"We would do it again" - Rostock-based InsurTech hepster on starting a business in Mecklenburg-Vorpommern

Rostock - With its long beaches, beautiful cycle paths and lake district, Mecklenburg-Vorpommern is known as one of Germany's favourite (domestic) travel destinations. The federal state on the Baltic Sea advertises itself as a "land to live in", but is it also a land to start a business? A startup ecosystem and scale-ups, innovative business cases and serial start-ups are probably the only things that come to mind when travelling north on the motorway. InsurTech hepster took the plunge into founding in Rostock in 2016 and is now giving a personal insight into life as a founder in northern Germany and the advantages and prejudices of founding in MV.

Starting up in MV - between the Baltic Sea beach and a business plan

Mecklenburg-Vorpommern captivates residents and tourists alike with its 2,000 kilometres of coastline, countless lakes and beautiful castles. The federal state not only offers scenery with a sea view but also new opportunities for professional self-development - albeit with a few bureaucratic hurdles. Rostock-based InsurTech hepster also shares this experience.

"When we founded the company in spring 2016, we already had a somewhat rocky road behind us, lined with countless consulting approaches, concepts, networking events, funding applications, business plans and bureaucracy," recalls CEO and hepster founder Christian Range. "Back then, there wasn't just one point of contact for founders, but many different contact points. Especially for us as a start-up in the financial services industry with a completely digital business model, it wasn't easy to find the right contacts quickly."

Nevertheless, InsurTech achieved rapid growth: After less than five years, the company has almost 50 employees, is already working with more than 300 cooperation partners and has convinced more than 60,000 end customers of its insurance policies this year alone. In this way, hepster is creating modern, future-proof jobs in new digital business models.

A federal state with start-up potential

Politicians in Mecklenburg-Vorpommern have recognised for some time that start-ups play an important role in the economic and social growth of the region. Under the patronage of the Minister for Energy, Infrastructure and Digitalisation Christian Pegel, among others, many initiatives, projects and event formats have been launched in recent years and months. The aim is to make Mecklenburg-Vorpommern more attractive internally for establishing digital business models and better known externally for the existing start-up ecosystem. Appropriate framework conditions have been created to enable initial financing and the acquisition of suitable office and commercial space.

The Mittelständische Beteiligungsgesellschaft Mecklenburg-Vorpommern, which provided initial funding for the start-up idea - including follow-up investments in the meantime - and the Centre for Entrepreneurship at the University of Rostock were particularly involved and instrumental in the successful development of hepster through their ongoing commitment and the involvement of regional start-ups in a variety of events and projects.

Regional challenges and business reticence

In addition to political support, integration into the regional economy is also important for a start-up. As an InsurTech, hepster has had few points of contact here in the last four and a half years. Although the startup does business with cooperation partners throughout Germany and Austria, there has been no collaboration to date despite several efforts within the federal state. The willingness of established, long-standing successful companies from Mecklenburg-Vorpommern to cooperate was negligible. "The first references of a young company or start-up usually come from the region. This allows everyone involved to learn from the innovative spirit and experience, to grow and develop further. Mutual support is essential," says Christian Range. Why is there a lack of regional cooperation in MV? "In our view, this is due to a lack of trust in young companies on the one hand and a lack of experience with such collaborations on the other," says Alexander Hornung, General Manager and co-founder of hepster. "Ultimately, however, we can only ever reflect our own experiences. We know that other start-ups in the area have had more success in this regard."

Jonas Flint, Managing Director of Koopango and, like hepster, an active part of the MV start-up ecosystem since 2016, adds: "More doors have opened than closed for our business model (special software for indoor navigation) in the regional economy in recent years." Space is also growing for small start-up teams and self-employed people in Mecklenburg-Vorpommern, for example through various co-working spaces in Rostock, Schwerin and Stralsund. Young companies such as YourCar and Lakör are settling in Rostock's co-working spaces and utilising the advantages of shared office space.

Close ties in a manageable ecosystem

Start-ups and founders that focus on the regional characteristics of the location have a clear advantage in the north. These primarily include the maritime economy, renewable energies and the tourism sector. MV is therefore not a classic location for start-ups in the service sector. "Our business model of digital, distribution-driven insurance is quite specific. The start-up centres and investors here in MV sometimes lack experience and an understanding of such new and complex business models," says Alexander Hornung. "The start-up scene in MV is currently still focussing more on promoting smaller and traditional business concepts. There is often a lack of imagination and willingness to take risks to scale up: more growth, more employees and more turnover. As a result, many opportunities remain unrealised as the ideas and goals of those involved are often too far apart. This makes it difficult for young founders with a tech background to gain a foothold here."

