German tech at a crossroads: What the next government must get right

As Germany gears up for federal elections, the tech ecosystem stands at a crucial turning point. While Berlin has established itself as a major European startup hub and German deep tech continues to draw international attention, we’re still not reaching our full potential.

The numbers tell a clear story: Germany hosts the most clean tech manufacturing facilities in the EU, leading with 64 wind tech plants compared to Spain’s 38. Yet bureaucratic hurdles and policy gaps threaten this leadership position. Here’s what needs to change – and why the next government’s decisions will be crucial for Germany’s position in the global tech race.

Where we stand: The good, the bad, and the bureaucratic

Let’s be honest: Germany has massive advantages as a tech hub. We have world-class engineering talent, strong research institutions, and Europe’s largest market. We’re even aiming to increase R&D spending to an ambitious 3.5% of GDP by 2025. But we’re also facing challenges that could hold us back in the international competition for talent and capital.

The most pressing issue? Bureaucracy. Recent studies show German startups spend 10% of their weekly working hours on administrative tasks. That’s precious time that could be spent on innovation! While 2025’s Bureaucracy Reduction Act IV was meant to help, 69% of companies expect it to have only minimal impact. While many entrepreneurs stick around for our market size, others are giving up and moving to more founder-friendly jurisdictions. We simply can’t afford this brain drain anymore.

The climate tech opportunity we can’t miss

My focus as a climate tech investor gives me a front-row seat to one of Germany’s biggest opportunities – and challenges. We’re seeing amazing innovations in energy transition, sustainable mobility, and industrial decarbonization. But here’s the catch: our international competitors aren’t sleeping.

The US has its Inflation Reduction Act, pumping $369 billion into climate tech over the next decade. We urgently need our own version – a “politicians-proof” plan that provides long-term certainty for climate tech investments. Just look at the heating transition: While countries like Finland install 69.4 heat pumps per 1,000 households, Germany lags behind at just 6.7. This isn’t just a statistic – it’s a warning sign that we’re losing our competitive edge.

Five critical changes the next government must deliver

1. Bureaucracy bootcamp: We need a radical simplification of startup administration. Everything that can be digital should be digital. One-stop-shops for startup registration, funding applications, and regulatory compliance should be the norm, not the exception. When 10% of a startup’s working hours go to paperwork, something’s clearly broken.
2. Smart stock options: Our current tax system turns what should be a powerful talent attraction tool into a bureaucratic nightmare. We need a framework that makes equity participation attractive and accessible not just for top executives, but for all employees. This isn’t just about fairness – it’s about competing globally for the best talent.
3. Talent magnet strategy: Germany’s new “Opportunity Card” allows skilled workers one year to find a job while working 20 hours per week – that’s a good start. But with “move to Europe” searches from the US at an all-time high, we need to do more to make Germany the obvious choice for global talent, especially in climate tech. We need smoother processes, better incentives, and a more welcoming ecosystem for international talent
4. Climate tech catalyst: The heating transition is just one example of where we’re falling behind. While we lead in manufacturing capacity, our domestic adoption of clean technologies needs work. We need a comprehensive strategy that combines smart regulation with financing solutions. Those who invest in clean tech now will benefit in the future – but many need support to make that initial investment
5. Innovation-first regulation: Whether it’s AI, climate tech, or other emerging technologies, we need regulatory frameworks that enable innovation while ensuring responsible development. The EU is setting many rules – Germany should be proactively shaping these discussions, not just following them.

The path forward

The next government will have to make critical decisions that will determine Germany’s position in the global tech landscape. We can’t afford another period of incremental changes and complicated compromises. What we need is bold action to:

• Dramatically reduce bureaucratic burdens (that 10% time waste needs to end)
• Create competitive advantages for talent attraction
• Establish long-term certainty for climate tech investments
• Enable faster scaling of innovative solution

The opportunity is clear: Germany could become Europe’s powerhouse for sustainable tech innovation, combining our industrial strength with digital transformation and climate action. We already lead in clean tech manufacturing – now we need to lead in adoption and innovation too

The upcoming election will be crucial. Whichever parties form the next government, they must understand that Germany’s future competitiveness depends on getting these tech policy decisions right. The time for half-measures and complicated compromises is over. Let’s make Germany the tech hub it has the potential to be.

The post German tech at a crossroads: What the next government must get right appeared first on EU-Startups.