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ENTREPRENEUR

‘German startup founders in general are much more extroverted’

New data based on social science tests reveal that Berlin and Munich founders are similar in that they are more open, creative and extroverted than founders elsewhere across the globe. But they have a few differences too.

'German startup founders in general are much more extroverted'
Photo of team members at a startup: Deposit Photos.

In the study by Founder Institute which looked at data from over 100 cities worldwide, Berlin founders ranked fifth in the world for their openness, trailing behind entrepreneurs in Denver (fourth), Rome (third), Tel Aviv (second) and Athens (first).

Based on data collected from founders in Munich and Berlin, the findings also show that German entrepreneurs are generally more open than their counterparts in Silicon Valley, the rest of Europe and across the globe.

READ ALSO: Berlin v. San Francisco: Which is better for startups?

“The more international or more liberal the city, the higher the openness and creativity,” co-founder of the Founder Institute, Jonathan Greechan, told The Local in a phone interview.

But it goes even deeper than that, says Greechan, who describes openness as a “big five personality trait” that involves creativity in addition to people who are “open to new experiences, who challenge norms and are more likely to take risks.”

Image: Founder Institute.

According to Greechan, a strong correlation exists between one's openness and entrepreneurial success.

The idea of developing a social science test that people could take to evaluate whether they have the potential to become strong entrepreneurs or not dates back to 2006. Back then, Greechan started conducting research on the topic with his now co-founder, Adeo Ressi, after having a hard time finding the right people to hire for their startup.

Since the Founder Institute – which describes itself as an idea-stage accelerator and startup launch program – kicked off in 2009, the results of 30,000 people from all over the world who have taken the test have been analyzed, including over 600 entrepreneurs in the capital city of Germany and the capital of Bavaria.

Having collected years of data, the team at the institute have used the results to determine traits they believe make a successful entrepreneur, regardless of one's locale, idea or demographic.

German entrepreneurs are also among the world’s most extroverted, according to the findings. The institute has found that extroverted people generally display high energy, assertiveness, and sociability; in these areas, too, Berlin and Munich founders displayed higher extroversion compared to their counterparts in Silicon Valley and the rest of the world.

“German founders and European founders in general are much more extroverted,” said Greechen.

“Definitely German founders are good at selling and compared to the rest of Europe, they are more hardworking,” he added, emphasizing that conscientiousness is another big five trait they have tested that aims to determine someone’s industriousness and ability to get things done.

Image: Founder Institute.

But one area in which German entrepreneurs fared lower in comparison to founders across the globe was agreeableness, one of the major traits the institute believes makes a good entrepreneur.

Berlin and Munich entrepreneurs showed lower than average agreeableness, a trait the institute says manifests itself in individual behavioural characteristics that are perceived as kind, sympathetic, cooperative, etc.

Greechan warns though that while agreeableness has to do with friendliness,“if you’re more agreeable that’s not generally a good thing; you want to be somewhere in the middle.”

And while Berlin founders have many similarities with Munich founders, they differ from them too.

The data show that entrepreneurs in Berlin are more creative than their Munich counterparts, something which Greechan speculates is because “Berlin is sort of an artsy city.”

But while Berlin founders have also shown they are more hard-working and extroverted than Munich founders, entrepreneurs in the capital city of Bavaria on the other hand are more agreeable, emotionally stable and have higher fluid intelligence.

Fluid intelligence describes one’s ability to learn and apply a rule set quickly in order to solve problems; it correlates positively with entrepreneurial success, says Greechan. Traits like emotional instability, conversely, correlate negatively.

For members

WORKING IN GERMANY

EXPLAINED: The legal steps for starting a business in Germany

Whether it's a small start-up or a much bigger venture, there's obviously legal steps to bear in mind when starting up a for-profit business in Germany.

EXPLAINED: The legal steps for starting a business in Germany

Starting up a for-profit company in Germany follows different procedures than either forming a non-profit foundation (a Verein) or registering as self-employed.

If you need to register as a corporation, the first step is to figure out which of two general company types your venture would fall into in Germany. The first is a Gesellschaft mit beschränkter Haftung (GmbH), which is a limited liability company. This is by far the most common option. Another is an Aktiengesellschaft (AG) – or a joint stock company or corporation. While these two tend to be the most common, there are a few others as well.

