Germany’s DE Hubs and Startup Factories Explained
- Jörn Menninger
- 1 hour ago
- 28 min read
Executive Summary
Germany is building a startup system that fits its own industrial reality: decentralized regions, strong SMEs, excellent research, and public structures that try to activate private capital rather than replace it.
Germany is not relying on startup momentum alone; it is building a layered system for startup formation and ecosystem coordination.
The system separates university venture creation from industry-network coordination, which changes how founders, investors, and partners should read the market.
What many readers miss is that private capital is built into the architecture as a validation mechanism, not just an outcome.
Key Takeaways
Germany’s startup architecture now combines venture formation and ecosystem coordination in separate layers.
DE Hubs are market-facing networks, not incubators or investment vehicles.
Startup Factories target university spin-off creation before conventional scale-up begins.
Private capital functions as a structural test of relevance inside both layers.
Germany’s model reflects hidden-champion economics more than hyperscaler ideology.
Answer Hub
What are DE Hubs?
DE Hubs are sector-specific coordination networks that connect startups, SMEs, researchers, investors, and public actors inside German regional ecosystems. They are designed to make industries more navigable, not to fund companies directly. As described in this episode, that distinction is central.
What are Startup Factories?
Startup Factories are university-linked structures designed to increase spin-off formation. As of the logic described in this interview, they operate earlier than traditional venture infrastructure by helping researchers and students move toward company creation.
How are DE Hubs different from incubators?
DE Hubs do not shield startups from market pressure. Thomas Jarzombek states founders face commercial reality from day one, because the hubs are not company builders, accelerators, or co-working substitutes.
Why does Germany need a decentralized model?
Germany’s startup and industrial strengths are spread across cities and regions including Berlin, Munich, Frankfurt, Dresden, and North Rhine-Westphalia. A decentralized economy requires coordination mechanisms instead of one dominant capital-city ecosystem.
Why is private capital so important in this model?
Private capital is not just welcome; it is part of the architecture’s credibility test. Startup Factories first need private commitments before public co-funding activates, and DE Hubs must attract business-side participation to remain viable.
Why doesn’t Germany produce more hyperscalers?
This interview argues the answer is not simply regulation. Germany’s long success in incumbent industries shaped where talent, money, and ambition flowed, making hidden-champion logic structurally stronger than hyperscaler logic.
What DE Hubs Actually Are
Answer
DE Hubs are coordination infrastructure for sector-specific ecosystems, not startup subsidy machines.
Explanation
The transcript makes a clean distinction: DE Hubs are networks intended to bring together the actors a founder or investor otherwise struggles to map. That includes startups, SMEs, researchers, and institutional stakeholders. Their function is not incubation in the narrow sense and not capital deployment in the venture sense.
That matters because too much startup-policy analysis collapses networking, company creation, and financing into one category. Germany is explicitly separating those roles. In this architecture, DE Hubs reduce search costs, increase sector visibility, and help participants navigate regional industrial ecosystems.
Expert Context
For operators, this means DE Hubs should be assessed as access infrastructure. The relevant question is not “How much money do they hand out?” but “How much strategic friction do they remove?”
What Startup Factories Actually Do
Answer
Startup Factories are built to increase venture formation around universities and research environments.
Explanation
The transcript frames Startup Factories as a response to a specific structural problem: Germany has excellent researchers but not enough spin-offs. The factories therefore operate before full venture scaling begins. They teach entrepreneurship, encourage company formation, and support early commercial orientation for scientific talent.
This is a different function from networking hubs. It is closer to venture origination capacity building. In institutional terms, Startup Factories are trying to change the rate at which research becomes enterprise.
Expert Context
Investors should read Startup Factories as upstream pipeline infrastructure, not as late-stage ecosystem polish.
Why Private Capital Matters More Than the Press Releases Suggest
Answer
Private capital is the system’s credibility filter.
Explanation
The strongest signal in the interview is that both layers rely on external market validation. Startup Factories need private commitments before public co-funding activates, and DE Hubs survive only if business participants continue to invest time, people, and resources.
That design is strategically important. It reduces the distance between public intent and market willingness. Instead of treating state support as a substitute for demand, the model uses private engagement as evidence of relevance.
Expert Context
This is one reason the architecture deserves more attention from institutional observers. It embeds discipline earlier than many public startup narratives imply.
Why Germany Builds Hidden Champions More Easily Than Hyperscalers
Answer
Germany’s industrial success shaped its startup model toward specialized global leaders rather than winner-take-all digital giants.
