Startups in Germany see record levels of investment
A study found that start-ups in Germany received more venture capital than ever last year. Most of the investments were invested in companies in the finance, e-commerce and software sectors.
German start-ups received more than 17 billion euros
Germany has long been known as a hotbed for start-ups, with many aspiring entrepreneurs moving to the federal republic with the intention of setting up their own businesses. While start-ups in Germany have certainly felt the pressures of the coronavirus crisis in 2020, they have garnered record investments in 2021. A study by consultancy firm EY found that newly founded companies in Germany received around 17.4 billion euros in 2021, which is about three times more than in 2020.
The study found that the number of investments over €100 million increased significantly, from eight in 2020 to 33 in 2021. There was also a record number of financing rounds in 2021, which increased rose 56% (compared to 2020) to 1,160. “There’s a lot of investment pressure on the side of investors,” said EY partner Thomas Prüver. “There is a lot of money in the market – it is currently benefiting promising young companies.”
Technology and finance sectors see high investment
Most of the venture capital received by start-ups has been invested in the finance, e-commerce and software sectors. Prüver believes that the coronavirus pandemic is the catalyst for the current financial boom from which start-ups are profiting. New companies that follow online or digital-based business models, allowing for greater employee flexibility, have benefited from the increased focus on digitalization and remote working during the pandemic.
“Young companies are often very innovative and often have the potential to advance the digital transformation of the German economy with their solutions and thus to act as drivers of innovation,” Prüver said.
The biggest deal to take place in Germany in 2021 took place in September: an 861 million euro investment in Gorillas, the Berlin-based grocery delivery company. Munich-based software provider Celonis, online bank N26 and online broker Trade Republic have also received significant investments.
Berlin attracts most investment
Entrepreneurs from Berlin received the most investments in 2021, followed by entrepreneurs from Bavaria. In Berlin, the average investment per financing round was around 21 million euros; in Bavaria, the figure is 19 million. “For other start-up sites, however, it’s hard to keep up,” says Prüver. Indeed, entrepreneurs in federal states such as Baden-Württemberg and North Rhine-Westphalia received on average only eight to six million euros.
Berlin start-ups managed to receive seven of the 10 biggest funding rounds in 2021, while the other three went to Bavarian companies.