Insolvency harms German digitalization effort

German politicians, economists, business leader – all know: Germany is struggling in the (not so) new digital environment. There are many reasons and many symptoms. In this post I am focusing on ‘brain drain’ and insolvency and how the two are connected.

Start-Ups to the rescue

A healthy digital industry requires, above all else, innovation. Innovation appears to happen in Start-Ups – companies that have been founded around an idea, they are typically small, young (both the company and it’s people) and have flat hierarchies. Start-Ups need highly innovative, smart, experienced and dedicated employees, especially developers (software engineers), product strategists, designers and analysts. These experts are rare and Germany continues to loose a large amount of them to places like Silicon Valley.

Why do experts leave Germany?

According to the Statistisches Bundesamt (Office of Statistics) 46% of German companies are struggling to fill IT vacancies.

It’s simple economics: supply and demand. These experts are in high demand, and there simply aren’t enough to satisfy this demand. Germany probably produces a good healthy number of them, with it’s free, high quality education system. But despite attractive employment laws, German companies fail to get and keep IT experts while tech companies abroad lure them away with the promise of: exciting and innovative work, great pay, and the typical ‘work hard and play hard’ ethic.

In face, the pay is so attractive, that potential employees oversee the lack of health-care, vacation time, sick leave, family support, etc… But young creative types, are less interested in security, so the big bucks and the sheer nature of the work they are hired to do, is sufficient to lure them into Start-Up hubs like Silicon Valley.


Germany promises more to experienced experts

To compete, German companies not only have to offer comparable great remuneration packages, exciting work, a great work environment but also security. Demonstrating why this ‘safe’ life in Germany is attractive. As a former Silicon Valley expert, who returned to Germany, I now value the 28 days vacation, sick leave, the health care system and a better work life balance. Life in Germany is more promising for more senior experts, who have already experienced the mad flash of excitement present in many Start-Ups (and know that it often ends in frustration or chaos), who have families and care about education, child-care, health-care and job security so they can fulfill their obligations.

It stands to reason, that the German Start-ups employee base is typically older, more experienced and with a young family. Most of my colleagues in the US were single and between 20 and 28, while most of my colleagues in Germany are between 28 and 38 and have a young child or two. All my colleagues on both sides of the big water, value innovative projects and exciting work. But, my colleagues in Germany also really value life/work balance and job security, while for my colleagues in the US, a fun office, participation in international conferences, BBQs/Sushi, etc… was more important.

Germany is in fact, very well equipped to attract and keep experts. Or is it?

High Risk

As we all know, Start-Ups have to take on high risk and failure is frequent and not necessarily considered the worst possible outcome. Most Start-Ups fail. So a country that desperately needs to attract experts, and where one of the major attractions is security, must manage failure better!


My last employer in Germany, Auctionata – a tech start-up in the Art and Luxury auction market, recently underwent insolvency. In and by itself, this is not unusual or shocking because it was one of the high-risk Start-Ups: huge potential but also high risk. As highly sought after IT experts, we should have simply been able to move on. However, the insolvency proceedings, they way it was managed and the treatment the experts experienced by the state laws, off-sets the one advantage Germany can offer (security) and consequently damages  digitalization and innovation efforts.

Many Start-Up employees are foreign and were enticed to move to Germany for their job at the Start-Up. They moved their families, pulled kids out of schools, learned a new language, moved house-holds and in turn, they expect a more secure life in Germany. Many of my colleagues, were bound by a 3 month notice period and were consequently not able to ‘hop on’ a new career opportunity when things start looking bad. Yet, they can be (and were) ‘set free’ by their employer during insolvency proceedings, without so much as a day’s notice! And here is the biggest problem: if they haven’t yet paid into the German unemployment insurance for at least 12 months: they are now faced with applying for social welfare (Hartz 4) – which is by no means guaranteed and which doesn’t come close to their earning potential.

Many readers may now think, that this is a luxury problem. But my point is not that this is a grave social injustice, my point is that if we fail be an attractive place for foreign IT experts to live and work, we will not be able to staff the companies that the economy relies on.

Sure, there are hundreds of employers eager to employ these experts, but the point of moving to Germany was not to rush into a new, insecure or unattractive employment. After all, these experts rightly expect to have a choice and to match their skills and interest in their chosen jobs. And because this process takes time, and since they have NO INCOME during that time, they are now highly likely to leave the country. And so the ‘Brain Drain’ continues.

Another opportunity missed, Germany!


3 thoughts on “Insolvency harms German digitalization effort

  1. Pingback: Nightmare in Berlin: What happens when the startup you work for goes broke? | HEUREKA magazine

  2. Pingback: Nightmare in Berlin: What happens when the startup you work for goes broke? | Startup Tips By Darrel

  3. Christine Coester

    Hi, my name is Christine Coester and I am an editor at The Heureka, an online magazine that looks at startups and startup culture. A colleague of mine via Gründerszene showed me your blog and said you might be interested in being interviewed.

    Would you please shoot me an email and we can discuss a bit more over the phone.

    Wishing you a wonderful Tuesday,


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