When a clumsy attempt to muzzle German business journalists backfires.

We always get slightly nervous at REFIRE when Germany goes all bullish on the stock market. It’s not that we don’t believe in the stock market as a source of capital and wealth-building – we do – but it’s just that, well… Germans in general don’t buy into that story. They save, they rent their properties, they invest their money in low-interest ‘capital-life’ insurance policies and they buy property indirectly through mutual funds, making these fund repositories the biggest investors in Europe.

But there is a dedicated cohort that sees itself as different and they often become cheerleaders for the stock market. Whether it’s day-trading, punting on exotic derivatives or hanging on the latest guru’s every stock recommendation and spouting on endlessly about it in print or social media, they represent a sizeable community. As many of us veterans well recall the days of Germany’s high-tech Neuer Markt over 20 years ago, excessive German exuberance about the stock market tends not to end well. This week’s events have had us pondering on parallels with the past.

Here’s the story in a nutshell. Three months ago, an advisory group to the German government published an 11-page position paper on the website of the German Economics Ministry dealing with the establishment of “rules to avoid biased defamatory articles” about startup companies hoping to ultimately go public via an IPO.

This advisory group, called Beirat Junge Digitale Wirtschaft, is an influential body which consists of several leading names in Germany’s startup scene. It was established in 2013 under the liberal economics minister of the time, Philipp Rösler, and consults with the Ministry on startup and digital matters, such as artificial intelligence, digital policies or looming shortages of skilled workers. The group has official standing within the ministry. In fact, current economics minister Peter Altmaier was only recently quoted as saying that he hoped to receive “valuable suggestions” from the group. Well, here’s a whole pile of them from his trusted lieutenants to chew over.

It looks like nobody paid much attention to the position paper until earlier this week, when business daily Handelsblatt reported on it. That threw the cat among the pigeons, who have been scarpering for the hills in the days since the article’s appearance. Peter Altmaier says he knew nothing about it. Several of the leading startup founders on the advisory board have been hastily apologising, saying an internal mistake had allowed the wrong document to be published. Others have been taking to LinkedIn to distance themselves from the paper’s demands. A handful have already resigned.

The offending document has disappeared off the Economic Ministry’s website, with the Beirat’s chairman saying an incorrect version was published by mistake, as a result of the “failure of our internal control mechanisms”. Strangely, the replacement document as a result of the “internal mistake” has not appeared yet. Doubtless it is being hastily written as we speak.

What was in this document and why does all this matter?

The document makes it clear that the environment for smoothing the path for more German startups needs to be made much more user-friendly. User-friendly to the startups, that is. For the clear enemy of all this natural flowering of creative animal spirits is the free press, who have been hindering the ambitions of the whole digital industry at every turn. To muzzle these enemies of capitalism, the 29-person advisory board recommends “ensuring balanced reporting on IPOs by enacting rules to avoid one-sided defamatory articles that have spread as downright IPO- and new-economy bashing among financial editors”.

The wayward press must now be obliged to report on even the smaller IPOs, which might otherwise “fall between the cracks” of the larger media. The press needs to be “disciplined” to provide factual, correct and complete information, reinforced by the obligation to immediately provide a rebuttal in case of misinformation. And internet forums and bloggers must be obliged to disclose their full identity and would be held liable for any “false allegations and insults”.

It goes without saying that, for the digital experts on the BJDW board, these demands are breathtaking in their audacity and arrogance. It’s no wonder they’re throwing up a smokescreen to limit the damage. It’s not so long ago that the one great white digital hope that Germany has produced in the last 15 years – Wirecard – was itself a startup. If we’ve learned one thing from this debacle, it’s not that Germany needs less scrutiny of its nascent IPO candidates, but more.

Among those potential IPO candidates are quite a number of proptechs – nimble visionary startups looking to add value to the German real estate industry – a notorious laggard in matters digital and now desperately playing catch-up with more digitised markets elsewhere. 

Startups in Germany, like elsewhere, always talk a good game. They have to – it’s in the nature of the theatrical drama they almost must create around themselves to help part those world-weary venture capitalists from a few million or 20 in the next critical funding round. The hoped-for rewards from all this hype are plentiful: cash for rapid scaling, attracting the attention of a hungry predator and the undeniable kudos of recognition by your peers across the social media channels.

They naturally only want journalists to report positively on their startups – what used to be known as court reporting – and are positively hostile to a journalistic approach which seeks to critically understand the fundamentals behind a business with such a self-evidently glorious future. While they know a lot about their startups, they know little about the practice of professional journalism. Or, indeed of PR and marketing, into which they might consider investing a few bucks to raise the genuine level of interest in their world-beating endeavours. They’ll need to learn.