from Hacker News

We don't need startups, we need Digital-Mittelstand

by mertbio on 2/24/25, 7:40 AM with 236 comments

• by pembrook on 2/24/25, 8:59 AM

  The authors examples of “Digital Mittelstand” companies are not businesses at all but tiny “creator economy” side projects.

  These do not scale to 30% of GDP in the same way high value B2B industrial equipment does (in manufacturing you happily pay $100,000 for a piece of machinery because it can turn inputs into more valuable outputs at scale).

  Instead of coming up with incorrect ideas about what the government should “encourage” from the top down, what if European elites focused on cooperating more with their neighbors to open more opportunities and meanwhile let the peasants (the market) figure out the most productive and profitable uses of their time.

  If Europeans can’t figure out new valuable areas where they can contribute to the world, than their system isn’t as clever or morally righteous or fantastic as they think it is. I believe if allowed the opportunity, the people would find this positive-sum value to be created. Who do you think founded all the Mittelstand in the first place?

• by hresvelgr on 2/24/25, 9:30 AM

  I think Mittelstand is perhaps misdirecting away from a more interesting conversation. Reading between the lines, this highlights an inherent bias in the majority of American companies to provide service to extract value as opposed to providing service for public benefit. Simply put, it's "move fast and break things" versus "WE DO NOT BREAK USERSPACE."

  If you want to dig deeper, this is a consequence of America beginning in recent history as a frontier settlement, primarily attracting aggressive, adventurous go-getters to make their fortune. Extracting for personal gain was baked into the culture from the beginning and is an artifact that has persisted to this day.

• by albertzeyer on 2/24/25, 8:32 AM

  There are a lot of such companies already in Germany. Basically most small/medium sized IT companies in Germany fit that classification. So I don't really see how this is now a new approach. And I'm also not sure what is proposed here to be done now. Invest more into IT infrastructure? That's a goal that many parties claim to do since many years. Many people fully agree with this. However, currently, the main topic in Germany is again immigration. Second topic is economy, but the opinions on how to improve economy widely varies. Many of the more traditional parties want to invest more into car companies.

• by fhennig on 2/24/25, 8:56 AM

  I really like the idea, but I'm not sure how the traditional "Made in Germany" success stories would translate into a digital world.

  For example Würth is the world leading producer of screws. I think it's a good example of how a lot of these companies make parts. But what are the parts in the digital world? It's libraries and frameworks, and nobody is paying for those.

  Also the values you mentioned: excellence and stability. That's exactly what we see in libraries. Everybody wants stable APIs and the library to get out of the way.

  Maybe another angle to look at this can be "parts" for a knowledge-based company. Like a software to model and simulate financial products or insurance risks, or - as the article mentions - complex 3D models. I have also already seen companies working on digitazing factories, digital twins etc.

• by theiebrjfb on 2/24/25, 8:15 AM

  For start Germany needs better internet connectivity. Getting 1gbps symmetric fiber or 5G coverage is a scifi!

  Even Romania has better infrastructure!

• by fxtentacle on 2/24/25, 9:05 AM

  I'd say the biggest issue with this article is that it only suggests solutions which are already underway.

  1. Salary Grants => SEED / EXIST stipends

  2. Simplify Bureaucracy and Regulations => Who doesn't want that?

  3. Expand VAT Exemptions => Council Directive (EU) 2020/285 will bring this law: "For SMEs conducting cross-border transactions, a cumulative turnover cap of €100,000 across all 27 EU member states applies"

  4. English Language Support => I'd say most of the EU is already pretty good at this.

• by yobbo on 2/24/25, 8:56 AM

  The difference isn't mainly in ethos or culture; those startups make services with zero marginal cost, and where growth and eventual near-monopoly is the only successful outcome. Europe lacks investors for those types of startups.

  "Mittelstand conditions" are replicated for digital products/services that are 1) expensive to build, 2) are very useful/profitable for customers, and 3) have small/fixed addressable markets.

  More sustainable examples would be engineering consultancies building embedded systems for infrastructure, machines, robots, etc.

• by thomassmith65 on 2/24/25, 8:22 AM

  I kept waiting for the post to mention the German company who make Things.app (culturedcode.com). It seems like a good example of the ethos.

• by nwellnhof on 2/24/25, 8:46 AM

  The mythical German "Mittelstand" again. This word is absolutely meaningless. It has been used to describe small businesses, but also companies like Robert Bosch GmbH which has 400,000 employees. "Mittelstand" is nothing but a vague idea Germans cling to, so they feel special.

