With the rise in interest rates and economic concerns, many young companies have run into financial difficulties because investors preferred to wait and see. Now the situation is improving – but by no means for all young companies.
After the financing crisis of recent years, start-ups in Germany have received a little more money from investors again. In the first half of the year, around 3.4 billion euros in venture capital flowed in, 12 percent more than a year earlier (just under 3.1 billion euros). This is shown by a study by the auditing and consulting firm EY, which is available to the German Press Agency. The authors speak of “signs of a trend reversal” – in the first two half-years of 2022 and 2023, investments in start-ups had fallen significantly. While Berlin remains unchallenged as a start-up hotspot this year, North Rhine-Westphalia is catching up.
Young start-ups in financial difficulties
Despite the upward trend, the financing situation has not improved for all start-ups. The number of financing rounds fell significantly – as in the previous year – to 367 deals, almost a fifth less than in the previous year. “There is still no general sigh of relief in the German start-up scene,” said EY partner Thomas Prüver. While there were slightly more medium-sized and large financing rounds of over 100 million euros, the number of small deals under ten million euros plummeted. It is “alarming that it is apparently becoming more and more difficult for very young start-ups to get fresh money.” Cash injections are essential, especially in the initial phase.
Recovery after difficult times
Start-ups depend on investors for their growth. Large funds and corporations invest venture capital in young companies in the hope that their ideas will prevail. Start-ups experienced a boom during the Corona pandemic. They benefited from low interest rates and the boost to digitalization – for example in financial transactions, online shopping or food deliveries. In the boom year of 2021, almost 7.6 billion euros flowed to start-ups in the first few months alone.
But the rise in interest rates was followed by a crisis: many start-ups cut jobs, others were taken over. According to EY, venture capital investments fell by 39 percent in 2023. Now at least the worst seems to be over.
Berlin still ahead – but NRW wins big rounds
Berlin remained at the top of the list of federal states in the first half of the year, but lost ground. Investments in start-ups there fell by a quarter to just under 1.1 billion euros. One reason: significantly less money flowed into online commerce, where Berlin is traditionally strong. Start-ups from North Rhine-Westphalia, on the other hand, came closer. According to EY, they received 822 million euros in the first six months – 653 million more than in the same period last year. This was due to large financing rounds, led by the online translation service DeepL (277 million euros) and the semiconductor company Black Semiconductor (254 million). Third place went to start-ups from Bavaria with 577 million euros, a decrease of around a third.
Source: Stern
