contracting authority even more and increase the access to public tenders so at once, to make it especially for startups that go in the direction of the government agenda and, like you do, tech startups must make it possible for them to, yeah, get Jo jobs and, well, get funding from the government directly. So those...

...are really the points that stand out with the coalition contract in terms of startup politics. And that is basically and that is basically the guidelines around oh which what they are planning like that the bigger picture. And do we already see some initiatives? For example, we had the person in charge of the ten billion startup program here in an interview. Is this going to continue? Yes, of course, so that's not something that will just be forgotten overnight or however ridden. The startup program of the former government will of course still be intact, also referred to as the future fund, and the new government plans on just further developing it because it's a really great initiative. And, for example, the new government wants to reserve parts of the Future Fund specifically for female founders. So there are some ideas and place for the ten billion startup program but it has startups or whatever. So startups well and have to fear any fundamental changes. It will still be there. The money will still be there for funding with I was wondering. There have been also some rumors of a French and German initiative in the European Union to invest in startups. There was an article on the semiconductor investments the European Union wants to do in order to produce Sim contactors in the Europe again, they should also be some money...

...earmarked for startups. Plus, the Vice Chancellor and Finance Minister, Linna, also wanted to set some money aside for startups. Can you talk a little bit about that? And of course not all of this is final, so we're talking about potential scenarios here. Mostly. Yes, there is an well will, let's say, in the Ministry of Finance and to contribute one billion dollars to the socalled European tech and champions initiative. And Yeah, this is the European Tech Champions Initiative as a Pan European initiative to fund scale ups. So yeah, there's a going to be if this all really is going to set you set in place ten to twenty funds from I think it's sixteen European countries for scale ups in later stages. So I think that's really great that all these European countries want to come together and contribute to well scale ups, which are also really important for the startup industry. Yes, there has been some complaints about like the chain of financing. So very early on you start with the own money, then come the business angus, then come the early stage fund and at one point you are considered to be scale up. So unique, bigger money, more serious money, and they used to be out. There still is potential gap and that's what they're trying to fix here. Yeah, exactly. o Kay, now that we talked such a lot about...

...politics, bottom line is there is there is program to have ten billion invested in startups. There is an additional political will to invest one billion more in the European Tech Initiative. Plus there is some interest to make startups foundable within twenty four hours. Did I forget anything? Import Coodn't here? No, I don't think so. Maybe that new government also wants to found a new agency and create a new law specifically for yeah, so called Bureaucracy Relief Act, which is to well fasten or develop the reduction of bureaucracy in politics. And this new agency. Is that what the FTP and the Greens wanted? So in agency and institution that is independent and kind of brings together universities and research to be used for startups, for creating business ideas and so that none of the ideas or anything will just go to waste. So these are some of the plans that the new government has and time will show how this new law, this new agency and generally the will for the politics to take a step ahead with the startups will actually, yeah, set be set an action...

...for everybody who doesn't understand this idea of an agency, we may just highlight that MP three was actually invented in Germany, but the big money was made outside of Germany, and Germany wants to keep investing in basic research to turn up, hopefully, stuff like MP three again, but then want to also commercialize it within the country. Yeah, exactly. Well, Kara, thank you very much. There was a very small trip into what is politically going on in Jimmy, what to expect from the next government and really hopefully we'll have you back in some time and talk about what the guys, meaning the coalition government, actually realized here. Yes, it was really a pleasure talking about politics, taking a look at the new government, at the coalition contract, and kind of seeing that expectations of startups were really met in the coalition contract. But of course there is still much to do. But that's just how politics work. And Yeah, as I said, time will show what will actually be changed and how startups can profit from the politics. Well Up, great, thank you very much, with pleasure having as guests. Have a good day. Thank you you too. Bye, bye, bye. That's all. The folks find more news streams, events and interviews at wwwgs start up, bread, DOC Hio. Remember Sherry is carry.

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