• by camillomiller on 2/24/25, 8:13 AM

  Ulysses (the Mac/iOS writing app) is made by a German company that's a good example of this.

• by postepowanieadm on 2/24/25, 8:30 AM

  We must stop associating the European economy with the German economy.

• by meerita on 2/24/25, 11:18 AM

  Can someone give me a reason why paying an engineer a yearly salary would ensure that they contribute a truly valuable piece of software that the market will use? Why should money be given based on years of experience? Is experience really a good indicator of ability? I know many engineers with 10+ years of experience who are mediocre.

  What happens if that well-paid engineer decides they no longer enjoy software development? What if they need more than a year to deliver results? What if they produce something useless for the market?

  This Keynesian approach is full of unknowns—it looks great on paper, but we've already run these experiments in the past, and they simply didn’t work.

• by noelwelsh on 2/24/25, 10:28 AM

  A lot of older dot-coms (e.g. Meetup, Foursquare, Quora) could have gone this route instead of the VC model. Meetup was recently bought by an Italian company (Bending Spoons) which basically has the Mittelstand model.

• by yorwba on 2/24/25, 9:06 AM

  The recommendations here don't seem very Mittelstand-specific. Salary grants, less bureaucracy, VAT exemption and English support would help a grow-or-die startup just as well.

  I think the more interesting aspect is funding: if you tell a VC that you're aiming to become market leader in a small niche, they hear "no outsized returns" and go looking for riskier ventures.

  But there is an existing funding ecosystem for small businesses that don't expect to get big, I guess mostly bank loans or bigger companies financing new suppliers. I wonder how open those are to software companies.

• by autonomousErwin on 2/24/25, 9:21 AM

  This is a great read and exactly where I think the global economy is going - instead of large companies you'll have millions of medium sized businesses run by small teams still making a bit of a dent in their own niche universe.

  I do disagree with the work-life balance part, I struggle to see how you can build something (and maintain it at such a high level) without intense focus and commitment.

• by anonzzzies on 2/24/25, 9:04 AM

  Yes, but this already happens, just not in the hn/reddit echo chamber. Most people are not looking/shooting/wanting to fight for billions$ or market leader or whatever; most are happy with a nice life making stuff for local companies. There are tons of regional companies making software/saas/services just in their part of the country (whatever country) and making a nice living for decades.

• by pyb on 2/24/25, 8:05 PM

  Meanwhile, in the UK: let's obliterate our Digital-Mittelstand. https://news.ycombinator.com/item?id=43152154

• by gizmo on 2/24/25, 9:40 AM

  > However, if you’ve ever used a product marked “Made in Germany,” you’ll understand what German culture truly values: mastery of a craft and uncompromising quality. You won’t find many Germans willing to sacrifice their health or personal milestones—like the birth of a child—for work, or to forgo their well-earned vacation in Mallorca. They’re not the kind to release half-baked products and patch issues later, nor are they likely to push for higher prices just to fatten shareholders’ returns.

  Self-serving prattle if you ask me.

  German cars have notoriously bad and buggy infotainment centers. Germans do of course release half-baked products (like literally every other country). German cars don't even get patched. The built-in navigation system is useless and broken the day you buy your shiny new BMW and it will still be broken and useless by the time car goes to the scrap heap a decade or two later.

  When BMW decides to a subscription model for heated seats is that not shameless profit seeking? Or is BMW somehow not German?

  > Basic Law of Germany begins with “Human dignity shall be inviolable.” The entire culture fundamentally opposes many hallmarks of the typical startup ethos.

  Germany is unable to build first rate tech businesses because -- wait for it -- Germany has superior culture. Give me a break.

  > If you’ve ever worked with Mittelstand companies, you’ll know that many have a long queue of customers waiting for their products. It’s not uncommon to wait months—or even years—for an order.

  This attitude is why the German economy has been shrinking for two years straight. Chinese businesses also do high precision machining and they do not make their customers wait for years. The belief that you can coast because competitors will never catch up is pure German arrogance.

  The reality is Germany will loose badly if attitudes don't change.

• by anothereng on 2/24/25, 3:30 PM

  the article sounds nice but burecreats dont care about making it easier to start companies. They care about making sure they have jobs tomorrow. This is a better pitch for entrepreneurs in 3rd world countries than european governments. Offering a digital product in a 3rd world country allows you to not have to deal with local corruption while accessing a global market.

• by fire_lake on 2/24/25, 8:06 AM

  How can they compete with well capitalized start ups?

• by internet_points on 2/24/25, 10:17 AM

  I'd love for the Mittelstand way to work, but having read https://www.slatestarcodexabridged.com/Meditations-On-Moloch it seems they only survive by luck and the fact that there is still some friction in the world.