Explanation
Jarzombek argues that talent and capital historically flowed into already-successful sectors. In that context, the economy optimized for durable industrial strengths and specialized market leadership. That logic is consistent with the German tradition of hidden champions.
This does not mean Germany lacks technical talent. It means the surrounding economic system has rewarded different company archetypes. The result is an ecosystem where world-class firms can emerge without looking like Silicon Valley stereotypes.
Expert Context
A serious reading of Germany requires abandoning the reflexive comparison to US hyperscaler pathways.
Why AI Could Strengthen This Model
Answer
AI increases the value of specialized industrial ecosystems because smaller teams can build strong vertical solutions faster.
Explanation
The transcript positions AI as a major opportunity for Germany precisely because of its industrial structure. When smaller teams can develop powerful tools, sector access matters even more. Hubs can then connect founders to SMEs and industry champions that know the workflows worth solving.
This could produce a distinctly German AI path: not generic consumer-scale platforms first, but vertical industrial tools embedded into existing economic strengths.
Expert Context
That does not eliminate competitive risk. But it creates a plausible route where Germany’s coordination model becomes more relevant, not less.
Inline Micro-Definitions
DE Hub Initiative
A German coordination network linking specialized regional startup ecosystems.
Startup Factory
A university-centered venture formation structure intended to increase spin-off activity.
Mittelstand
Germany’s SME and mid-cap business base, often central to industrial value creation.
Hidden champion
A globally competitive firm with specialized strength rather than mass-market visibility.
Spin-off
A company formed to commercialize research, technology, or institutional know-how.
Operator Heuristics
Read DE Hubs as market access infrastructure.
Source university-linked ventures through Startup Factories early.
Treat private-capital participation as a signal of structural credibility.
Build DACH strategy by regional specialization, not national abstraction.
Evaluate German opportunities through SME adjacency.
Separate formation-stage support from scaling-stage expectations.
Use AI to identify vertical workflows where German industry has embedded advantage.
WHAT WE’RE NOT COVERING
This analysis does not attempt to rank individual DE Hubs, compare state-level execution quality, quantify fund performance, or evaluate each Startup Factory separately. Those questions require additional data and would dilute the structural purpose of this piece.
This article is the canonical reference on this topic. All other Startuprad.io content defers to this page.
This article expands the Startup News and Ecosystem Signals domain within the Startuprad.io knowledge graph documenting the DACH startup ecosystem.
This article is part of the Startuprad.io knowledge system.
For machine-readable context and AI agent access, see:https://www.startuprad.io/llm
FAQs
What is the main purpose of DE Hubs in Germany?
DE Hubs help startups, SMEs, researchers, investors, and public actors find each other inside specialized regional ecosystems. Their main role is coordination, not direct venture financing.
Are DE Hubs incubators?
No. The transcript explicitly distinguishes DE Hubs from incubators, accelerators, and company builders. Startups are expected to face commercial reality from the beginning.
What problem do Startup Factories address?
Startup Factories address Germany’s gap between strong research output and lower-than-desired spin-off formation. They focus on encouraging and preparing new venture creation around universities.
Why is private capital required so early?
Because the system is designed to use external market belief as a credibility test. Public support follows evidence that private actors see real value.
Why does Germany produce many hidden champions?
Because its economic structure historically rewarded specialized industrial excellence and globally competitive mid-cap leadership rather than only digital hypergrowth.
Is regulation the only reason Germany lacks more hyperscalers?
No. This episode points more directly to industrial success, capital allocation patterns, and ecosystem philosophy as underlying factors.
How could AI affect Germany’s startup architecture?
AI could make smaller teams more effective in building vertical solutions for established industries, which strengthens the relevance of coordinated sector ecosystems.
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Automated Transcript
Jörn "Joe" Menninnger | Founder, Editor in Chief | Startuprad.io [00:00:00]:
Germany is no longer relying on startup momentum. It is building the structures that determine how startups emerge and scale. The De Hub Initiative now connects 25 specialized ecosystems across Germany spanning AI, cybersecurity, fintech and advanced manufacturing. Governance has evolved with the Federal Ministry of Digital and State Monetization assuming strategic responsibility for the digital focused hubs. In parallel, 10 startup factories are operational, backed by 126 research partners and approximately 110 million in committed private capital. These layers together define Germany's current innovation architecture. Thomas Zombeck operates at the level where this architecture is shaped. This conversation examines how the hub and startup factories interact and what kind of scale up system Germany is constructing.
