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ENTREPRENEUR

‘German startup founders in general are much more extroverted’

New data based on social science tests reveal that Berlin and Munich founders are similar in that they are more open, creative and extroverted than founders elsewhere across the globe. But they have a few differences too.

'German startup founders in general are much more extroverted'
Photo of team members at a startup: Deposit Photos.

In the study by Founder Institute which looked at data from over 100 cities worldwide, Berlin founders ranked fifth in the world for their openness, trailing behind entrepreneurs in Denver (fourth), Rome (third), Tel Aviv (second) and Athens (first).

Based on data collected from founders in Munich and Berlin, the findings also show that German entrepreneurs are generally more open than their counterparts in Silicon Valley, the rest of Europe and across the globe.

READ ALSO: Berlin v. San Francisco: Which is better for startups?

“The more international or more liberal the city, the higher the openness and creativity,” co-founder of the Founder Institute, Jonathan Greechan, told The Local in a phone interview.

But it goes even deeper than that, says Greechan, who describes openness as a “big five personality trait” that involves creativity in addition to people who are “open to new experiences, who challenge norms and are more likely to take risks.”

Image: Founder Institute.

According to Greechan, a strong correlation exists between one's openness and entrepreneurial success.

The idea of developing a social science test that people could take to evaluate whether they have the potential to become strong entrepreneurs or not dates back to 2006. Back then, Greechan started conducting research on the topic with his now co-founder, Adeo Ressi, after having a hard time finding the right people to hire for their startup.

Since the Founder Institute – which describes itself as an idea-stage accelerator and startup launch program – kicked off in 2009, the results of 30,000 people from all over the world who have taken the test have been analyzed, including over 600 entrepreneurs in the capital city of Germany and the capital of Bavaria.

Having collected years of data, the team at the institute have used the results to determine traits they believe make a successful entrepreneur, regardless of one's locale, idea or demographic.

German entrepreneurs are also among the world’s most extroverted, according to the findings. The institute has found that extroverted people generally display high energy, assertiveness, and sociability; in these areas, too, Berlin and Munich founders displayed higher extroversion compared to their counterparts in Silicon Valley and the rest of the world.

“German founders and European founders in general are much more extroverted,” said Greechen.

“Definitely German founders are good at selling and compared to the rest of Europe, they are more hardworking,” he added, emphasizing that conscientiousness is another big five trait they have tested that aims to determine someone’s industriousness and ability to get things done.

Image: Founder Institute.

But one area in which German entrepreneurs fared lower in comparison to founders across the globe was agreeableness, one of the major traits the institute believes makes a good entrepreneur.

Berlin and Munich entrepreneurs showed lower than average agreeableness, a trait the institute says manifests itself in individual behavioural characteristics that are perceived as kind, sympathetic, cooperative, etc.

Greechan warns though that while agreeableness has to do with friendliness,“if you’re more agreeable that’s not generally a good thing; you want to be somewhere in the middle.”

And while Berlin founders have many similarities with Munich founders, they differ from them too.

The data show that entrepreneurs in Berlin are more creative than their Munich counterparts, something which Greechan speculates is because “Berlin is sort of an artsy city.”

But while Berlin founders have also shown they are more hard-working and extroverted than Munich founders, entrepreneurs in the capital city of Bavaria on the other hand are more agreeable, emotionally stable and have higher fluid intelligence.

Fluid intelligence describes one’s ability to learn and apply a rule set quickly in order to solve problems; it correlates positively with entrepreneurial success, says Greechan. Traits like emotional instability, conversely, correlate negatively.

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WORKING IN GERMANY

Reader Question: Can I have a freelance side gig as an employee in Germany?

Going freelance in Germany - or even starting a side hustle - can be a rewarding and exciting challenge. But it can come with its own bureaucratic challenges. What are the rules around having a freelance gig if you already have a job?

Reader Question: Can I have a freelance side gig as an employee in Germany?

