Financing for German tech startups continues to improve: The 10 best-funded startups alone received $3.1 billion in capital last year. This is almost double the amount of 2018. The mobility and fintech sectors are particularly benefiting, according to the auditing and consulting organization EY.
From the report “Venture Capital and Startups in Germany 2019” A study by EY shows that the 100 largest tech startups in Germany have raised $11 billion from investors since their founding. Compared to the top 100 from 2018, this represents an increase of $4.8 billion, or 77 percent. The Munich-based startup secured Flixmobility With 560 million US dollars, it was the largest financing of the past year. The Berlin-based travel platform Getyourguide took second place with 484 million US dollars, and the Berlin-based direct bank N26 took third place (470 million US dollars). Celonis In fifth place (290 million US dollars) another Munich startup is among the top 10.
"In 2019, new dimensions were reached in startup financing in Germany. While three-digit million-euro financing amounts were once the exception in this country, they have now become the norm. The high valuations are also due to the fact that the young companies are not only innovative with their digital business models. Due to the transformation of entire industries, some of them have a real chance of becoming the new market leaders,"
says Thomas Prüver, Partner in EY's Transaction Advisory practice and responsible for technology transactions. Prüver continued, noting that startups in the mobility and cleantech sectors in particular have steadily increased in recent years.
"Climate and sustainability aspects are also gaining importance in the German startup market. Experienced founders are increasingly focusing on compliance with sustainability criteria in their companies, which investors are also increasingly taking into account when making investment decisions."
Financing tech startups is changing
Compared to previous years, the share of financing for German tech startups continued to rise, while investors simultaneously made fewer acquisitions. While in 2017, there were 481 financing rounds compared to 138 M&A (merger and acquisition) activities, in 2019 there were already 671 financing rounds and 120 M&A deals.
As the EY report shows, the share of domestic investors has increased significantly. This is particularly evident when looking at exits: In 2017, German investors were still in the minority, accounting for 46 percent of exits. By 2019, 52 percent of exits were completed with German investor participation. This demonstrates the maturity of the German venture capital market, according to Prüver:
"Investor structures in this country have become increasingly professional. They are able to assess the potential of startups even in their early stages of development and provide support not only with money but often also with expertise."
Mobility and fintech startups receive the most funding
With $1.4 billion each, the majority of the funding in the top 100 startups went to young companies in the mobility and fintech sectors. Software and analytics followed in third place with just over $1 billion. These startups were able to secure significant funding, particularly in later stages of development. Of the $4.8 billion invested in the top 100 startups in 2019, about half went to ten tech startups that had completed at least one Series D financing round, meaning they had already completed several financing rounds and demonstrated measurable success. Prüver summarizes:
"Late-stage financing is still almost exclusively carried out by international investors; German venture capitalists play almost no role here. The beneficiaries are usually startups whose business model has already proven to be functional and scalable, meaning it can be transferred internationally to other markets. In the future, it would be desirable for more German investors to be able to lead later and larger financing rounds. Venture capital funds from insurers, for example, could provide a further boost, and the government can also exert a positive influence: The German government's planned Future Fund for startup financing is an important step toward a stronger financing infrastructure in this country."
