Startups ready to transform government

Berlin, 29 June 2026. The GovTech Startup Monitor 2026, published by the German Startup Association and Accenture in cooperation with the Hertie School’s Centre for Digital Governance, shows that the potential for a digitally sovereign and high-performing state exists, but is being held back by structures and procurement practices that prevent startups from making a more effective contribution to a future-ready public sector.

Germany faces a structural problem: the majority of surveyed startups report that procurement procedures favour established providers (77%), and that they would like to see a stronger focus on outcomes rather than processes (92%). There is also broad agreement that this is about more than efficiency alone: 86% view procurement as a matter of digital sovereignty.

“We talk a lot about digital sovereignty, but achieving it first requires significantly more startup-friendly conditions in public procurement. Thousands of startups are ready with exactly the technologies a modern state needs. If we finally adapt procurement law, public purchasing can become a powerful lever for both growth and sovereignty,” said Verena Pausder, Chairwoman of the German Startup Association.

Government remains a second choice in practice

On paper, government appears to be the ideal customer: 78% of GovTech-oriented startups rate the volume of public contracts positively, and 71% see public-sector organizations as valuable reference customers. In practice, however, the picture changes dramatically. Only 11% of these startups consider working with public administration more attractive than private-sector clients, while nearly six out of ten (59%) find it less attractive.

The main reason is access. Eight out of ten startups struggle to identify the right point of contact within government, with most relying almost exclusively on personal networks (64%). 

According to the report, the potential is considerable: approximately 15,000 startups in Germany already work with business or public-sector customers today.

It’s not the culture, it’s the processes

The common narrative of an unbridgeable cultural divide between government agencies and startups is not necessarily supported by the data. Startups that do not apply for public contracts primarily cite overly complicated (43%) and excessively lengthy processes (42%) as barriers. Only 28% point to the culture of public-sector clients.

The greatest challenges lie within the procurement process itself, including:

• Overly complex tender documentation (72%) 
• Extensive reference requirements (60%) 
• High revenue thresholds (56%) 
• Strong emphasis on price over other criteria (54%) 

Once government agencies and startups begin cooperating, the most significant challenge is the length of decision-making processes, according to 85% of respondents.

Procurement must catch up

The willingness to cooperate is already there: 71% of startups would engage more strongly with the public sector if framework conditions improved.

There is also broad agreement on the key levers for change. Startups prioritize:

• Faster decision-making processes (73%) 
• Procurement regulations that are better suited to startups (72%) 

Public IT service providers could play a crucial role in opening the market, with 80% of startups viewing them as potential bridge-builders.

“The idea of involving startups more closely in the digital transformation of public administration has been discussed for quite some time. Yet progress in implementation has been slow. A better understanding is needed – not only of the potential and concrete technological solutions that startups offer, but also of the specific challenges they face when engaging with public administration. The Monitor makes an important contribution in this regard,” said Professor Gerhard Hammerschmid, Professor of Public and Financial Management at the Hertie School.