Comment by abhinai
2 years ago
Distraction. Being compliant with all these regulations takes the very valuable focus away from the main goal of a startup: Finding product market fit. Established companies have no problem being compliant because they already have everything setup.
This level of compliance is so low that every business in Germany manages it. It is dirt cheap to outsource to a tax advisor, and in doing so no distraction at all.
Product market fit doesn't matter if you are unable to run a business.
I don't think 1000€ per year for a yearly closing for a dormant company is "dirt cheap", but we might have different definitions of what constitutes "cheap".
Well, it is more like 800. And there is a difference between dormant, in my cade, and a holding. Because the holding is serving a purpose. The 800 are if you have someone do it for you, it is much less if you do it yourself. In case of a dormant company wothout activities it is easy enough. If you know how balance sheets work. I do, I'm just too lacy to do it myself. In the end, yes, all things considered 800 are cheap. After all, I have a mortgage.
And yet there is no successful German internet company on the scale of Amazon, Facebook, Netflix, Apple, Google. I claim the regulatory environment is a factor preventing such businesses being successful - why are are you so sure it couldn't be?
There are many difference. A key one: German companies will start to cater around German-speaking market, then expand to Europe, then further out.
An American company will focus on American market and while doing that is - due to using a wide spread language - immediately useable world wide and then can adapt to languages and cultures over time.
Because easy access to vebture capital, a huge single language market, a risk affine culture and prior success in these fields seem to play a much larger role than how difficult it is to incorporate. If an entepreneur is already discouraged by incorporating, maybe he should stay an employee.
German people of the elder generation ( boomers ) are generally risk adverse. I would say that this is the biggest reason why.
1 reply →