VC business climate index collapses

The war in Ukraine, the high inflation rate and the turnaround in interest rates are worsening the mood on the capital market. capital market.

The business climate on the German venture capital market deteriorated in the first quarter of 2022, as announced by the Kreditanstalt für Wiederaufbau (KfW). The German Venture Capital Barometer fell from 35 points to 7.2 points. This means that the level is only just positive. In the first quarter, the assessments of the economy, interest rates, fundraising climate and value adjustment pressure fell the most.

"The VC business climate really collapsed in the first quarter of 2022. This certainly has to do with the high inflation rates and the international central banks' tightening of interest rates," says Fritzi Köhler-Geib, Chief Economist at KfW. In addition, geopolitical and economic uncertainties caused by the war in Ukraine are also having an impact on the business climate. The economic climate has fallen even more sharply than during the coronavirus shock two years ago.

In contrast, the amount of deals, willingness to invest and exit opportunities have hardly changed. Around three billion euros of venture capital had already been invested in the first three months of 2022. As with the pandemic, the climate slump could therefore primarily reflect the shock of the events and have no short-term impact on actual investment activity. "It is to be expected that investment activity on the VC market will remain stable, partly because investors are still sitting on a lot of capital. In addition, the effects of the war on the energy supply could even increase interest in clean and climatetech start-ups," says Köhler-Geib.