The German start-up scene has recently experienced golden times. But in 2022 the flight will be over for the time being. Investors are holding back – the start-up strongholds are clearly feeling the effects.
Investments in German start-ups collapsed after a record year. Last year, growth companies raised around 9.9 billion euros in venture capital from investors – 43 percent less than in 2021. This shows an analysis by the consulting and auditing company EY published on Wednesday.
Start-ups depend on investors because they don’t initially make any profits. Large funds and corporations invest money in young companies in the hope that their ideas will prevail. In view of rising interest rates and the uncertainty surrounding the Ukraine war and the economy, investors’ money was no longer so easy.
Rising capital costs, falling valuations
Germany’s start-up scene has to adapt to tougher times, says EY. “With the cost of capital rising and valuations falling, investors are paying more attention to profitability than long-term growth promises,” said partner Thomas Prüver. Start-ups must show a clear path to profitability.
According to the analysis, the number of deals closed in 2022 fell by 13 percent to 1008. There were still 37 large financing rounds with a volume of over 50 million euros – only around half as many as in the previous year. Despite all the crises, German start-ups experienced 2022, the second best year since the data was collected in 2015, said Prüver.
Start-ups experienced a boom during the pandemic and, according to EY, raised a total of 17.4 billion euros in the record year 2021. They benefited from the fact that money was cheap and that digitization was given a boost in the times of Corona – for example in financial transactions, online shopping or food deliveries. Now the market has turned: Some start-ups cut jobs, others like the Berlin delivery service Gorillas were taken over.
Wefox and Celonis got the most
The start-up metropolis of Berlin also felt the effects of the crisis. According to EY, start-ups from the capital again collected by far the most money in 2022 (4.9 billion euros) – in the previous year it was more than twice as much at 10.5 billion.
Growth companies from Bavaria followed, where the money raised almost halved to 2.4 billion euros. Of the ten largest financing rounds, six went to Berlin. Most of the money went to the Berlin insurance company Wefox and the Munich software start-up Celonis.
Source: Stern
Jane Stock is a technology author, who has written for 24 Hours World. She writes about the latest in technology news and trends, and is always on the lookout for new and innovative ways to improve his audience’s experience.
