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Deeptech startups are experiencing a severe talent shortage, unable to find qualified German or European applicants. Concurrently, Intel's expansion in Eastern Germany may exacerbate this issue by intensifying competition for skilled workers, potentially leading to greater talent bottlenecks in the region.
Minister-based startup Pixel Photonics faces a unique challenge when expanding its 35-person team: it must cast its recruitment net far beyond Germany, sourcing talent from countries like Turkey, India, and Iran.
Specializing in the development of single photon detectors capable of detecting minuscule particles of light, Pixel Photonics targets applications in quantum computing and communications, microscopy, and health diagnostics. With €1.45 million in venture capital funding and backing from various EU and German grants, the startup's technology holds promise for future applications such as cancer cell detection in patients.
Pixel Photonics faces persistent challenges in recruitment, notably struggling to find qualified personnel for crucial roles. Cleanroom technicians and engineers, vital for manufacturing the company's chips in a controlled environment, are particularly difficult to recruit, alongside financial accountants and IT system administrators.
Christoph Seidenstücker, cofounder and CFO of Pixel Photonics, laments the scarcity of German or European applicants for certain positions, underscoring the depth of the company's recruitment struggles.
German companies face significant challenges when hiring employees from outside the European Union. Obtaining visas, finalizing employment contracts (previously required to be signed physically), and the prolonged process of acquiring tax identification numbers are all cumbersome procedures that hinder companies' operations and impede their growth, according to entrepreneurs. However, if Germany intends to realize its ambition of evolving into a "startup republic," it must tackle the recruitment obstacles experienced by startups operating in pivotal sectors such as chip manufacturing and quantum technology.
In-demand roles
A notable talent deficit plagues Germany, with a shortage of 310,000 professionals in fields encompassing science, technology, engineering, and mathematics (STEM), as indicated by a 2023 study conducted by The German Economic Institute. This scarcity impacts deep technology (deeptech) startups to varying degrees, contingent upon their developmental stage and sector, asserts Elisabeth Schrey, managing partner of Germany's state-supported fund for deeptech and climate technology (DTCF).
According to Elisabeth Schrey, managing partner of Germany's state-supported fund for deeptech and climate technology (DTCF), early-stage startups often find it relatively easier to recruit by targeting junior profiles fresh out of university, nurturing them within the company. However, as startups progress to the scaleup phase, the challenge intensifies in securing senior engineers possessing specialized expertise within their sector, coupled with leadership and team development experience.
Schrey highlights that hiring hurdles for some deeptech startups stem from the nascent nature of the industries they operate in, resulting in the scarcity of qualified candidates for niche roles. For instance, McKinsey reports a striking statistic: globally, there's only one qualified candidate available for every three quantum job openings, underscoring the scarcity of talent in emerging fields like quantum technology.
Recruiting talent for Berlin-based semiconductor startup Akhetonics, specializing in developing a photonic Reduced Instruction Set Computer (RISC) processor, has been relatively smooth thus far. The company has successfully onboarded software developers and photonic design engineers essential for its technological advancements.
However, founder and CEO Michael Kissner acknowledges the existence of challenges in finding individuals with specific skill sets, such as "optical quantum system engineers," a rare combination encompassing expertise in quantum physics, photonic design, engineering, and computer science. Kissner notes that the company's strategy involves identifying candidates proficient in two of these fields and providing training in the third.
Meanwhile, Pixel Photonics encounters difficulties in recruiting engineers with expertise in analogue high-frequency electronics. Despite the availability of relevant programs in numerous German universities, the field remains underrepresented, according to Seidenstücker, a representative of the company.
Seidenstücker highlights another significant challenge in talent acquisition: the escalating competition from large corporations, which is expected to intensify further. This competition is exemplified by the substantial investments being made by industry giants.
For instance, US chipmaker Intel has committed €30 billion towards constructing two new factories in Magdeburg, located in the eastern region of Germany. Similarly, Taiwanese chipmaker TSMC is in the process of establishing a semiconductor facility in Dresden. Additionally, GlobalFoundries, another prominent US semiconductor company, plans to invest $8 billion to expand capacity at its chip manufacturing plant in Dresden.
These substantial investments are anticipated to generate tens of thousands of employment opportunities across various domains, spanning from hardware and software engineering to AI research science. Consequently, the competition for talent is expected to become increasingly fierce as these companies expand their operations and create job opportunities in the region.
