Overall, Startups According to KfW, in Germany, around €1.5 billion was raised in 204 financing rounds in the last quarter of 2023. The deal volume in Q4 thus remained at the same level as the previous quarter, Q3, at around €1.5 billion, but the number of deals declined again significantly (-19 percent). In 2023 as a whole, €7.2 billion was invested in 1,088 financing rounds in German startups. Thus, while venture capital flow was slower than in 2022 (€10.5 billion), the investment volume was still quite solid by long-term comparison.
KfW Chief Economist Dr. Fritzi Köhler-Geib says:
"In 2024, various factors could contribute to an improvement in the situation on the German VC market. For example, the prospect of falling interest rates in the second half of 2024 could have a positive impact on company valuations and thus also exit proceeds, alleviate fundraising concerns, and also provide new impetus to investment activity."
The volume of growth financing rose slightly again in the last quarter of the year and stood at 705 million euros in the final quarter, according to the development bankThis means that scaleup financings again account for almost half of the invested funds at 47 percent. In Q3, they accounted for only 28 percent of the total volume, at €534 million. In total, growth financings accounted for around €3.4 billion in 2023, compared to around €5.2 billion in the previous year. The share of growth financing in the total VC deal volume was thus very similar in 2022 (49 percent) and 2023 (48 percent).
KfW: Foreign investors are reluctant, IPOs are not forthcoming
Since the global VC market began to slow in early 2022, the share of venture capital from foreign VC investors in the German market has declined. The share of US investors, in particular, declined. It was only 17 percent in Q4, and 25 percent for 2023 as a whole. In 2021, it was 39 percent. In contrast, the share of funds from domestic investors grew to 32 percent (26 percent in the previous year).
Based on the number of exits, the KfW report describes 2023 as a solid year. Exit activity among VC-backed startups in Germany in Q4 also primarily consisted of acquisitions. The final quarter of the year, with 28 transactions, contributed to a further increase in the number of acquisitions. However, IPOs, which are particularly profitable as an exit channel, continue to be absent. However, possible interest rate cuts could further boost the stock markets and give the IPO market momentum in the second half of 2024.
