Energy crisis, supply chain disaster, interest rate turnaround – and a weakening economy in critical global markets have been causing significant concerns for many entrepreneurs in Germany for months. Florian Ploner, the partner responsible for the industrial sector at Deloitte, succinctly sums up the complaints of companies in an interview with the Börsen-Zeitung: "In many conversations, it becomes clear that the current cost surge threatens to eat into profit margins. Some companies then relocate their energy-intensive production abroad and achieve significantly better financial results."

The manager knows: "There is a high level of uncertainty among many companies." High energy costs are often the most pressing issue. An industrial electricity price would be helpful, but it is only "a band-aid at best" for something that is more than a minor problem. A survey by Deloitte and the Federation of German Industries (BDI) has shown that companies are taking action: Two-thirds of respondents from large and medium-sized companies reported having shifted production to a "moderate to significant extent." However, this primarily involves less complex areas of value creation. "Deindustrialization has already taken place there," says Ploner. Accordingly, 41% of companies in the critical sectors of the automotive industry, mechanical engineering, and industrial goods anticipate worsening conditions at their current location, with 29% of them looking to the United States.

According to his colleague Alexander Börsch, Chief Economist at Deloitte, the current development should not be confused with foreign investment trends that have always existed. "When we inquire, maybe it's just about market expansion; the answer is no. It's clearly about relocation." However, even though Ploner fears that the trend will continue and more, potentially more critical parts of value creation may migrate, it is evident that companies are hesitant. "Legal certainty and a high level of education are advantages not readily available everywhere." Nevertheless, the consultants also emphasize the harmful effects of excessive bureaucracy. The new behemoth, the "Supply Chain Due Diligence Act," is seen as a significant burden in light of the already strenuous efforts to enhance resilience. "However, adjusting supply relationships during a relocation is anything but trivial," warns the expert against hasty relocation plans.

From his perspective, it would be conducive to more confidence in Germany as a location to consult more "with the business sector before new regulations are introduced." Other countries are also significantly ahead in conducting an "impact analysis" of new laws. "For example, Australia schedules a review within a specific timeframe and has sunset clauses for many laws. If there is no evaluation and revision, laws automatically expire," adds Börsch.

The high pressure for transformation, driven by cost increases, regulations, the necessity to adapt to geopolitical shifts, and technological challenges, has recently led to a greater sense of renewal in the German economy than in many years prior. Ploner observes an increasing willingness to collaborate with a growing startup scene as it becomes more evident that future challenges are "easier to tackle by a small speedboat than by a tanker alone." In his assessment, what is on the rise is not necessarily just acquisitions that complement one's own portfolio in a crucial area, but companies are increasingly becoming customers of startups, indirectly financing them and directly benefiting from their innovation power.

However, there are also significant developments in financing innovation made in Germany. A "shining" example, according to Florian Nöll, Head of Corporate Development & Innovation at PwC Germany and former Chairman of the Startup Association from 2013 to 2019, is the multi-million-dollar investment by SAP, Bosch, and the Schwarz Group in the German AI hopeful Aleph Alpha. "SAP's involvement may not be unique, but the participation of two family-owned businesses is indeed a signal," Nöll believes. He also considers the new fund from the development bank KfW, which aims to mobilize a total of 1 billion euros in venture capital, to be an essential step. This is particularly significant because it has finally succeeded in "getting the insurance industry on board" as well. Allianz, Signal Iduna, Debeka, Generali, and others are involved. The industry had, in years when there were practically no returns on traditional safe assets like government bonds, entrenched itself behind investment restrictions, "often revealing that the existing allocations for alternative assets were not fully utilized."

Despite this "incredibly positive development," the mobilization of venture capital is just beginning. Corporate venture capital is still relatively insignificant in Germany. It surged only in the middle of last year, then dropped by a fifth in the third quarter. The transaction volume is far below the peak in the fourth quarter of 2021. In this regard, the billion-dollar fund is just a drop in the bucket. "We still have significant financing gaps in deep tech, biotech… This is a market failure among private investors."