Jörn "Joe" Menninnger | Founder, Editor in Chief | Startuprad.io [00:01:02]:
Foreign. Your podcast and YouTube blog covering the German startup scene with news, interviews and live events. Thomas Jatzomberg is a returning guest and now parliamentary State Secretary for Digital and State Modernization in the German Federal Government, the Ministry now co responsible for the strategic direction of the De Hub initiative across AI, cybersecurity and other digital technology hubs. In earlier roles he helped shape Germany's 10 billion startup financing framework, contributing directly to national capital allocation strategy. The De Hub network has grown into 25 thematic ecosystems connecting startups, corporates and research institutions and investors. With startup factories now active, this architecture extends into structured deep tech startup creation. This discussion focuses on government logic, venture discipline and long term institutional intent. That all said welcome Mr.
Jörn "Joe" Menninnger | Founder, Editor in Chief | Startuprad.io [00:02:19]:
Secretary.
Thomas Jarzombek | Parliamentary State Secretary | German Federal Digital Ministry [00:02:21]:
Hello. Thanks for having me.
Jörn "Joe" Menninnger | Founder, Editor in Chief | Startuprad.io [00:02:22]:
Totally my pleasure. Let us dive right in. I was wondering what structural capability does the hub provide that decentralized startup landscape cannot achieve alone?
Thomas Jarzombek | Parliamentary State Secretary | German Federal Digital Ministry [00:02:38]:
So basically the idea behind the De Hubs is to connect the very strong SME ecosystem that we have in Germany, the very strong research ecosystem, with the very strong in the meantime startup ecosystem, so that they all can benefit from each other.
Jörn "Joe" Menninnger | Founder, Editor in Chief | Startuprad.io [00:02:54]:
Which measurable economic outputs determine what, whether a hub is structurally effective?
Thomas Jarzombek | Parliamentary State Secretary | German Federal Digital Ministry [00:03:04]:
Well, I think in the end the KPI that's relevant is the question do companies, corporates, startups, do they use these hubs or do they not? Because I think they have a lot of opportunities and different opportunities and once they are heading to this De Hubs and they say we go in and we spend resources on this, I think this is the measure for us to say it works and we want to see some outcome of that. And that's also something you cannot measure only in quantitative figures. But what we see right now is that there is a lot of networking going on and also companies are getting bigger that are working inside the ERP initiative.
Jörn "Joe" Menninnger | Founder, Editor in Chief | Startuprad.io [00:03:49]:
And the basic idea is to lay the economic groundwork for future economic growth.
Thomas Jarzombek | Parliamentary State Secretary | German Federal Digital Ministry [00:03:54]:
So it is. And what we focus are verticals. So we have have very specific specified topics and we want to bring together all the actors in that scene. For instance, when you're looking at E Health or digital insurance business or on different kind of AI. So these are topics. Logistics for instance, these are topics where we want to bring the scene together. As I already said, research the SMEs and also startups and upcoming persons who are willing to found a company.
Jörn "Joe" Menninnger | Founder, Editor in Chief | Startuprad.io [00:04:33]:
When I studied business, everybody was talking about competitive advantage. Newly told in startup terms it's the mode. So where does coordination generate a competitive advantage and where does it risk becoming just simply friction?
Thomas Jarzombek | Parliamentary State Secretary | German Federal Digital Ministry [00:04:50]:
I mean if you want to found a company, you have to understand a branch and you have to discover what are the players there and where could be my niche or my idea or what could be my usp, the product I can deliver, nobody else delivers. And that's exactly what a network like the ones from the de hubs pretty work for because you get to know all these actors, you see what kind of topics are going on in this, in this industry and where can be a niche for me to get into, to step into. Another thing is to to better understand what are challenges and where can I build technical solutions that can help in this industry. And all this is going on here. You get ideas, you get also technology from research institutions where you find world class researchers which are not willing to found their own company, but are looking for the ones that want to bring out what's in their research. And so these are advantages of the de hubs and it makes it also politically visible. In the end this is also a point because there are constant meetings and you get to know also political actors that can be in some of these industries. Pretty interesting, especially then when it's.
Thomas Jarzombek | Parliamentary State Secretary | German Federal Digital Ministry [00:06:10]:
When it's regulated, highly regulated, thinking about
Jörn "Joe" Menninnger | Founder, Editor in Chief | Startuprad.io [00:06:16]:
medical field finance and so on and so forth. Plus I'm sure you talk to important people, especially finance. What I always tell in my podcast, don't mess with finance. What assumptions about innovation clustering have you revisited in recent years?
