Social Entrepreneurship in Germany

Because there is no requirement for a certain legal form, social entrepreneurs in Germany have a wide range of legal forms, which do not necessarily match the definition of social entrepreneurs put forward by the European Commission. According to the Social Entrepreneurship Monitor, conducted and provided by the Social Entrepreneurship Netzwerk Deutschland (in short “Send eV”), companies use mostly the form of a private limited company (22,3%), followed by one-man businesses (12,8%) and registered associations (12,8%). Nearly 12% also stated that they have two legal forms.

When it comes to funding, there is a number of public and private funding schemes available for social enterprises in Germany. E.g. in 2012, Germany’s Development Bank (Kreditanstalt für Wiederaufbau or in short “KfW”) created a program to invest in social enterprises. The KfW acted as a co-investor, therefore a legal form was necessary which could facilitate these investments that did not fit for most social enterprises - the program was terminated in 2014. Since 2015, a “European Recovery Programme Venture Capital Fund” has replaced this fund, but again it is not widely used. The KfW provides low-interest-rate loans to welfare organizations and other “third sector” actors, e.g. for infrastructure investments, but this is again not a need for social enterprises. 

That said, social enterprises overwhelmingly turn to private funding schemes, as the acquisition of state subsidies is not so easy and acquisitions from friends & families are simpler. 36.9% of the companies initially financed themselves from their savings, followed by family & friends (13,1%) and public funding (9,1%) and Crowdfunding/investing (8,2%), according to the findings of the Social Entrepreneurship Monitor. Similar findings were mentioned in a guide for social business founders from the German Ministry of Economy in Germany, in which was stated: “The financing needs of social enterprises at an early stage are on average up to 50,000 euros, often financed by own means, friends, foundations, prices, etc.”

Among the three biggest hurdles for SE's is the weak lobby for social enterprises in politics, followed by too little targeted follow-up financing and the difficulties to understand the allocation of public funds, summarizes the Social Entrepreneurship Monitor. It also states that 46,1% of social enterprises see the lack of an appropriate legal form as an essential hurdle. Send eV is lobbying for a special law to support social enterprises - one of the aims is to create a special legal status for social enterprises, another is to dedicate money of so-called “dead” banking accounts to the support of social enterprises.

In terms of education, there is a variety of courses and educational services for social entrepreneurs offered by public universities and training institutes affiliated with the welfare organizations, e.g. “third sector” studies or “management in the social sector”. In 2010, four universities in Munich started a cooperation and implemented the “Social Entrepreneurship Academy” (Social Entrepreneurship Akademie) that has its own study curriculum, with different courses from two days offers to certified two-year-long programs. Apart from that, some university chairs relate to social enterprise in Germany, but mainly focusing on measuring, conceptualizing and generally researching the field. 

Also, there are many incubators and support initiatives that offer services for social start-ups. For example The Social Impact Labs in Berlin, Hamburg, Frankfurt and Leipzig (by the Social Impact gGmbH) and the Social Lab Köln support with co-working infrastructure, consultancy, financial matchmaking, networking, research and pilot projects.