Study: German start-up investments on the decline

After a record year in 2021, things appear to be looking less rosy in the start-up sector. Investments are still at a high level, but there are fewer of them and their value is falling. Meanwhile, Berlin remains the start-up capital

According to a recent study by auditing and consulting firm Ernst & Young (EY), both the volume and number of financing rounds in Germany are declining: the total value of venture capital investments in German start-ups fell by 20 percent in the first six months of 2022 compared to the same period last year. While the amount invested between January and June 2021 was still €7.6 billion, it was only just over €6 billion in the first half of 2022. That is a drop of seven percent.

Nevertheless, we can breathe a sigh of relief: This is still the second-highest first half-year figure ever. Only in the first half of the record year 2021 did more venture capital flow to German start-ups. The same applies to the number of financing rounds: This is still significantly higher than in the years prior to 2021. "The level of investment remains high compared to previous years - at least there is no sign yet of the widely feared slump," says Thomas Prüver, Partner at EY. "There is still a lot of liquidity in the market - but investors are taking a closer look at where they invest. Geopolitical uncertainties, the turnaround in interest rates and an unclear economic outlook are causing great uncertainty in the market, which may not yet be fully reflected in the figures for the first half of the year."

There is reason to celebrate in the capital: Berlin was once again the hotspot of the German start-up scene in the first half of 2022: there were 219 financing rounds here - more than in Bavaria (118), North Rhine-Westphalia (59) and Hamburg (38) combined. Most of the capital continues to flow to Berlin in total: more than every second euro invested in start-ups ends up in the capital: 3.25 billion euros in the first half of 2022. Prüver says: "The start-up heart of Germany continues to beat in the capital."

The most successful start-up sectors were hardware, software and energy. Most venture capital flowed into the software and analytics sector. The sector generated a total volume of more than 1.8 billion euros, roughly the same as in the same period last year. More than 900 million euros in investments flowed into the energy sector: a good 870 million euros more than in the first half of 2021. This was followed by the mobility sector with a financing volume of 844 million euros. However, this had still amounted to 1.41 billion euros in the first half of 2021. The decline in fintechs and insurtechs was particularly extreme: the financing volume here fell from more than two billion euros in the same period of the previous year to around 760 million euros in this year's first half.