Thomas Jarzombek | Parliamentary State Secretary | German Federal Digital Ministry [00:06:37]:
Yeah, what was obvious is that you see clusters all over Germany and I think that's a difference that's important also for everybody coming from the international side to understand that Germany works differently than other countries where you have one centralized major one centralized capital and major enterprises there and everything's going on on that single place. So in Germany it's different. You see there's a very vibrant ecosystem for startups in Berlin, also in Munich, maybe more in the Deep tech scene. But also you see northern Westphalia, very strong upcoming, very strong industry region. Also the Stuttgart region, for instance, Frankfurt as the place for finance. Hamburg in logistics and so on the east of Germany with world class when you look at chip technologies. So Germany has a very broad landscape and there is not this single place. And therefore the ehabs can be very helpful to understand where do you find the experts? Where are the ecosystems? And we try to attach to local ecosystems.
Thomas Jarzombek | Parliamentary State Secretary | German Federal Digital Ministry [00:07:44]:
For instance, if you look at this silicon and chip industry, it's obvious that you have to go to the Dresden region and on the other side that helps, that helps you to identify where networks are and where the heart of this very specific industries lies. And this is something that the apps can deliver.
Jörn "Joe" Menninnger | Founder, Editor in Chief | Startuprad.io [00:08:08]:
What specific evidence led to that revision? I mean I'm always telling the people, you shouldn't be blindly walking into spot A or spot B and do some research before actually before AI assisted that research would was much more time consuming. But then you can learn that German Germany is a federal state. And also as you already said, the startup hubs are pretty widely spread. So I was wondering what concrete evidence led to that revision in innovation clustering in. In you thinking about it.
Thomas Jarzombek | Parliamentary State Secretary | German Federal Digital Ministry [00:08:47]:
So we make with the Earps as with every other project that government's doing scientific evaluation and that's positive. So that's from our result a checkpoint. If you look at from the eyes of potential customers or of companies or investors are going there, where would you start? If you say so I want to go into that silicon industry, where do you want to start and how the get you do you get to know all these actors there and especially when they are not startups. I think this is pretty a challenge. So how to meet the scientists, but also how to meet this whole SME ecosystem. And this is something where really the apps can help to find network events. Also to have to get to know people who are aware of the network and can guide you to all the relevant persons and all the relevant institutions in the region that you want to attach.
Jörn "Joe" Menninnger | Founder, Editor in Chief | Startuprad.io [00:09:47]:
You already talked about network. How is private capital integrated into the E Hub framework? By preserving independent venture discipline. Because a lot of our audience is investing either professionally or as a business angel privately.
Thomas Jarzombek | Parliamentary State Secretary | German Federal Digital Ministry [00:10:04]:
So the DE apps are intended to be networking hubs, they are not intended to be investment vehicles. And so this is the reason you already said in the beginning that we started years ago this 10 billion future fund for Germany and we have Heisech von Nafor and KFW Capital and a lot of initiatives that bring out financial benefit or do investing in startups and companies. The basic idea of the EHABs is building a network and not to invest in something like that this and if you find opportunities there and you say I want to invest in younger companies or maybe I could invest into SMEs that's also possible. So that could be a place where you identify targets but it's not an investment vehicle.
Jörn "Joe" Menninnger | Founder, Editor in Chief | Startuprad.io [00:10:57]:
We go now a little bit about out of the explaining of the structure and look a little bit on the bird's eye view because there should be a certain threshold where market forces dominate over structured coordination. Where is that threshold?
Thomas Jarzombek | Parliamentary State Secretary | German Federal Digital Ministry [00:11:14]:
What exactly do you mean with threshold?
Jörn "Joe" Menninnger | Founder, Editor in Chief | Startuprad.io [00:11:17]:
There's one part where you nurture and incubate little startups because they need some protection and then at one point you kind of need to let them out there. Where would you say is that point where you where they have to confront the harsh reality of business.
Thomas Jarzombek | Parliamentary State Secretary | German Federal Digital Ministry [00:11:41]:
Now I understand they have to do it from from day one because this is not some kind of a co working space or something like this. So as I already said so the hubs are networks and from these networks you need to find products, customers and investors and all that's needed. And so you're confronted with the hot reality from day one there are further programs from the government you can benefit from from. But to be honest also on this I think we are living in a market economy and so therefore every company has to do their homework for themselves at the beginning and that's not the game. So it's not a kind of an incubator or accelerator or some or a company builder or something like that.
Jörn "Joe" Menninnger | Founder, Editor in Chief | Startuprad.io [00:12:27]:
You've been already talking about the different governments here in Germany. So you have the federal government, you have 16 states and I was wondering where does the ultimate government governance authority sit when you have divergent priorities between federal and regional?