Seidenstücker emphasizes that Pixel Photonics is currently in a race to secure a seed round of funding to expedite the recruitment process for at least 15 new hires. These hires are essential across various departments, including fabrication, accounting, and IT administration. The urgency stems from the looming threat of larger corporations attracting the same talent pool.
However, Gopalakrishnan Balasubramanian, CEO of XeedQ based in Leipzig, offers a contrasting perspective. He suggests that startups face a stark reality wherein they are unable to match the compensation packages offered by big corporations, particularly in terms of salary. Balasubramanian's sentiments underline the challenges that startups encounter in competing for talent against well-established corporate entities.
Quantum startups like XeedQ face a critical need for skilled professionals in areas such as fabrication, process engineering, and cleanroom operations. In academic settings, salaries for these roles typically range from €45,000 to €50,000 annually. However, most startups offer a slight premium, approximately 10% more than academia, especially for fresh graduates, according to Gopalakrishnan Balasubramanian.
XeedQ distinguishes itself by offering competitive starting salaries ranging from €55,000 to €60,000, particularly for candidates with experience in nanofabrication—an exceedingly rare skill set—or process development. Nevertheless, corporations can significantly outbid startups, offering approximately 20-25% higher salaries.
Balasubramanian highlights instances where candidates with relevant expertise expect starting salaries between €65,000 and €75,000, citing prevailing market trends. This wage discrepancy underscores the challenges faced by startups in attracting and retaining talent in highly specialized fields, particularly in comparison to the compensation packages offered by larger corporations.
For Pixel Photonics, the challenge of sourcing talent from outside the EU is only one part of the equation; the other half involves facilitating the relocation and settlement of new hires in Germany.
The process of securing German work visas has long been criticized as complex and arduous by founders. Additionally, navigating the immigration office as a new employee in Germany presents its own set of challenges.
According to Seidenstücker, employees of Pixel Photonics have encountered significant hurdles, including waiting times of over four hours to secure appointments at local immigration offices. Furthermore, communication barriers arise as many officials at these offices either do not speak English or opt not to do so, further complicating the process for foreign employees.
In addition to visa complications, securing housing poses another challenge for Pixel Photonics, particularly due to landlords unaccustomed to dealing with international tenants. To address this, the company actively assists new employees in finding accommodation and directly liaises with landlords to bridge language barriers and assure them of payment.
Seidenstücker highlights instances where landlords express disbelief regarding the income levels of employees from countries like India, reflecting a xenophobic attitude prevalent among some landlords in Germany.
He emphasizes that the hurdles in talent relocation are not merely procedural but stem from the mindset of individuals working in immigration, housing, and related departments. Seidenstücker identifies a broader issue with the "welcome culture" in Germany, suggesting that a shift in attitudes and practices is necessary to facilitate smoother integration and support for international talent relocating to the country.
According to Seidenstücker, alleviating the challenges associated with hiring talent as a German startup requires several key measures.
Firstly, simplifying the immigration process for migrants seeking to relocate to Germany is crucial. While the German government introduced reforms in June of the previous year aimed at facilitating immigration for skilled workers, Seidenstücker emphasizes the need for further improvements. This includes digitizing and streamlining procedures for obtaining visas and employment contracts, as well as enhancing the training of staff in government departments to provide better support and assistance to migrants.
Furthermore, Seidenstücker suggests that the government could enhance its efforts to promote job opportunities offered by startups to potential candidates within Germany and internationally. By raising awareness of available roles, startups can better fill vacancies and access the talent they need to grow and thrive.
Founders acknowledge that addressing the talent shortage in specialized fields like quantum technology in Germany is a multifaceted challenge. To increase the supply of skilled professionals, particularly in emerging areas such as quantum computing, sensing, and communication, founders suggest a comprehensive approach that begins with education.
According to Kissing, educational institutions play a crucial role in showcasing to students the potential career paths and future developments within the industry. By dispelling skepticism and illustrating the possibilities in these fields, institutions can encourage more students to pursue relevant studies.
One proposed solution is to promote dual degree programs that combine disciplines such as quantum physics and computer science. Kissing advocates for government support to incentivize students to pursue these interdisciplinary programs, extending beyond the typical financial assistance provided through programs like BAfög (Federal Training Assistance Act). Such initiatives would not only broaden students' skill sets but also bolster the talent pipeline in specialized areas critical for Germany's technological advancement.
“That way, the student faces less risk when they enter the industry.”
Source: Sifted
