Study: German start-up investments decline

After a record year in 2021, things are apparently looking less rosy in the start-up industry. Investments are still at a high level, but they are decreasing and their value is falling. Berlin, meanwhile, 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 startups 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 EUR 7.6 billion, in the first half of 2022 it was just over six billion euros. That is a minus of seven percent.

Nevertheless, we can breathe a sigh of relief: It is still the second-highest first-half figure ever. Only in the first half of the record year 2021 did more venture capital flow to German startups. The same applies to the number of financing rounds: This continues to be significantly higher than in the years before 2021. "The level of investment remains high compared to previous years - at least there is no sign yet of the slump that many feared," says Thomas Prüver, Partner at EY. "There is still a lot of liquidity in the market - but investors are looking more closely at where they invest. Geopolitical uncertainties, the interest rate turnaround and unclear economic prospects are creating strong uncertainty in the market, which may not yet be fully reflected in the first-half figures."

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

The most successful start-up sectors were the hardware and software and energy fields. Most venture capital flowed into the software and analytics sector. The sector brought in a total volume of more than €1.8 billion, about 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. The mobility sector follows with a financing volume of 844 million euros. However, in the first half of 2021 this figure was still at EUR 1.41 billion. The decline in the fintech and insurtech sectors was particularly extreme: The financing volume here fell from more than two billion euros in the prior-year period to around 760 million euros in this year's first half.