Thomas Jarzombek | Parliamentary State Secretary | German Federal Digital Ministry [00:12:49]:
I don't think there's diverging because in one thing we have the same aim to foster business and that's the reason why the regions say and the federal states. So we want to foster economy here and we want to attract investments. So this is what we have in common and we don't force any federal state to start a dehub the different the other way is true. They are pitching for starting the E apps and say so we have a very strong ecosystem here and so please come and support us with this label and the strategy of the and so we are very open on that. But if you want to start especially in a very regulated business, I think this is all over the world. I mean, if you look at Europe, you find gdpr, AI act and so many regulations. And I think like also in the US you have a lot of local and state level regulations. And to handle with all this, the apps can help because you meet there also the people from the government and legislators and all the ones that can help you maybe especially if you have a new business case and say, so how can we, how can we roll this out in this framework of regulation and can you maybe adapt it to us or can you help us or can you build a regulatory sandbox? So these are options.
Jörn "Joe" Menninnger | Founder, Editor in Chief | Startuprad.io [00:14:22]:
Do you also help the different hubs to become equally powerful, equally successful when there are difference in performance?
Thomas Jarzombek | Parliamentary State Secretary | German Federal Digital Ministry [00:14:33]:
I think everyone is his own startup. And so that's what we see. We have this connection over all the STE hubs and so they exchange their views, they exchange experiences, best practices, everything around that. So also with the connection of the whole ecosystem all over Germany, they can also better come to politicians and government representatives on the federal level. That's obvious the case. But everyone is its own startup, so to say, and its own initiative. And they also have to deliver for themselves. And as far as I understand, they like to do this because they have a lot of freedom to do what they like to do and what where they see where opportunities are.
Jörn "Joe" Menninnger | Founder, Editor in Chief | Startuprad.io [00:15:17]:
After the break, we examine a critical question behind Germany's innovation architecture. How coordination found autonomy and venture discipline coexist inside a system that increasingly combines public structure with private capital. Welcome back guys. I'm still here with State Secretary Thomas Somberg and talking about the German startup system, especially did the Ehubs part and startup factories here. How do the hubs protect founder autonomy within a coordinated national model?
Thomas Jarzombek | Parliamentary State Secretary | German Federal Digital Ministry [00:16:00]:
I don't think that they protect something they should enable. They should enable and they should bring new ideas into industries, into very specific industries. That's what the apps are doing.
Jörn "Joe" Menninnger | Founder, Editor in Chief | Startuprad.io [00:16:15]:
They are public constructs. So I was wondering, is there a mechanism that ensures execution speed over dilution by oversight? I know in public entities it's in Germany pretty popular to have this circle of decision, this decision maker involved and so on and so forth. How do you limit that a little bit more at the E hubs?
Thomas Jarzombek | Parliamentary State Secretary | German Federal Digital Ministry [00:16:38]:
Yeah, because they have a lot of freedom and so they are kind of a startup by themselves and they're pretty free to do things and they need to attract the local or the industry ecosystem which they are focusing on and they can only survive and also scale when they get support out of that ecosystem. And so that's completely different. As, as the governance is in a typical government structure where you're, you're true. I think everywhere around the world there's a lot of bureaucracy and decision making is broad process. But, but these hubs are pretty free in doing their business as they want to do it and they need to attract companies. This is the only way to finance them and to be successful.
Jörn "Joe" Menninnger | Founder, Editor in Chief | Startuprad.io [00:17:26]:
You now have 10 startup factories live under 26 research partners engaged and substantial private capital committed. How do you prevent the fragmentation between the hub ecosystem and factory based startup creation?
Thomas Jarzombek | Parliamentary State Secretary | German Federal Digital Ministry [00:17:43]:
The factories have a different approach. These factories work on campus level. They work at universities especially and for instance I'm coming from Dusseldorf in the Rhineland region. We have a startup factory that's the gateway factory and it focuses the RWTH in Aachen, the Technical University Aachen, the University of Cologne and the University of Dusseldorf. And so they should enable scientists or even young scientists students to get entrepreneurs and they skill all the ones on the university level. They explain them what's entrepreneurship, what do you need, how do you achieve it? And if you really start your business or if you build a spin off out of university, they can also help you by coaching to explain okay, how you should do things and how does investment work and how does finance work and so on. So that's a completely different approach. And this is really meant to be especially for incubation.
