Last year, German startups raised $5.7 billion in venture capital, 49 percent more than in 2018. This means that the startup ecosystem in Germany is significantly better funded than in most other European countries. Furthermore, the number of German unicorns increased by four to nine. This is the finding of a study by the international early-stage venture capital fund White Star Capital.
Among European countries, only the United Kingdom distributes more venture capital to startups ($11.2 billion), according to the study authors. However, growth there is significantly lower at 38 percent. France follows in third place with $4.1 billion, and Sweden ranks fourth with $1.5 billion.
If we compare the US and China, it becomes clear that the German ecosystem, although much smaller, is nevertheless highly dynamic. Investments were significantly higher in both countries—the study cites well over $100 billion for the US and just under $50 billion for China—but growth in the US was only 7 percent, while the amount of venture capital invested in China actually declined by 55 percent compared to the previous year.
Fewer venture capital deals than in 2018
Despite the significant increase in venture capital, the total number of deals in Germany has declined. While 862 financings were completed in Germany in 2018, this number fell to just 785 in 2019 (down 9 percent). The local ecosystem is thus following a Europe-wide trend, as the number of deals also declined in other countries — even significantly more than in Germany: In the UK, the number fell by 16 percent to 2,097, in France by 35 percent to 739, and in Sweden by 18 percent to 379. However, this also means that the individual financings distributed significantly more capital to startups than in previous years.
Venture capital especially for mobility and B2B startups
The largest number of investments was recorded in Germany, according to the study The B2B software sector: With a total of 148 deals, startups in this sector raised around one billion dollars. However, the largest sum was recorded in the mobility sector: Here, 1.3 billion dollars were distributed across 27 deals. Fintech-Industry was generously rewarded with $1.2 billion in 48 deals.
Investors were particularly interested in later financing rounds. More than a third (38 percent) of the financing volume was invested in Series B financings, representing a 106 percent increase over the previous year. Series C rounds accounted for another fifth (21 percent) of investments, with an increase of 82 percent.
Berlin in first place, Munich in second place
Investments in Germany were very decentralized: 34 percent of venture capital was invested in Berlin-based startups, followed by companies in Munich (16 percent) and Hamburg (6 percent). Due to the high degree of fragmentation, the majority, 41 percent, falls into the "Other" category. Corporate venture capital (CVC) also plays an important role in investments: they account for 27 percent of all deals and 58 percent of the total investment volume.
According to the study, the financing with the largest volume in Europe was the Series F of Flixbus, which brought the company $564 million in fresh capital. Four more German startups, Get Your Guide, N26, FCG, and Celonis, made it into the top ten of Europe's largest financing rounds.
German unicorns
A lot has also happened in the unicorn sector in Germany: Last year, four new companies (Flixbus, Wefox, N26, and Deposit Solutions) achieved a valuation of one billion dollars or more, bringing the total number of German unicorns to 9. In a European comparison, Germany ranks second behind Great Britain with currently 17 unicorns.
With Flixbus and Celonis Two of Germany’s top startups are based in Munich. Lilium, which has a valuation of $0.6 billion, is considered another potential Munich unicorn.
