Digital location North Rhine-Westphalia: Business opportunities for international startups

North Rhine-Westphalia (NRW), Germany's most important economic region, offers young companies optimal conditions for growth. Many of them have already expanded successfully, because NRW offers plenty of room for investment and innovation, explains Felix Neugart, Managing Director of the state-owned foreign trade promotion company NRW.Global Business.

Mr. Neugart, why is North Rhine-Westphalia particularly interesting as a business location for international startups?

Felix Neugart: You have to think of NRW as the economic heart of Germany and an international hub. The region is not only the economically strongest of all the German states with a GDP share of more than 20 percent, but also the No. 1 investment location for foreign companies. Around 20,000 foreign companies have settled in our region. They benefit not only from the ideally connected location in the center of Europe, but also from an innovative, future-oriented environment. NRW plays a key role in Germany's digital transformation. We combine traditional industrial structures with a strong ICT sector. It is precisely these interfaces between classic industry and innovative IT solutions that offer the best conditions for the digitization of production and logistics processes, for example. This results in exciting prospects for international companies from the digital economy.

It sounds as if international startups in particular have opportunities in North Rhine-Westphalia. How do you assess that?

Felix Neugart: Absolutely, NRW offers excellent market opportunities for young companies with innovative technologies. For one thing, no other location in Europe can reach so many people in such a short distance: More than 160 million people live within a radius of 500 km around the state capital of Düsseldorf. On the other hand, the state's high density of industrial and trade trading companies, the state offers numerous B2B customers and cooperation partners. With more than 700,000 SMEs, it is not only home to a strong entrepreneurial middle class, but also to more than a third of the 50 companies with the highest sales in Germany. For SMEs in particular, digital transformation is naturally a top priority. Our NRW companies benefit from the know-how that international startups bring to the state.

What are the general conditions for startups in North Rhine-Westphalia?

Felix Neugart: International startups are in good hands here. The state has a dynamic startup scene; by now, every fifth German startup comes from NRW. In addition to customer proximity, they particularly appreciate the considerable potential of skilled workers. 68 universities in the state educate around 770,000 students. This talent pool has been growing constantly for years - an important location advantage for startups as well. They also find a dense support network here: accelerators such as Startplatz, xdeck or Startport provide support with mentoring, workspaces and qualification measures. Five regional DWNRW hubs and players such as Digital Hub Cologne, Founders Foundation or garage33 connect startups with SMEs and large industrial companies. DigitalHub.Logistics in Dortmund and InsurLab Germany in Cologne also have a targeted industry focus here. The big players in our economy are also active themselves: Metro, T-Mobile, Vodafone, Evonik and eon, for example, run accelerator and cooperation programs to invest in innovative business models. For community building and, above all, for contact with investors, there are various matchmaking platforms such as startups.nrw or Matchmaker Ruhr. In addition, numerous events bring the scene together, such as the world's largest trade fair for digital marketing dmexco or events such as Pirate Summit, StartupCon, RuhrSummit, Digital Demo Day or Hinterland of Things. Another important contact is the startup association NRWalley, which also supports international startups in entering important networks.

How does NRW.Global Business support startups in implementing their international expansion?

Felix Neugart: NRW.Global Business supports startups with their plans and projects to locate or grow in NRW. As a state-owned company for the promotion of foreign trade, we support the companies throughout the entire process as a confidential contact for all project-related issues. Even during the analysis and planning phase, we provide them with our expertise and a proven network of contacts from business, science, politics and administration. This ensures a good start in NRW.

The Indo-German Chamber of Commerce (AHK India) participates as one among other German Chambers of Commerce Abroad at the Start.up! Germany Tour 2021 by acquiring and selecting promising startups from India to participate in this year's Start.up! Germany Tour.

In this interview we talked with Mrs. Chaitra Dole, Manager for Outbound Services from the Indo-German Chamber of Commerce (IGCC) about the startup ecosystem in India and their role as AHK in the ecosystem. As part of the business advisory team, she is the Startup Lead and is assisting Indian companies with their trade and investments into Germany.

Chaitra Dole, Manager Outbound Services, Indo-German Chamber of Commerce.

Dear Chaitra, please describe your role as AHK in the ecosystem and establish the link to Germany.

Given our long standing experience, IGCC plays an important role in connecting the new economy with the old economy. There are several initiatives in the Indo-German start-up space, and IGCC is playing a key role in fostering cross-border start-up ecosystems. We are partners to initiatives like GINSEP and AsiaBerlin.

We are building close rapport with members and Corporates in India and Germany to understand their innovation requirements and accordingly assist them further to scout for relevant start-ups / new age technologies. We can provide market information and insights to startups, assessing market entry opportunities and accordingly establishing a value proposition. We can connect them with corporates and suitable business partners for conducting pilots and / or offering products and solutions. 