• by randomNumber7 on 2/24/25, 8:14 AM

  This is absolute nonsense. Using buzzwords can not replace reasoning. There are structural problems why germany failed to build a digital economy.

• by hoseja on 2/24/25, 9:10 AM

  And yet the non-western world is full of German engineers hoping to accomplish some insane feat for a brutal dictator, away from the scolding eye of all-regulating bureaucracy.

• by cupofjoakim on 2/24/25, 8:20 AM

  I enjoy the idea of Mittelstands. The "forever growth" that is a common target otherwise feels misguided and overbearing at times, but I also understand that this clashes a lot with the american super-capitalist mindset. We should all be billionaires right? /s

  On the topic of mittelstands vs startups - I think it's a non issue. You can have both. However, startups are starting to get a certain smell to them. Probably swearing in church here (hello ycombinator) but too many startups feel unreliable and the amount of founders just looking for an early exit is really not helping.

• by kdbbfjx on 2/24/25, 8:44 AM

  The startup model works where there is capital specifically large upfront capital available.

  Large upfront capital automatically means you chase profit or growth.

  Just like McDonalds. Which is really what the SV model is if you scrape away all the whizbang tech bullshit.

  There is a reason McDonald inspite of "scale" and "low price" cant feed the world.

  Because of the cost of opening a new store and initial capital involved. US had that capital available (thanks to dollar hegemony) esp post Ww2. No one else did.

  There is no German/Chinese/Indian version of McDonalds.

  Why? Because people are used to running sustainable restraunts without high upfront investment cause there was no capital for it.

  McDonalds runs profitably and grows usually at the cost of something else (easy to see what those costs are in mature markets where growth has stalled) just like Google provides free shit at cost of all kinds other things.

  But watch carefully what happens to these high capital models if they cant produce profits or growth.

  Many have been coasting over the last 2 decades and have captured entire market. But that period is over just like the period where the British Empire expands till it cant any further. A high capital process btw cause you have to pay your army upfront to go shoot the native feudal lord and take his shit. Once expansion is over and all the land is captured how long did it take for British East India company to unravel?

• by thiago_fm on 2/24/25, 8:32 AM

  What we need in Europe, is protectionism both against US companies and Chinese companies. They have been funded by both country's heavily deficitary budgets and incentives.

  Just fining Meta and Google a few billions every year isn't enough. Need to either tax all that digital pollution they bring over here.

  And now they clearly aren't our partners anymore. With China not sharing democratic values and wanting to invade Taiwan, and the US setting up a trade war against us and at the same time siding with our enemy Russia that has just invaded Ukraine...

  We need to have our own tech, for everything.

  Similar to what US is doing against China, we should have a strong position against both of them. And one that strikes close at heart in the US are the Big Techs.

  It's hilarious that we don't let even Fanta be sold with the terrible chemical formula it has here in the EU, like they have in the US.

  But when it's about manipulating people's opinions with the US's social networks and communication apps. We are ok with that.

  I'm sure anybody nowadays can build similar software than Meta or Google did. Even now more with AI search being so good.

• by blackeyeblitzar on 2/24/25, 7:50 AM

  I didn’t find this article credible. It is arguing for small and medium businesses instead of startups, and offers steps to see the vision it paints. But startups are where some of the biggest game changing ideas come from. Large enterprises can sometimes do that too. I feel like the mid sized companies are often stagnant. The product areas it suggests for businesses are very hard to survive in.

  These other lines sort of felt like an idealistic version of Germany:

  > However, if you’ve ever used a product marked “Made in Germany,” you’ll understand what German culture truly values: mastery of a craft and uncompromising quality.

  > They’re not the kind to release half-baked products and patch issues later

  Anyone who has owned a German car knows the idea of German quality is a myth.

• by flanked-evergl on 2/24/25, 9:48 AM

  Europe is the world's sick man. Merz is talking as if he is going to spite the US by having Germany fund their own defence, but in reality, whether Germany will be able to fund anything at all is very much in question as its economy is in full collapse and there is no way Merz will pull it together, he will just put pedal to the metal in a car that has already gone over the cliff.

  Germany needs to stop reinventing the wheel, clearly they don't understand how it works. They should instead just try doing what the US has done. In Norway our politicians are now talking about increasing our tax burden even more, and raising the cost of living even more so more money from middle-class and poor people in Norway can be used to shore up the failing German economy because they can't be bothered to pull themselves together. It's an embarrassment. All while Europe is still playing graduated escalation games with Ukrainian lives.