How to make it in the DACH region: the world’s 2nd largest market for SaaS

How to make it in the DACH region: the world’s 2nd largest market for SaaS Build • Martin Gramling • 27/12/22 • 4 min read

France Digitale , France’s main association for tech companies, organized a Franco-German evening in November 2022 which I attended. The event’s idea was to present a toolkit and testimonials from German and French founders, and investors to entrepreneurs aiming to do business in Germany. These tools were valuable, as entry into the DACH market can be challenging.

Among founders, the DACH region is often associated with negative features: a strong adversity to change, the language barrier and fewer investments available than in hubs such as Paris or London. — Vidar Andersen Before working for Scaleway, I spent more than 6 years living and working in Switzerland and Germany. In Düsseldorf, as head of the Tech department of Business France, I spent 4 years supporting French digital companies looking for partners and end-customers in the DACH region. I love working with this region and with my personal experience, I would like to share with you the particularities of the DACH startup ecosystem and explain how you can make the most of it.

Even though the DACH region should be outpaced by China in 2025, it still currently is the world’s second largest market for SaaS in revenues

More than 70,000 startups are to be found in Europe’s second most financed tech market

DACH is an acronym that englobes Germany, Austria and Switzerland. With around 100 million inhabitants and cities such as Vienna, Salzburg, Zurich, Geneva, Munich, Cologne or Berlin, it can be described as one of Europe’s economic powerhouses. As an illustration: the zone generated a global GDP of 5,300 billion euros in 2021.

Depending on the sources and the calculations, there are 7 times more startups in the DACH region than in France. However, this is still much lower than the United Kingdom, where, in 2021 alone, more than 38,000 tech companies were incorporated .

2021 was an exceptional year for DACH startups looking for investments. According to Statista and the various Startup Barometers produced by EY, more than 21 billion euros of funding went to Swiss, German and Austrian startups that year.

To put things in perspective, this figure is twice as large as the amount of money raised by French-based startups that same year. This amount is even more exceptional when you consider that an average of 2.66 billion EUR has been invested between 2017 and 2020 in DACH startups, versus respectively 4 and 10.3 bilion euros for that same period, for France and the United Kingdom. As illustrated by the following chart, if the UK remains the European powerhouse when it comes to startup funding, the DACH region truly sits at the top of the class.

Germany alone is ranked #2 for cumulative capital invested in startups since 2016. The gap with France is even more blatant when adding figures regarding Switzerland.

As recently reported by the Handelsblatt or T3n , the perspectives in the DACH region could seem bleak: between July and September 2022, the number of startup creations in Germany decreased by 30% in comparison to the same period in 2021. However, as pointed out by Verena Finkenzeller from the BMW Foundation , Respond Accelerator, “There is a lot of money out there, ready to be spent. Especially towards businesses that are developing climate tech solutions.”

So, as a founder, where can I start looking for investment opportunities in the DACH region?

Gründerstipendien, accelerators and investors: different opportunities for different development stages

There’s a positive side to the story brought by T3n: 5 billion euros have been invested in DACH-based startups in the first half of 2022. This figure is twice as large as the average amount of money invested in German, Swiss and Austrian startups between 2017 and 2020. Whether I want to launch my business or scale it to the next level, where do I look to identify opportunities?

1. Search for Gründerstipendium

As a founder, pay attention to the packages generally offered by incubators, accelerators, and trade agencies but also local and federal governments. If you are not a native German speaker, search for the term Gründerstipendium. Briefly explained, those are grants that public or private organizations give founders in order to assist them launching their startup. To give you an example, Vienna’s economic agency provides 25,000 euros of financial support and additional services (coaching, networking opportunities for instance) over 6 months. In Germany, similar grants exist on a regional and on a national level. In North Rhine-Westphalia, as highlighted by Johannes Gräf from STARTPLATZ , the NRW Gründerstipendium encourages students, graduates, potential founders and scientists to turn their idea into a business model and supports part of the financial risk (1,000 EUR per month for 1 year) associated with creating a startup. At the national level, a similar initiative is called the EXIST-Gründerstipendium and is run by the German Federal Ministry for Economic Affairs and Climate Action.

2. Look beyond one single region

When managing a pre-seed or seed business, the decentralization of the countries (more on that later) is key. In other words, the opportunities of funding are numerous and are not limited to one hub or region. As illustrated by Dr Johannes Veiling (Ministry of Economy, Industry, Climate Protection and Energy of North Rhine-Westphalia), startups founded in North Rhine-Westphalia have plenty of choices, as more than 20 different funds based in that region were created over the last 10 years. Without considering funds from other regions, there are thus plenty of fish in the sea!

3. Invest in physical events

For Seed and above startups, despite the gloomy business environment, I can assure you that plenty of potential investors (not only VCs but also corporate ventures) are to be found at events. Almost 180 investors coming from the DACH region were, for instance, registered on the Slush matchmaking platform!

Besides these general observations, be aware that there are some local specificities. Let’s stop for a moment and look at what makes the Swiss investment environment unique. Compared to other ecosystems, the Swiss investment market is still characterized by the presence of “old money” (e.g., corporate ventures or traditional players like banks and insurances) investing money in startups. According to Thuy-Linh Uong,…