The signs for German start-ups are pointing to investments as data from 2018 indicate.
Never before has so much money been raised by German start-ups as in 2018. According to the global database Dealroom a total of EUR 4.4 billion has been invested in 2018 (compared to EUR 3.2 billion in 2017). Key driving factors were a dramatic increase of mega-rounds into “Growth Equity” and “Series A” German companies (investments of EUR 87 million plus). Germany has improved its position in the ranking and is now the No.2 tech hub in Europe after the U.K.
Early-stage investments driving growth
The early-stage investments are driving growth. The Seed and Series A funding rounds in Germany are bigger than in the U.K., France or the rest of Europe.
Some stats (source Dealroom):
- €4.4bn Total Investment in German start-ups in 2018 (€1.8bn thereof from the US and Asia)
- €1.7bn Value of mega-rounds (over 100m) in 2018 (more than double 2017)
- €106bn Combined value of Germany’s 28 unicorns created since 2000 (over a third of them (nine) became unicorns in 2018 alone)
German unicorns growing
While U.K. is still leading as Location for start-ups and unicorns, Europe’s tech hubs have set their sights on catching up.
Berlin, for example, is home to over half of the companies Dealroom has identified as “future unicorns.” Senior analyst Lotf Belych explains the reasons why: “The success of German unicorns is driven mainly by a well-connected ecosystem of talent and start-up enablers, along with the rapidly-growing list of their international customer base, especially for the tech unicorns (Celonis, BioNTech). This increases the investors’ appetite for global expansion.”
Europe strong in sustainability
Another key driver is the increase in investment from the U.S. and Asia alone, which amounted to EUR 1.8 billion in 2018 compared to EUR 0.4 billion in 2016. Why does Germany remain attractive when intercontinental foreign direct investment is slowing down around the world? Achim Hartig, head of investor recruitment at Germany Trade & Invest, has some ideas: “The stability of the political system is a cornerstone of the E.U. as a free market and facilitates trade and investment worldwide,” he says. “The German government supports SMEs developing innovative products, services, technologies and processes. Start-ups in Germany are cooperating with traditional companies. As a result, we are attracting more international start-ups.”
Dealroom has identified FinTech, mobility, and deep tech as Germany’s principle investment growth areas, but the Digital Hub Initiative is fostering innovation in a number of specialist fields. The Deutscher Startup Monitor 2018 found that, besides digitalization, sustainability and ethical business practices were high on the priority list for start-ups.