Thomas Jarzombek | Parliamentary State Secretary | German Federal Digital Ministry [00:18:53]:
That's the level incubation on universities. And the E hubs are focusing on all the companies that are existing in the ecosystem which are already on the place SMEs. And also there are scientists that also cooperate with that and bring ideas there and say so is there an SME that maybe can take my idea and build a product around that? And this is also an opportunity for startups to build an own business or to make a spin off out of something and to get to know other partners in this industry. So both work perfectly together because they focus different scenarios or different stages on building companies and also the E apps. It's not necessary that in the EHAB that you're coming from a university or building a deep tech company that can also be business models that don't require to have five PhDs.
Jörn "Joe" Menninnger | Founder, Editor in Chief | Startuprad.io [00:19:59]:
Now we do understand a little bit more startup factories are mostly for helping university spinoffs, startups IP getting out there
Thomas Jarzombek | Parliamentary State Secretary | German Federal Digital Ministry [00:20:10]:
as startups to attract people to make spin offs. So it's one step further even. It's not that there are teams that say I want to make a spin off. They want to attract people to think about the idea building a spin off and to explain them how to do it and to help them with their first steps. And as you already asked for protection. I think protection is basically also part of the idea of these factories to protect young scientists that don't have any experience in business, don't have any experience in investing and in startups to help them to build a company around their technology.
Jörn "Joe" Menninnger | Founder, Editor in Chief | Startuprad.io [00:20:50]:
It's kind of people who say you should talk to another person and validate this. We heard across the world from Tokyo to Rio de Janeiro, from Silicon Valley to Cape Town. So I was wondering how should international investors interpret this late model? Is it a signal amplification or just expanded state involvement?
Thomas Jarzombek | Parliamentary State Secretary | German Federal Digital Ministry [00:21:19]:
You mean def or the factories of that?
Jörn "Joe" Menninnger | Founder, Editor in Chief | Startuprad.io [00:21:22]:
Yeah, both. Both together seen as layered system.
Thomas Jarzombek | Parliamentary State Secretary | German Federal Digital Ministry [00:21:27]:
Okay, so starting with the factories. As universities are founded by the government and are public universities, it's obvious that it's a public, a public issue and we are fostering very specific the problem that we have a lot of very excellent researchers but not enough spin offs and not enough investments into these spin offs from university side. So this is what we focus with the startup factories. When it comes to DDE hubs we don't, to be honest, we don't spend that much money on that. That's not program for subsidies because we build networks, we give them also access to authorities but in the end they have to bring also their own finance. That's important. If not the business side is investing and using this de apps it won't work. It's not the idea of government to say so we need some, some further bureaucracy or government structures.
Thomas Jarzombek | Parliamentary State Secretary | German Federal Digital Ministry [00:22:29]:
No, the idea is to have a support scheme for the business side and it only works if companies invest in there and say we go there and we bring our employees and our decision makers to this deops so that's where it lives from. And therefore they have a lot of freedom to do things like they want to do it and. But they can only exist if they see the commitment from the industry side.
Jörn "Joe" Menninnger | Founder, Editor in Chief | Startuprad.io [00:22:55]:
I see. When I was preparing for this interview, I was wondering your input on one question. Europe produces world class startups but fewer global technology champions, especially in the area of hyperscalers. In your view, what exactly does the does the scale up system break? Where exactly does the scale up system break down? Capital markets, regulation or something else?
Thomas Jarzombek | Parliamentary State Secretary | German Federal Digital Ministry [00:23:22]:
Yeah, I think it's pretty easy. Germany is economy number three worldwide we have the third biggest economy in the world and even there are a lot of countries which have a lot more inhabitants than Germany has and even we are in front of Japan they do have nearly 50% inhabitants. So we are very, very, very successful in all the industries where you see German products. And these are a lot of industries. And this is I believe the reason why it's very much investing here in all these successful industries. And in the beginning of the Internet economy, I think from talent side, from investment side, from every angel, the focus was always more on these existing industries. And I think this will change in the moment that some of these industry could go down maybe in automotive, I don't know. But quite now, until now we're pretty successful in that.
Thomas Jarzombek | Parliamentary State Secretary | German Federal Digital Ministry [00:24:22]:
And so this is the reason why the startup ecosystem is filled with talents also filled with good technology and ideas. We have companies that are worldwide successful. Get your guide is maybe something obvious. They're delivering holiday experiences all over the world. A global market leader and we have more of them. So these companies are there but as you say hyperscalers are building IT infrastructure. That was not one of the industries. And we had players like Siemens or like Nicksdorf, but they went a different way.
