> You are dead in the water if you don't have that amount of money in advance as a buffer
In Germany, yes.
The people that usually have the high-enough risk tolerance to build a startup are usually broke college graduates. For a group of 3 broke college graduates each with 10k Euros in debt from BaFoG, coming up with 25k Euros just to try an idea that in the vast majority of cases will not succeed is pretty much impossible.
I finished my masters in germany debt free with 22 years old. The first time I got 25k in the bank was when I was almost 30, that's after working 7 years full time as an employee.
My risk tolerance at 30 is completely different from the one I had at 22. At 22 I could have "lost" 1 or 2 years building a startup that fails, living with 500 Euros a month or less in a shared apartment with my university buddies, waiting tables to pay the bills in between, no problem.
But now that I have 25k ? There is no way in the world I would quit my job to start a company. I have a family that depends on me, and other things I can invest those 25k in (car, house, pension fund, ...).
If you want fresh and broke college students with nothing to do to attempt a moonshot, those moonshots need to be almost free. Only 1 out of every 10.00 or 100.000 moonshots will land your country a profitable company, so you need to have a lot of them.
Requiring people to come up with 25k euros upfront is nuts. If you already had a couple of moonshots succeed, and each moonshot created a generation of 300 millionaires like it happens in the valley, then chances are that some of these risk-friendly and nostalgic millionaires will sponsor some of these startups is high. But Germany would need to somehow create that ecosystem first.
This is all valid if you need a GmbH. But if you are building a website you can do without. Which risk do those students take that cannot be stomached?
On the other hand, since you have 25k, where else but in your startup can you invest your money and expect high profits? If anything, your family does not only rely on you but you can rely on your family to start a company. Your children depend on you showing them how to take risks and be successful.
> This is all valid if you need a GmbH. But if you are building a website you can do without.
If you are doing that alone sure, but if you need to hire people and only have equity to pay them, things will get sketchy quickly without some kind of legal entity.
> On the other hand, since you have 25k, where else but in your startup can you invest your money and expect high profits? If anything, your family does not only rely on you but you can rely on your family to start a company. Your children depend on you showing them how to take risks and be successful.
High profits are the reward for high risk, and high risks do by necessity materialize very often - otherwise they wouldn't be high.
Also, high risks aren't necessarily rewarded with high profits - there are many risks that just aren't worth taking.
Those are the true lessons for the children: assess the risk, asses the profits, and decide whether taking the risk is worth it _for you_. Every person is different and has a different risk tolerance, there is no right answer to the question of whether a risk is worth taking.
A 25 year old joining a startup is taking a smaller risk than a 30 year old simply because they are investing less (their time is worth less, they have less to lose, etc.). The profits are also higher for a 25 year old: 1 year of failed startup experience at 25 can have a huge impact on your human capital long term - if you are a manager at 30, and jump to a startup that fails people will just think that you hugely miscalculated a risk. That might actually hurt your human capital.
There are legal forms to share a company that are not a GmbH but come with personal liabilities. There is also always the option to use an English Ltd or that Swedish form.
>there is no right answer to the question of whether a risk is worth taking.
I tend to disagree. Multiply the risk with the expected profits. Unlike extreme sports, death is not part of the outcome unless you invest in drugs. It's not about thrills and crossing boundaries. If the expected profits are the highest, a risky investment is the reasonable choice, no matter the size of the risk.
Regarding the age, a 25 year old has the most to lose. Until 26 or 27, the brain has the biggest capacity for development. Wasting those years on something profitable but non-educative is a waste of potential. On the other hand, most successful companies are created by older founders because they have the experience and network to be able to succeed.
The 30 year old manager on the other hand hasn't even reached the middle of his life. What if he runs a project in his company that fails? Will he have to prevent mistakes at all costs? Will he ever be able to manage instead of having to cover his ass for further 30 years? By focussing on what he could lose, he is wasting all the opportunities in his life. People who think like that shouldn't start a company.
High profits don't come from high risks. As you say, if you only have the option between high profit, high risk and low profit, low risk, then it is all about risk preference. However, it's all about information asymmetry. Once you know a market and you see an opportunity, that means the risk is lower or the profits are higher than any other market participants assumes.
In Germany, yes.
The people that usually have the high-enough risk tolerance to build a startup are usually broke college graduates. For a group of 3 broke college graduates each with 10k Euros in debt from BaFoG, coming up with 25k Euros just to try an idea that in the vast majority of cases will not succeed is pretty much impossible.
I finished my masters in germany debt free with 22 years old. The first time I got 25k in the bank was when I was almost 30, that's after working 7 years full time as an employee.
My risk tolerance at 30 is completely different from the one I had at 22. At 22 I could have "lost" 1 or 2 years building a startup that fails, living with 500 Euros a month or less in a shared apartment with my university buddies, waiting tables to pay the bills in between, no problem.
But now that I have 25k ? There is no way in the world I would quit my job to start a company. I have a family that depends on me, and other things I can invest those 25k in (car, house, pension fund, ...).
If you want fresh and broke college students with nothing to do to attempt a moonshot, those moonshots need to be almost free. Only 1 out of every 10.00 or 100.000 moonshots will land your country a profitable company, so you need to have a lot of them.
Requiring people to come up with 25k euros upfront is nuts. If you already had a couple of moonshots succeed, and each moonshot created a generation of 300 millionaires like it happens in the valley, then chances are that some of these risk-friendly and nostalgic millionaires will sponsor some of these startups is high. But Germany would need to somehow create that ecosystem first.