Due to a lack of mega-deals, Germany's startups raised significantly less money through financing rounds last year than in the previous year. The total value fell by almost a third, from €3.2 billion to €2.2 billion. At the same time, however, significantly more young companies benefited from fresh capital: In 2016, 455 startups nationwide received venture capital, compared to 383 in 2015. The number of financing rounds rose from 417 to 486.
Berlin continues to lead the way in comparison to other German states: In 220 financing rounds (previous year: 212), Berlin-based start-ups received a total of €1.07 billion (previous year: €2.24 billion). As in Berlin, more financing rounds were recorded in Bavaria (83 transactions), North Rhine-Westphalia (48), and Hamburg (40) than in the previous year. In terms of financing volume, the startup locations of Bavaria (€527 million) and North Rhine-Westphalia (€141 million) ranked behind the German capital last year – and recorded significant increases: Bavaria by 87 percent and North Rhine-Westphalia by 57 percent. The financing volume declined in Hamburg, where €127 million flowed into start-ups – compared to €321 million the previous year due to a mega-deal.
Munich makes it into the European top ten
Across Europe, the number of startup financings rose even more sharply last year than in Germany: by 41 percent. The total value of investments also declined less sharply than in Germany: by 11 percent to €11.8 billion. In terms of the number of deals, France led the UK (535) and Germany (486) with 583 transactions. However, in terms of transaction value, the UK was by far the leader: a total of €3.74 billion flowed into British startups. Germany followed closely behind with €2.23 billion and France with €2.22 billion.
After Berlin was able to call itself Europe's startup capital in 2015 thanks to some very large investments, London (€2.2 billion), Paris (€1.3 billion), and Stockholm (€1.2 billion – thanks to a major Spotify deal) were ahead of the German capital in 2016. Munich also placed second in the European top ten with an investment volume of €345 million, placing the Bavarian capital seventh.
These are results of the Startup Barometer of the auditing and consulting firm EY (Ernst & Young)The study is based on an analysis of venture capital investments in Europe.
"The increasing number of financing rounds in Germany's leading startup regions demonstrates that Germany has continued to grow in attractiveness as a startup location, and that, in addition to the Berlin hub, other German startup ecosystems are also developing positively. The startup scene in Germany today has a broader foundation than ever before,"
commented Peter Lennartz, Partner at EY, the numbers.
Berlin still at the top, but Bayern is catching up
Despite a decline in investment volume, Berlin remained by far the leader in Germany. Unlike Berlin, however, investment volumes increased in most other federal states: in Bavaria from €282 million to €527 million, in North Rhine-Westphalia from €90 million to €141 million, and in Saxony from €16 million to €101 million. Investment volumes declined in Hamburg (from €321 million to €127 million) and Baden-Württemberg (from €149 million to €87 million).
With the exception of Baden-Württemberg and Saxony, where two deals were counted each year less than in the previous year, all other major startup regions recorded an increase in transactions, with the increase being particularly strong in North Rhine-Westphalia, where the number of deals more than doubled to 48. Lennartz observed:
"Startup ecosystems have evolved throughout Germany. While Berlin remains at the forefront and continues to be very attractive to startups worldwide, Munich, Hamburg, and Cologne in particular are emerging as hotspots with strong momentum."
In Cologne, for example, investment activity increased significantly from eight deals in 2015 to 25 deals last year – the volume also increased significantly from 25 to 45 million euros.
“The further development of startup ecosystems in Germany and the resulting closer cooperation between innovative startups and German companies represents a great opportunity for the future development of the German economy as a whole.”
