Big ideas often begin small – in garages, in laboratories, and above all in minds that approach problems differently. Today, we see this most clearly in deep tech. A new wave of company formation is emerging from Germany’s outstanding research landscape and strong industrial base, turning visions into reality with technological breakthroughs.. 

Scaling disruptive technologies, however – whether in nuclear fusion or green hydrogen production – requires substantial capital. The Frankfurt Stock Exchange can provide sustained access to that capital and, in doing so, help secure a company’s long-term independence. Given today’s challenging geostrategic environment, the question of economic dependency has become more pressing than ever. 

But let us start at the beginning. 

Roughly 3,000 start-ups are founded in Germany each year. That is a solid base – but the growth potential is enormous. This is evident when looking at degree programs relevant to entrepreneurship, where 20% of students in these subjects can imagine starting their own business. If that potential were realized, the number of start-ups in Germany could increase sevenfold. 

Financing as the first hurdle 

The challenges begin early – above all with financing. For most start-ups, traditional bank lending is not an option. They are simply not bankable – Founders typically lack the collateral required, nor can they repay interest. In their early years, start-ups rarely generate revenue. The focus is on building a team and developing a product. In this early phase, business angels and venture-capital funds provide equity financing. They enable scale and, in return, take ownership stakes.
 
Germany has made progress in venture capital in recent years, but it still lags behind internationally. In 2024, venture capital investment per capita amounted to €510 in the United States, €108 in France, and just €90 in Germany. This money is particularly lacking in the growth phase. The implication is clear: Large financing rounds for German scale-ups in the hundreds of millions are often dominated by non-European investors. These investors have one thing in common: They are exit-oriented. And this is where the stock exchange comes into play. 

An IPO is a crucial element in the cycle of innovation and investment – a cycle that, ideally, reinforces itself. When a company goes public, early investors recover their invested capital and can redeploy it into new ventures. At the same time, returns are generated that are reflected in a VC fund’s track record and attract new fund investors. Most importantly, however, a listing provides scale-ups with access to global capital markets and the means to finance continued growth. The word “exit” is misleading, to say the least. Contrary to what the term suggests, in most cases it is actually the beginning of a new chapter in an entrepreneurial success story. 

More opportunity than risk

Despite these advantages, the number of listed companies in Germany has declined dramatically over the past 20 years. The reasons are complex. Greater availability of private capital has played a role, as has the significant increase in regulation of public markets. Some companies may also be deterred by greater visibility – and the associated risk of becoming a target for activist investors. The stock exchange is certainly not a cozy place. 

Yet taken as a whole, the opportunities outweigh the potential risks. This applies primarily to the companies themselves. At the same time, the stock exchange also offers the general public the opportunity to share in companies’ economic success. Germany, however, has yet to fully harness this potential. The pension system is a case in point. This is not about reviving the idea of a “people’s stock.” It is about a more fundamental question: how to add a funded capital-market component to retirement provision and make it sustainable for the future. 

In today’s political climate, that may sound like a vision. But if so, the stock exchange is exactly where it belongs.  

Verena Pausder is an entrepreneur, investor, and Chair of the German Startup Association (Startup-Verband).