Whether it’s to try out freelancing or simply to earn a bit of extra money, many people in Germany may have thought about trying out a side gig – or a nebenberufliche Tätigkeit – while they still have a job. It might be an especially attractive option for part-time workers looking to try out a new project as well.

Germany generally allows this, provided that your employment contract doesn’t prohibit it explicitly.

That’s why the first thing you should do if you’re thinking about starting a side hustle is to read your employment contract.

At first, you’re looking to see if side gigs are explicitly prohibited. If there’s no explicit mention of it being prohibited, the next thing to look for is whether you need to seek the company’s permission – possibly through their HR department – to take up your side gig. If you do, this will be explicitly spelled out in your contract.

Once you do that, you need to check and see whether your side gig falls under the Trade Act (Gewerbeordnung). If it does, you will have to apply for the corresponding business license. If it doesn’t, you can be classed as a Freiberufler – or freelancer – and won’t need a special licence to start your business.

You’ll need to do some homework on what kind of business you are – and you’ll need to register with the tax office. Photo: picture alliance/dpa/dpa-tmn | Benjamin Nolte

However in both cases, you will still have to register with your local tax office (Finanzamt). 

In Germany, some professions will require you to have a Befähigungsnachweis – “certificate of competence” – proving you have expertise in your area and are appropriately accredited. These include regulated trades like working as a financial advisor or real estate agent.

Other trades, like marketing services and hospitality, won’t need such a certificate, but you might still be classed as a Gewerbe – which brings some different rules with it. Those who belong to the so-called “new self-employed”, such as artists, writers and journalists, are Freiberufler and don’t need a trade licence.

READ ALSO: Everything you need to know about becoming a freelancer in Germany

Do I need extra insurance?

For your job as an employee, you already will have the necessary health, care and pension insurance – with your contributions from your income there getting taken off your payslip.

If you have a side gig, you remain insured through your main job and don’t need to take out additional insurance. Your contributions – based on the income from your main job – will remain the same.

This changes if your side hustle becomes your main hustle – measured by your working hours. As long as the number of working hours you spend on your side hustle amount to less than your main job, you don’t need extra insurance.

In most cases, having a side hustle in Germany won’t impact your health insurance eligibility or contributions. Photo: thirdman /Pexels

The exception to this is if you take on an employee who works more hours than a mini-jobber. Hiring a mini-jobber is still fine.

If your side hustle does become your main hustle and you’re publicly insured, you need to advise your Krankenkasse.

KSK: How creative freelancers can pay less for German health insurance

What income tax do I have to pay?

First up, Germany has a tax class basically designed for second jobs. It’s called Tax Class 6 and it exists alongside your other tax class. That means that the income from your main job will be taxed according to the rules of one of five different tax classes. Which one you belong to in this case depends on family variables like your marital status or whether you’re a single parent.

Tax class 6, however, doesn’t take any of these variables into account and exists only for your side income. As such, your main employment income will never be taxed according to tax class 6 and your side income won’t receive the breaks and credits that your main income will if you normally belong to a tax class that gives you any advantages.

Tax class 6 will apply to any income you earn on your side hustle above €538 a month. Anything you earn up to this amount though is exempt from additional tax.

It’s important to note that if you do earn more than the monthly €538 minimum on your side hustle and thus have income subject to Tax class 6, you’ll need to file a tax return.

EXPLAINED: What German tax class are you in?

Do I have to charge VAT?

If your side hustle is earning you €22,000 a year or less, you can class yourself as a “small firm” or Kleinunternehmer – and you don’t need to charge VAT on your invoices. This is also the case if you earn above this amount but your income is earned abroad or from foreign clients. 

If you earn above that amount and work with German clients, then you will need to charge VAT and submit VAT returns to the Finanzamt. There can be advantages in doing this though, as it’s through these returns that you can get VAT back that you spend on legitimate business expenses.

EXPLAINED: What are the best bank accounts in Germany for freelancers?

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