Investments in German start-ups have continued to collapse. From January to June 2023, growth companies raised around 3.1 billion euros – 49 percent less than in the first half of the previous year. This emerges from a new analysis by the consulting and auditing company EY. The number of financing rounds fell to 447, after 549 in the same period of the previous year.
Start-ups are dependent on financial tailwind from investors because they initially do not make any profits. They had experienced a boom during the corona pandemic. In the record year 2021, according to EY, investors had pumped 17.4 billion euros into up-and-coming companies – around 7.6 billion of them in the first six months of the year. Start-ups had benefited, among other things, from the fact that money was cheap and digitization was given a boost in Corona times – for example in financial transactions, online shopping or food deliveries.
In view of rising interest rates and the uncertainty surrounding the Ukraine war and the economy, the money was no longer so easy in 2022: the total collapsed by 43 percent to around 9.9 billion euros, around 6 billion of which was attributable to the first half of the year.
Less thick boards drilled
Now the decline is continuing in leaps and bounds. According to EY, the repeated slump is mainly due to the fact that there were fewer large deals. Up to and including June, there were only five deals that were worth more than 100 million euros. In 2022 there were still 15.
According to EY partner Thomas Prüver, the financing environment for start-ups is currently difficult. There are several reasons for this, such as the major geopolitical risks, high inflationary pressure, high interest rates and weak economic development. Young companies must now show the way to profitability. “That’s the clear focus that investors want to see,” he said.
Even Berlin lets up
The start-up metropolis of Berlin also felt the effects of the ongoing crisis. With more than 1.4 billion euros, start-ups from the capital again collected the most money in the first half of the year. A year earlier, however, it was 3.4 billion – more than twice as much.
Growth companies from Bavaria followed, where the venture capital raised fell by 27 percent to 851 million euros. Hamburg and North Rhine-Westphalia followed at a clear distance.
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Of the ten largest financing rounds, five went to Berlin. Most of the money nationwide went to the Berlin solar start-up Enpal and the energy transition company 1Komma5Grad from Hamburg, each with 215 million euros.