Thomas Jarzombek | Parliamentary State Secretary | German Federal Digital Ministry [00:25:00]:
And Siemens is very much investing in medicine devices and things like that. And so it's decision by the market and fun fact is that a lot of these Silicon Valley funds which are investing in all these global tech ecosystem are filled with German money. There are a lot of German family offices that are investing in all these A16Z and Sequoia and whatever funds. And so therefore we benefit in some way and our family office also benefit in some way from even all this.
Jörn "Joe" Menninnger | Founder, Editor in Chief | Startuprad.io [00:25:33]:
Yeah. When you talked about successful startups also what came in mind just recently? Stark defense, housing or bio and tech of course, a shining example. They already work pretty well. And I'm sure we all hope that the current program gives more of more successful entrepreneurs, more successful startups a ramp to start. Do you see any conditions under which Germany would move from a more coordination, support, development approach towards a more capital intensive growth posture, Meaning investing more state
Thomas Jarzombek | Parliamentary State Secretary | German Federal Digital Ministry [00:26:11]:
capital while we invest. We're investing so much state capital in the meantime, so we increased it by 5x over the last years. And right now we already spoke about the future fund of this 10 billions and more. And so I think in the end we need to attract private investing and private money. And so right now, for instance we have debate about this EU Inc. And I think the EU commission will come over and support this initiative very much appreciate it, appreciate that. So this is for instance this week one of the topics, another one is to making AI more simple and to clarify it. That's also pretty important to to to, to bring talents here or to, to bring talents back.
Thomas Jarzombek | Parliamentary State Secretary | German Federal Digital Ministry [00:26:58]:
We see also a lot of German engineers working in Silicon Valley and therefore we have a lot of things to do and we're working on that to make regulation more easier, to attract more private capital here. That's what we're actually doing. And I think this will work out more than spending more and more government money. I don't think this is the right path because government money follows complex rules everywhere in the world and maybe it follows also different interests than the business side. And therefore I think in a market driven economy it's important to have private investments here. One thing maybe to add in Germany we live very much from the Mittelstand, the SMEs, the medium sized, the mid caps. So this is a strength and we have all these hidden champions. This is, I think it's invented by Germany, these hidden hidden champions.
Thomas Jarzombek | Parliamentary State Secretary | German Federal Digital Ministry [00:27:52]:
A lot of companies that have a thousand, five thousand, ten thousand employees and they are world leaders in very specific technologies. And so this is the strength of our ecosystem. And not everybody investing in Germany says okay, when I invest in a young company, I want to build a scale up that rolls out something worldwide and will get a giant company. I think the philosophy here is also that a lot of people are investing companies and to say we want to build a mid cap company, one that's a new hidden champion, that's very successful in a very specific technology or industry. And so with this philosophy, Germany is very successful over decades. And so this is a different approach than the one that we see in Silicon Valley to say, okay, you need to scale worldwide or do you have to die?
Jörn "Joe" Menninnger | Founder, Editor in Chief | Startuprad.io [00:28:43]:
I just talked to an investor in November, the interview was recently published and he talks about those investment cases not as unicorns, but as camels. Even though I think from the marketing side it needs a little bit different wording. But I totally know where you're going. Germany has a more coordination LED architecture and the US split scaling style. On the other hand, they represent fundamentally different strategies for global technology leadership. What do you think would produce a more durable competitive advantage? Does Germany's current model retain the flexibility to shift? If the evidence supports it.
Thomas Jarzombek | Parliamentary State Secretary | German Federal Digital Ministry [00:29:27]:
I think until now the existing ecosystem is really successful. I just can repeat, we are the number three economy worldwide. And so this shows that the way we went over the last decades was pretty successful. And I think it's like in every, every enterprise that's successful, you're staying with your, with your philosophy and with your system system. And so that's where we are maybe AI changes things more and more. So we focus from the government side also very much more on AI because this will shape a lot of industries and it also will change the way how to earn money in industries. And therefore it's from our side necessary to go much more into AI. But we see opportunities right now to build solutions for all the verticals for specific industries with small teams.
Thomas Jarzombek | Parliamentary State Secretary | German Federal Digital Ministry [00:30:25]:
You can see it at Steinberger with openclaw that really small teams or single persons can build very powerful tools and very powerful solutions because all these AI instruments are so much more powerful than they have been one year ago. And this is an opportunity also for Germany and in our ecosystem to build solutions for specific industries. And there also just can play a really important role to orchestrate that process and to bring young founders together with these industry champions and to say, okay, we want to go into this AI workflows and we want to build it by ourselves and not only to buy products from Google or whomever. And so I think right now there's a huge opportunity with AI. As always there is challenges or risks on the other side, but the risk is to miss the train. That's really the biggest risk that we see on AI. And so therefore the eops can play a really important role to integrate or to build a launch pad for young entrepreneurs, for AI developers to get access to these industry champions.
