Michael Jackson’s Post

Do they know about the batshit crazy German exit tax rule? https://www.linkedin.com/posts/sabbirahmmed_this-is-why-germany-is-a-land-of-bureaucrats-activity-7348460444904247296-velo

There are indeed founders choosing to start their companies elsewhere unfortunately, but I don't think this is due to lack of capital. There is a lot of early stage capital here in the ecosystem and most late stage capital anyways comes from the US and from my experience they don't care where you are based - as long as the company performs of course. I'm glad we started Personio on Germany and I would do it all over again. Access to capital was never an issue. The biggest challenge is experienced talent but that will also improve as the European ecosystem continues to grow. 🇪🇺

I visited Germany quite often in the last year. My impression was actually that the start-up / scale-up community there was more supported than in the Netherlands and that there was more capital available, also because the large corporates are more active with VC funding and there seems to be more cooperation between corporates and start-ups there. Which in the Netherlands is very low.

The German Mittelstand ecosystem was always the envy of the UK. Family owned specialized hi tech businesses formed long term partnerships with local banks with patient capital...industrial electronics being a particular strength. However bad you think it is in Germany, at least you're starting from that position of strength! To me the answer for Germany and the UK is to turn your citizens' pension funds into a sovereign wealth fund for innovation. In the UK our citizens put £28Bn per year into defined contribution funds, and get generous tax breaks for doing so. But most of that money ends up abroad, much of it in passive index funds. Why don't we mandate that 20% of that has to go into funding for domestic SME innovation and growth... or you don't get the tax breaks.

Yikes. – When the next-door German HNWI self-declared Angel investor asks you for collateral on their 20k pre-seed check, you know it's time to run. LOL.

True! I had EU investors approach us over a million dollars and act as if it was a gargantuan investment. At the same time every conversation we had in the US was for up to $100 million and more.

Absolutely agree, Michael. Founders often feel they have to leave Germany early, before much value has been built. Or worse, they never start here at all. One of the biggest blockers is Germany’s exit tax and the “dry income” trap. If a founder owns just 1% or more and moves abroad, even without selling, they can be taxed as if they did. The tax is based on a notional valuation (often 13.75× earnings), and the bill can easily reach six figures. This kind of structural friction makes long-term, global company building from Germany incredibly hard and it’s one reason more founders are quietly choosing to build elsewhere. My co-founders and I are going through exactly this challenge right now and it’s every bit as frustrating as it sounds.

So where are they planning to go to have easier access to capital?!? (I would leave Germany to anywhere just to avoid the notaries but thats not the issue here ;)

Scary! Terrifying! And not surprising at all! And their governmebt doesn't even tax them on unrealised gains, as our current government in Norway does! If we don't change course, Europe is doomed!

There’s plenty of money in Germany, but insurance companies are largely not allowed to invest in startups. Mr. Merz addressed this in his campaign for chancellor and planned to give insurance companies more freedom with regard to venture capital. However, in his coalition government, this topic isn’t being talked about any more. Probably, the Social Democrats are opposing this.