Together with industry mentors and experts, we can offer guidance and coaching to startups on scaling up and developing sales strategy in the respective markets, customising and improving their pitch decks for local markets. We can also provide information on custom duties, taxation and protection of intellectual property. 

Present your startup ecosystem. What distinguishes it? What are its special features?

The ecosystem was barely notable a decade ago, but has now caught up and, according to common parameters such as the number of 'unicorns', investment volume, number of startups or jobs created by startups, is in third place worldwide behind China and the USA. There are currently 12,500 start-ups in the country, out of which 1,600+ start-ups were added in 2020. The ecosystem has witnessed a y-o-y growth of 8-10% between 2015-2020. The total number of unicorns is 59 as of August 2021, there are 300+ active institutional investors and 520+ incubators and accelerators active in India.

Taj Mahal monument – (c) Unsplash

The most mature and largest sectors include EnterpriseTech Solutions, FinTech, HealthTech and Retail & RetailTech. Besides, there is an increased use of DeepTech. The startups in India are currently still concentrated in three hubs: Bangalore, Delhi and Mumbai, but the growth of the industry is broad-based and other cities can develop into hubs in the medium to long term. The evolution of the start-up ecosystem in the past few years can be attributed to factors like government support – Start-up India campaign, availability of funding, pool of talent, increased use of internet amongst others. Also, more and more entrepreneurs who have already successfully developed their own ventures are promoting the growth of other startups with new ideas or in the form of financial support.

Where do you see developments and potential?

Verticals like Enterprise Tech, HealthTech, FinTech, EdTech and RetailTech have contributed to the growth in 2020. The pandemic has disrupted the economy, but it has also accelerated the growth in digital services and sectors like EdTech. The ecosystem offers opportunities in various other sectors for technologies like AI, Blockchain, AR/VR, Robotics, IoT and Big Data and India offers a large tech-savvy talent pool to keep up with newest technologies. Other segments such as infrastructure and logistics have been traditionally lagging in international comparison, and local startups are supporting overcoming these challenges and elevating the industries to global standards. Indian start-ups offer innovative solutions that can also be applied globally. In India, there is an unprecedented surge in demand among consumers for health and term life insurance, and the convenience of buying insurance through an app make InsurTech one of the most promising sectors in India.

In your opinion, what makes the German market interesting for Indian startups?

Germany lies in the heart of Europe and can be a springboard for the entire continent. There is already a strong partnership between Germany and India for developing sophisticated technology and engineering. Great infrastructure, stable and robust economy and ease of doing business are some of the other factors that make German market attractive for Indian start-ups.

What were your reasons for participating in the Start.up! Germany Tour?

We had enriching and positive experiences with the previous editions of Start.up! Germany Tour. The tour gives our start-ups the opportunity to get to know various German cities, learn more about the start-up ecosystem and connecting with various stakeholders.

How could you improve the market entry for specifically Indian startups?

By establishing the network as first crucial step, by advising on product-market fit and by supporting and building connections with corporates and German SMEs.

This year, the Ministry of Economic Affairs, Innovation, Digitalization and Energy of the State of North Rhine-Westphalia is one of our main partners of the Start.up! Germany Tour 2021. We are happy to share with you a warm welcome and greetings from our Minister of Economic Affairs, Innovation, Digitalization and Energy of the State North Rhine-Westphalia Prof. Dr. Andreas Pinkwart.

"Dear Ladies and Gentlemen, dear Entrepreneurs all around the world. Entrepreneurship is of high relevance on a global scale. Innovations can emerge around the world and entrepreneurs may use global markets to sell their products or offer their services.

With the Start.up! Germany Tour we want to provide visibility and financial support to promising international new business endeavors. We offer price money worth of 15.000 Euros in total to the top three startups of this tour.

Together with the network of the national and international chambers of commerce as well as NRW.GLOBAL Business as main partner and Germany Trade and Invest, we are jointly organizing this year’s Start.up! Germany Tour. This format has been successful since 2017. Last year more than 120 startups from 30 countries participated in our virtual Start.up! Germany Tour.

Today is the kickoff of this years tour with many exciting followup events to come, such as the ruhrSUMMIT in June or the Digital Demo Day in September. We are proud that participants of close to 40 countries worldwide will be pitching their ideas in the following weeks. We look forward to inviting the top 15 startups to Germany to show you our entrepreneurial ecosystem and connect you with our key players. Here in the state of North-Rhine-Westphalia, we have a highly supportive entrepreneurial ecosystem with numerous stakeholders who coach emerging startups, such as our five digihubs or our 75 STARTERCENTER NRW.

Also we offer new enterprises, who are selecting our state as main location for their business activities, a welcoming package of up to 3.000 Euros. We want to encourage you to join our Start.up! Germany Tour, pitch your ideas and grow your businesses on an international scale.

A warm welcome, here in North-Rhine-Westphalia."