German Startups Encounter Setbacks
Venture investors poured a record 10 billion euros in German startups in 2021. However, this figure has steadily declined since then. The number of financing rounds has decreased by almost 20 percent to 447.
"Major geopolitical risks, high inflationary pressures, high interest rates and weak economic performance have led to a challenging funding environment in the startup ecosystem in this country," Thomas Pruever, partner at EY, said in a statement.
With more than 1.4 billion euros, the capital Berlin remained the startup hotspot of Europe's largest economy. With a drop of 56 percent, however, its lead over other large cities in Germany has been shrinking.
"It will be exciting to see if this trend continues," Pruever said, emphasizing that "the strength of the German startup scene is, not least, that there are several hotspots that have different qualities and focuses."
Every fifth financing round in the first half of 2023, totaling 910 million euros, involved a startup with a sustainability focus. According to EY, this share has never been so high before. This development in the face of "economically stormy times" was a "strong signal," Pruever said.
According to the German Startups Association, there are already signs of a trend reversal after a startup slump in the country last year. Compared to the last six months of 2022, the number of new startups in the first half of this year rose by 16 percent to almost 1,300.
That was an "important signal for the economic and innovative strength of our country," the German Startups Association's Chairman Christian Miele said last week. "This momentum is not a foregone conclusion; we have to keep it alive with all our might." (1 euro = 1.12 US dollars).
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