Germany is fostering migrant entrepreneurship, but there’s still a lot to do

5 min read
29 Mar 2019

In 1989, the same year the wall came down, Turkish Mehmet Özcan started manufacturing and distributing Ayran – a yogurt-based drink – to Turkish tea houses in Berlin. He soon had to expand the production facilities of his company, 7gün.

Today, three decades later, the company generates €8 million in revenue and produces 15 million bottles of Ayran each year. The company has even started to export Ayran back to Turkey.

The story of 7gün can be compared to that of a fairy tale involving a person coming from afar to a strange new country. Luckily, the person has brought unique knowledge from home and this knowledge helps him succeed.

Germany is one of the hardest countries in Europe in which to start a business.

Mehmet’s story isn’t unique. Raafat Hantoush used to get lost in large marketplaces as a child in his native Syria. Raafat remembered this experience when he founded Bote in Berlin, a wearable device that allows parents to track the whereabouts of their children via smart insoles inserted in the child’s shoes.

By launching companies, migrant entrepreneurs open new markets and help make their adopted countries wealthier. Germany does a decent job of supporting founders from abroad. There’s still lots of room for improvement though.

Photo: Unsplash/Crystal Kwok

The good – Germany’s strong civil society

In writing the book Startup Migrants, me and my coauthor, Maria Amelie, were impressed by German civil society. The country has managed to foster strong social startups and NGOs that aim to help refugees start companies.

SINGA in Stuttgart and Berlin are among the most successful business incubators for migrants in Europe. Moreover, coding schools like DCI (Berlin, Hamburg and Düsseldorf) and ReDi School for Digital Integration (Berlin and Munich) make it possible for migrants to gain the necessary skills to get a job in the startup scene.

On the whole, migrants who manage to build up a local network or find a cofounder are most successful when it comes to entrepreneurship. A network is one of the most important things these institutions provide.

The mandatory membership for businesses of a business chamber (Industrie und Handelskammer or IHK in German) might also be beneficial, even though the membership is problematic from a civil liberty point of view.

Local chambers can be helpful if they connect migrant entrepreneurs with business ecosystems, where this connection can be the key to success for a founder. On the other hand, the downside is obvious: if the local chamber doesn’t provide necessary services, the membership is just another cost for entrepreneurs.

Migrants who manage to build up a local network or find a cofounder are most successful when it comes to entrepreneurship.

On average, an entrepreneur with a migrant background in Germany earns €2,167 net profit a month, a 2016 study by the Bertelsmann Foundation showed. That is 40 percent more than the average salaried person with a migrant background.

In large German states like Lower Saxony, Bavaria and Hesse, entrepreneurial migrants earn on average €800 more per month than their peers. In other words, migrants who start businesses will move faster into the middle class.

A big challenge remains, however. The number of migrant founders who succeed in Germany is still too low.

The bad – hurdles to starting up in Germany

According to the World Bank, Germany is in the middle of the pack when it comes to the ease of running a business in Europe. Still, along with Poland and Austria, it’s one of the hardest countries in Europe in which to start a business.  

3.1 percent of migrants (on average from 2009–2016) with postsecondary education in Germany start companies, according to the 2017 KfW Entrepreneurship Monitor. This is significantly higher than both the startup rate among migrants overall (1.8 percent) and the general startup rate among graduates (2.3 percent).

Germany is home to 709,000 migrant founders. The creation of these companies has contributed to some 1.3 million jobs. In social democratic Sweden, on the other hand, there are about 95,000 migrant founders, contributing to approximately 300,000 jobs.

Taking into account that the Swedish population is about one-eighth the size of Germany’s, it becomes obvious that migrants in Sweden are more likely to start businesses and that the companies they found also employ more people. As such, Germany could learn a thing or two from Sweden in this regard.

The Berlin skyline. Photo: Unsplash/Alessandro Bellone

It’s even harder outside the big cities

In light of the difficulties to launching a company in Germany, the work of NGOs, social startups and local business chambers become even more important. This is where another major challenge appears: most startup hubs are also big cities.

It means that if you are an entrepreneurial refugee, or want a job in the startup scene, you are in luck if you end up in Berlin, Munich or Frankfurt. For an EU migrant or an international with a work visa, this is not a big problem.

But asylum applicants are spread across the German states according to quotas using the so-called “Königstein key.” This means that a migrant may end up in a location that isn’t conducive to entrepreneurship, let alone migrant entrepreneurship.

This is not just a German problem; it is a European problem.

Isidro Laso, head of Startup Europe, points out that if you come from the rural Danish countryside and all your relatives work in farming, the chances are high you may not have ever visited a startup hub. The same goes for a person from somewhere in rural Germany and whose family works in, say, shipbuilding.

The problem is even more profound for migrants in Germany who, compared to locals, may find it even harder to start a company in rural regions.

The silver lining?

To foster more migrant entrepreneurship across Germany, there is a need for two structural changes.

Startup ecosystems need to broaden outside of just the big cities. It would then become easier for migrants to start a business in these rural locations.

Another change that could be beneficial is if an increasing number of foreign entrepreneurs decided to set up shop in other parts of Germany – not just in the nation's capital and startup hub, Berlin.

Main photo by Unsplash/Daniel James