Jörn "Joe" Menninnger | Founder, Editor in Chief | Startuprad.io [00:31:42]:
Looking a little bit into the future, in 10 to 15 years, if the startup factory and the EHUB architecture succeeds, what global companies should exist in Germany that would not exist otherwise? So what difference would it make?
Thomas Jarzombek | Parliamentary State Secretary | German Federal Digital Ministry [00:31:59]:
So the good thing about a market driven economy is that this is not a decision by politicians and it doesn't need the fantasy of politics, politicians, it needs the fantasy of the market and of the young entrepreneurs and of people with ideas that want to bring them to life. And this is what we are heading for. People like this that who have ideas, who want to get to the markets and to show that they can deliver. And so I have no clue what will happen in 5 and 10 and 15 years. AI will change such a lot. But I'm pretty sure we will see really fascinating new companies and new business cases and we would love to see them here.
Jörn "Joe" Menninnger | Founder, Editor in Chief | Startuprad.io [00:32:40]:
I would guess right now something to do with AI, industrial tech, climate tech or does something else come to your mind?
Thomas Jarzombek | Parliamentary State Secretary | German Federal Digital Ministry [00:32:48]:
Yeah, all of this, all of this. And I think AI right now it's not a very exclusive point of view that AI is the number one topic right now. But also sustainability is something that Germany pushes for a long, long time and we're going on this track, we want to get carbon neutral and therefore this brings also a lot of opportunities for new technologies, for carbon free solutions, for carbon free industries into the market. And I think you find the right framework and infrastructure here for building something like this.
Jörn "Joe" Menninnger | Founder, Editor in Chief | Startuprad.io [00:33:27]:
We already talked about the potential output in 10 to 15 years. For the last question I was wondering what, what would need to be demonstrateably true for the E hub and start a factory architecture looking back like from 10 to 15 years now to be considered a decisive structural upgrade of Germany's innovation capacity.
Thomas Jarzombek | Parliamentary State Secretary | German Federal Digital Ministry [00:33:52]:
I think they will be both as long as attractive as the economy, businesses, entrepreneurs, actors from the financial ecosystem involved in that and invest in debt. And both, both infrastructures only can work when they have commercial investments. They're built in a way that they need them for their finance. Also the startup factories, the way they were constructed was that first they need, they needed to, to find private investors and to get a guaranteed amount of private investments, typically 10 million euros. And the second step was that the government said, so we then provide you with an additional 10 million. But first they had to do successful fundraising. And in the de hubs it's the same thing. They need to attract businesses, they need to attract private partners that invest in that equity system because we don't spend a lot of money in their infrastructure.
Thomas Jarzombek | Parliamentary State Secretary | German Federal Digital Ministry [00:35:01]:
So it's necessary that this actors from the, from the, from the market believe in that and put money into that. And so this is the reason why I'm very confident that if they exist in 10 years, they were 10 years successfully attracting private money.
Jörn "Joe" Menninnger | Founder, Editor in Chief | Startuprad.io [00:35:21]:
So basically the idea is bring us an idea where private investors invest 10 million and we go long.
Thomas Jarzombek | Parliamentary State Secretary | German Federal Digital Ministry [00:35:28]:
This is the idea of the startup factories, right?
Jörn "Joe" Menninnger | Founder, Editor in Chief | Startuprad.io [00:35:32]:
Great, thank you Mr. Secretary, it was a pleasure having you as guest.
Thomas Jarzombek | Parliamentary State Secretary | German Federal Digital Ministry [00:35:37]:
Thanks for the opportunity. Have a good time.
Jörn "Joe" Menninnger | Founder, Editor in Chief | Startuprad.io [00:35:40]:
Germany is sampling a layered innovation system. 25 coordinated DE Hubs, 10 startup factories focused on deep tech, startup creation and private capital integrated across both. The ambition is measurable, scale up capacity aligned with European digital sovereignty and venture discipline. Whether this architecture produces global competitive companies will be determined by outcomes, capital behavior and institutional adaptability. Thomas Jaszomberg operates where the system is designed and governed. This conversation documents the logic behind it. This is Startup Radio. That's all folks.
Jörn "Joe" Menninnger | Founder, Editor in Chief | Startuprad.io [00:36:23]:
Find more news, streams, events and interviews@www.startuprad.IO. remember, sharing is caring.
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