Of unicorns and grasshoppers
The term "unicorn" is used to describe start-up companies with a value of more than one billion dollars. There have even been two unicorns in Austria this year: In March, Bitpanda - a platform for buying and selling cryptocurrencies - received funding that raised the company's valuation to 1.2 billion US dollars. In June, the tutoring platform GoStudent followed with a valuation of 1.4 billion. And in July, the biggest deal in Austria's start-up history was concluded when the Salzburg-based company has.to.be was sold to ChargePoint for 250 million euros. Anyone who has been following the business media in recent months might come to the conclusion that Austria is the next Silicon Valley. Unfortunately, it's not quite that simple.
518 million euros flowed to start-ups headquartered in Austria in the first half of the year, a multiple of the same period last year and around twice as much as in 2020 as a whole. However, four out of five euros went to the two unicorns, while everyone else received even less than in the crisis year 2020. The financing rounds were smaller on average, and it is clear that the small rounds of today may be the big rounds in a few years' time - but then this financing really has to work, for example with the digitalization fund announced in 2019.
Two unicorns do not yet make Austria a paradise for start-ups and venture capitalists. In 2019, investments from venture capital amounted to just 0.02 percent of GDP. This figure was 0.13 in Estonia and more than thirty times higher in the USA at 0.63. In Austria, the public sector invests much more frequently than elsewhere - which leads to market distortions, but is also evidence of market failure. Growing, successful companies are urgently looking for domestic investors - but the money usually comes from other EU countries and the USA, where investors and the tax authorities can enjoy the profits from Austria. In the worst case, prospering companies leave our country altogether.
Anyone who wants to give more unicorns a home will therefore have to pay more attention to their needs: Innovative companies and their financiers need more favorable taxation of corporations and capital income, and smaller and medium-sized companies in general need more attention. Privileged tax treatment of employee shareholdings, new company forms or even a reorganization of the GmbH could work wonders. The aim of all measures should be to ease the burden on founders and make it easier for them to access external equity capital. And finally, the interest and trust of institutional investors, such as pension funds and foundations, is also needed in order to provide sufficient venture capital for young companies at an early stage.
Much of this is already in the 2020-2024 government program - now all that is needed is courageous implementation. Perhaps unicorns will no longer be quite so rare in Austria in the future.
