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A closer look : Why Munich is becoming an important startup hub

Munich - a unique location for startups

About 440 startups in Munich have received funding in the last decade and support from German corporations, government. Bigger companies supply talent and capital for startup which early users need in order to invest on their product. Sometimes startups are acquired by the big Munich corporations after they grow.

Some of Munich’s world-famous manufacturing companies help out startups in various ways: BMW has a 500 million Euro venture fund and operates a startup garage which gives startups direct access to BMW experts. And Siemens has a 1 billion Euro fund. Moreover, Munich hosts offices for 100 Fortune 500 companies including IBM, Amazon, Google, Microsoft and Intel. Public Universities and Research Centers like TUM and the Ludwig-Maximilian-University provide a consistent talent pool of engineers and data scientists. The engineering talent from TUM s concentrated in fields such as sensors, Lidar, mobility, Internet of Things, and 3D-printing.
Apart of that Munich hosts a handful of startups — including Fitness App Freeletics, Smart Sensor Solutions supplier Konux, E-scooters maker UNU Motors, intelligent headphone maker Bragi, and sports data analyst Kinexon.
At different stages Startups need different kinds of capital bootstrapping, founder financing, or friends and family money to get a business model, Angel capital to win customers in a specific market segment, and venture capital to expand globally and broaden the product line. Experienced investors and executives in a region can form mentor networks that help companies and talented professionals tackle pressing challenges. At the corporate level, such mentoring includes help with strategic vision, acquisitions, raising capital, performance monitoring, organization design, culture, hiring and firing, product development, and getting customers and partners.
The question is whether enough Munich founders have experienced successful exits to create a deep pool of startup mentors. But given the high pay and benefits that would go to someone working for BMW or Siemens, it is hard to see why a local graduate would take the risk of starting a company in a place with such great, stable local employers. Moreover, Munich has a certain risk aversion for pure entrepreneurship though the involvement of companies like BMW — seeking to make open innovation work — is a promising middle ground. Perhaps if one of its startups, such as Celonis, achieves a successful exit, Munich families will begin urging their children to become entrepreneurs. And that change in values could help Munich boost its attractiveness to top entrepreneurs. To create a nurturing environment for startups, it helps a region tremendously when leading companies are willing to cooperate. With the emergence of Silicon Schwabing, Munich laid the  foundation for a vibrant startup scene. With global players such as IBM, Microsoft, General Electrics and Siemens, a whole range of important digitization companies have settled in Schwabing during the last years. In addition to already established large corporations such as the Allianz, BMW, BSH, Siemens, and EON, they create an environment that offers ideal opportunities for startups. Especially for those who work in areas such as AI, app development or automation.
Without risk capital barely anything happens in the startup scene – not even in Munich. However, things in Germany have changed a lot over the last years. For example, investments in German startups increased by more than 30% in 2016 alone – a trend that has continued in the years to come. And even the German industrial giants have long recognized the signs of the times, and are becoming increasingly active. Munich-based companies such as BMW and BSH recently increased their ventures significantly. Last but not least, geographically close startups in Munich also benefit from this development.
A healthy startup scene is important for the economy as a whole, the district of Munich has recently distinguished itself by clever investments in the startup-business. In recent years, the companies involved the district in four technology and incubator centers. The goal hereby is primarily to create jobs and retain skilled workers. And startups are an important employer for this profession. These technology and incubators focus primarily on digitization, smart cities, encryption technologies and the development of video games. App developers are in high demand in Munich.
by Massimiliano Marzo , 3 january 2019