The regional challenges on the one hand and the (still) manageable number of market-ready start-ups on the other have ensured that young companies have grown closer together in recent years. "There is a hard core of startups that, even if they come from very different industries, have been meeting up again and again for years and trying to support each other and politics in their projects relating to digitalisation," says hepster founder and COO Hanna Bachmann.

Mecklenburg-Western Pomerania: The state to live in(?)

The number of start-ups in Germany is rising continuously. In so-called startup strongholds such as Berlin, Munich and Hamburg, up to several hundred new companies are founded every year. According to the Startupdetector Report 2019, however, only 17 companies with innovative, digital business models were launched in Mecklenburg-Vorpommern last year. However, while the startup scene in Berlin and other cities is already very busy, founders in MV benefit from the family atmosphere: "As a young company, we are growing together with the developments in the state. While we would go under in Berlin with our business idea, here we benefit from the proximity to other start-ups and all the important contacts. As a startup, we also play an economic role in MV, as we create sustainable and future-proof jobs and offer motivated and very well-trained young professionals the opportunity to work in a constantly growing, challenging field," explains hepster founder Hanna Bachmann. Just last week, Handelsblatt published a study which, for example, confirmed that the Hanseatic city of Rostock has a good chance of becoming one of Germany's start-up strongholds by 2030.

The federal state itself advertises with the slogan "The state for living and working" and thus also wants to counteract the pressing shortage of skilled labour with new and former Mecklenburg residents. The proximity to the sea, to family and the comparatively low cost of living are equally appealing to career starters and skilled workers: "I grew up here, but I went to Australia for a twelve-month internship during my studies. Afterwards, Rostock seemed too close for my first professional experience, so I decided in favour of the Rhine-Main region," reports Franka Laudahn, Account Manager in the B2B team at hepster. "The desire to move back home at some point was always there. However, as a young mother, it initially proved difficult for me to find a job that combined a challenging field of work with an attractive part-time salary. But I was lucky and after a short diversion I found what I was looking for at hepster: a family-friendly work-life balance and the innovative business model are a great combination."

Unexpected challenge for start-ups: the coronavirus crisis

The coronavirus crisis in particular has shown that young companies have to struggle with new challenges at least as much as established economic giants. Startups in the Mecklenburg-Vorpommern region have proven to be exceptionally robust and resilient to the effects of the pandemic during this turbulent time. Advocado, a LegalTech from Greifswald, GWA Hygiene, a MedTech from Stralsund, LunchVegaz, a FoodTech from Rothenklempenow, Vyble from Rostock, which specialises in the digitalisation of payroll accounting - these are just some of the young companies (known as "scale-ups") from Mecklenburg-Vorpommern that have been successful for years. These young companies benefit from the growth conditions outside the start-up strongholds - without daily meet-ups, an unmanageable mass of potential investors and funding programmes on every street corner on the one hand and without constant competition for overpriced office space and qualified staff on the other. They have ensured that the young companies from the Baltic Coast are more creative and motivated in realising their business ideas with fewer available resources. Martin Setzkorn, Managing Director of the Centre for Entrepreneurship at the University of Rostock, confirms: "There is a powerful start-up community in Rostock in particular. Many decision-makers from politics and business take the time to interact with start-ups - this generates positive energy and continuous development." The proportion of women in the start-up teams is also impressive, for example: Laura Gertenbach founded Innocent Meat, one of the best-known in-vitro start-ups in Germany, Fanny Fatteicher founded MediTex, an exciting MedTech company, and hepster also has a female founder in Hanna Bachmann.

Conclusion: "Would we recommend a start-up to found in MV? Definitely!"

Even if Mecklenburg-Vorpommern still has a lot to learn when it comes to promoting start-ups and founders, the federal state is on the right track. "Would we recommend a start-up to found here? Definitely! MV is constantly developing and evolving, new networks and digital structures are emerging. There is simply an incredible amount happening in this state," summarises Hanna Bachmann. "Founders should dare to come to MV and utilise the advantages and structures of the state for themselves." The list of supporters is also long: "In recent years, many people and institutions in the state have supported us. As a startup, you have to be persistent, the path is individual for each company and cannot be standardised in the end. However, MV offers the opportunity to be very close to the neuralgic points in the state and to participate in the development towards becoming a start-up state." In the coming years, Mecklenburg-Vorpommern will have to set itself the task of sustainably supporting companies that are ready for the market, including in their growth. There is currently still a lack of suitable instruments here, but the state and the economy have recognised this problem and have understood that company foundations and start-ups are just as relevant as the development of these into medium-sized companies.