Challenges being faced by digital health startups
Even with Germany’s popularity as a startup hub in Europe, there are several existing factors, which complicate the startup process and can be a major challenge to prospective digital health startups.
Here are the five biggest challenges faced by eHealth startups in Germany:
1. Risk Aversion
Unlike the US, there is the likelihood that the venture or risk-taking spirit is absent or scarce in Germany’s business scene. This presents a problem regarding securing partnerships, investors, and investments. This issue has resulted in an unfortunate situation whereby startups (especially in the tech sector) move to the United States in search of investor-rich settings.
Moreover, many entrepreneurs are of the opinion that the time spent in starting up a business in Germany is far greater than that of the USA. For instance, after reviewing the pros and cons of startups in both countries, it is likely that the individual will be discouraged.
There is also the fear of failure in Germany. Bankruptcy is not a choice as it can land to incarceration. Such conditions go against the code of risk-taking and don’t foster the growth or progress of startups.
Difficulty in comprehending the steps and process of proper tax registration can slow down the pace of start-up companies; taking too much time, resources, and sometimes-financial capital. For example, most companies have to go through tasking serial (9) tax deductions, annually. Besides, about 200 hours of valuable time is spent on filing and submission of regular returns. In addition, about one-hundred and thirty-four hours are devoted to contributing to social security.
Again, dealing with the complicated setup of value-added tax (VAT) payments and corporate income tax has proven to be a backbreaking hurdle that digital health startups have to tackle and overcome.
Lastly, a total of fourteen various kinds of tax is in place and need to handle by the prospective digital startup before they can go ahead and establish a business.
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Staying power or in other words, patience is needed to stand firm in the face of such a rigid culture like Germany’s. The reason for this is that the German business society puts so much emphasis on hierarchy. A major impediment to the advancement of startups. More so, digital health companies have to be aware of, observe and participate in the laid down business policies, processes and culture. This might present difficulty and then lead to stumbling especially when the emerging entrepreneur has no prior knowledge or even adequate information about the protocol.
For a long time now, the country’s culture has emphasized and installed safe values like investment security, moderateness, and stability. Nonetheless, those ‘good’ values are a hindrance to the growth of startups.
Most times, potential entrepreneurs get to settle for the safe route; employment in corporations as opposed to the option of taking the risk of a startup.
The German economy has been largely successful in the last era. However, in this digitalized time, the previous economy would have to go through significant transformation; succeeding requires a major change of Germany’s business culture.
4. Compliances with regulations
The increasing number of federal and legal regulations comes with difficulty in accordance. The country’s government administers this industry by setting up, more than adequate guidelines and directives for safety. In addition, a specific standard of production has been raised. These all ensure continuity and proper maintenance of the high level in the qualitative manufacturing of Germany’s digital devices. Regulations such as this are based on essentials like safety and health, but they are also a tight bind/restraint on start-up operations.
Unable to keep up with the demanding and high standards of these new regulations, startups begin to struggle.
Furthermore, the latest crowdfunding regulation stirred up a considerable amount of discontent amongst startups. Prospective startup’s primary concern with Germany’s lawmakers’ decision to regulate crowdfunding, centres on the resulting restriction of the online fundraising capabilities. This particular challenge could be a difficult hurdle for start-ups in regards to financing.
Additionally, it does not help that the current legal structure operates slowly; dealing with insolvency matters, contracts, and other legal issues is a tiring process. About three hundred and ninety-four (394) days is required for an agreement to be valid, and it takes 439 days to settle bankruptcy issues.
5. Financial challenges
From the scarcity of investors to the struggle in acquiring worthwhile partnerships and prevalent unresponsive financial institutions, all of these factors above result in monetary and capital hardships for start-ups and manufacturers. The burden of capital needed for raw material and equipment required for the production of digital health devices, mostly test on the shaky shoulders of manufacturing companies instead of active financial institutions. As it is, money accumulated from sales to startups organizations can only cover a small percentage of the capital needed for the production process. With this in mind, it’s not difficult to predict the hard journey for start-up companies and their suppliers.
Albeit a whole number of incubators (startup investors) have come up, promising support, financial assistance and freedom for the creative process, it seems that actions are contradictory. The constant policing and regimenting add unnecessary pressure on the startups.
Dealing with these challenges requires a loosening up of restrictive and tasking regulations concerning start-up companies in Germany. The government’s strict laws concerning this industry slowdown the growth of emerging business and makes it difficult for small and medium-sized business to navigate the global market. When start-ups can get the much-needed release, they would be able to expand their workforce, reduce cost resulting in extra finances for production purposes and receive worthwhile investments.
Moreover, a more organized, simplified, and accessible tax structure would go a long way in aiding startups. It would discourage the tendency of startups to emigrate from Germany to other countries in search of a more favourable environment.
On the other hand, startups should arm themselves with ample knowledge of the business culture in Germany and figure out how best to work with it.
The challenges are indeed present but with patience, determination, and hard work, challenges can and will certainly turn out for the better.
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