German startups raised a record $7.5B (€6.4B) in venture capital funding in 2020, up over 20% YoY. Around 66% of the increase came from growth in late-stage investment, which is dominated by foreign investors. German VCs tend to focus on early-stage investments and are frequently entirely absent from late-stage funding rounds.
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- The startup industry is still small in Germany, compared with other European countries. VC investments in Germany represented 0.047% of GDP between 2017 and 2019, compared with nearly 0.1% in the UK.
- U.S. investor participation in German VC rounds exploded between 2015-2020. Last year saw a record 150 deals worth $4.75B (€4B), compared with just 76 deals in 2015 totaling $928.9M (€784.3M).
- Uwe Horstmann, general partner and co-founder of Berlin-based venture firm Project A, notes that emphasis on foreign investment creates a risk of German companies’ success primarily benefiting interested abroad.
- A study at the Technical University of Munich found that two-thirds of companies co-financed by non-domestic investors subsequently go public in another country or are sold to foreign investors. That is compared to just one-third of companies that receive domestic investment.
- Efforts to reverse the trend are beginning to emerge:
- Munich-based HV Holtzbrinck Ventures, which launched a $634.7M (€535M) vehicle to invest in non-portfolio late-stage deals in addition to Seed and Series A rounds.
- The German government also announced an $11.8B (€10B) fund to help late-stage startups expand.