EXPLAINED: How to start up your own verein in Germany

Setting up a GmbH

A GmbH is very common in Germany – and under it shareholders in the company aren’t personally responsible for the firms debts. You can set up a GmbH with only one person or shareholder. If you have more than one, you’ll need to draw up a notarised agreement between them.

A GmbH must also appoint at least one Managing Director (Geschäftsführer). The Managing Director is allowed to have shares in the company and is entitled to represent the company legally, whereas other board members are ordinarily not able to.

Shares in a GmbH are ordinarily only represented in notarised documents. There are no certificates which confirm that you have shares and those shares cannot be listed on stock exchanges. Shares, however, can be transferred through notarised documents.

The minimum start-up capital needed to form a GmbH in Germany is €25,000. If founders don’t have this, they can start up as an Unternehmergesellschaft – or entrepreneurial company – for €1. However, these are considered as vehicles to get to the financial capital of a GmbH. As such, UG’s are expected to set aside at least 25 percent of any annual surplus as savings. Once they hit the €25,000 mark, they need to change to a GmbH.

A GmbH is generally the most common type of corporation in Germany because the capital and administrative requirements tend to be less onerous – making it suited for small enterprises, for example. As soon as a GmbH enters the Commercial Register (Handelsregister), it legally exists as a company.

READ ALSO: Everything you need to know about becoming a freelancer in Germany

Grounding an AG

A German AG is a company at a different level – and tends to be more for mid-sized to larger-sized business ventures.

In contrast to a GmbH – which needs only one member – an AG needs to have a minimum of five members.

The capital requirements are also twice as much as for setting up a GmbH. You’ll need €50,000 for an AG. These shares can be listed on stock exchanges – although they don’t have to be.

Choosing which legal model of company for your business in Germany depends on its size, your available capital – and how much liability you’re comfortable with. Photo: Getty Images

You’ll need articles of association, authenticated by a notary, to set one up too. As with a GmbH, an AG legally exists when it enters the commercial register.

An AG must also have a managing board (Vorstand). Members are officers of the company and make its day-to-day decisions. They do, however, answer to a supervisory board (Aufsichtsrat). They must also hold general meetings (Hauptversammlungen) to allow for shareholders to exercise control over overall policy.

READ ALSO: What’s the outlook for the German job market in 2024?

Other types of German companies

In general, GmbH and AG companies are the most common ones you’re going to see in Germany. But other – mostly more complex models – exist.

These include an Offene Handelsgesellschaft (OHG), or General Partnership. This would often be for a company of two partners who had each contributed half the capital. They would share in half the profits but also each be liable for the firm’s debts – to an unlimited amount. You may find that certain family-run businesses use this model. The risk here is that the partners would be personally liable – down to their own assets – for the firms debts.

A variation of this is a Kommanditgesellschaft (KG) – or a limited partnership. This happens when one partner is entirely liable for the firms debts – down to their personal assets, while the other one is not. The limited liability partner would still be liable for the firm’s debts up to and including the amount they had invested in the company itself though. This model might be common for family-owned businesses that bring in outside experts to run day-to-day administration – for example.

Another complex arrangement is a combination of a GmbH and a KG – to a GmbH & Co. KG. Essentially this joins a GmbH and a KG together in a partnership agreement. While very complex and not often used, this kind of partnership may serve as a way to limit the recourse a company creditor has to go after a company member’s personal assets – with more liabilities tied up in the GmbH, which has limited liability.

More complex arrangements are available too for companies that want to have a presence in Germany but their head office might be abroad. These include a subsidiary (Töchtergesellschaft) and Zweigniederlassung – or a branch office. If you’re dealing with these kinds of entities, it’s recommended you seek tax and compliance advice to confirm which one is necessary. In general though, a subsidiary will manage many of its own affairs apart from its parent company. A branch office is likely to have only a small presence in Germany while the bulk of administrative tasks are handled elsewhere.

Knowing which one is applicable is important as it helps establish whether you need to make an entry in the commercial register or not – and what taxes will have to be paid.

Articles in The Local are not meant to replace professional legal or tax advice. We recommend speaking to an appropriated professional in case of further questions.

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