VC market starts the new year strongly

The KfW and BVK business climate indicator is once again approaching its best values. One reason for this is probably the controversial shell companies.

The venture capital market appears to have finally recovered from last year's coronavirus shock. The business climate in the segment approached record levels again in the first quarter of 2021, as announced by the promotional bank KfW.

The business climate indicator for the early-stage segment rose to 27.8 balance points, an increase of 11.5 points. Market participants also rated the current business situation very positively overall, with the corresponding indicator rising to 31.9 balance points, an increase of 16.4 points. It is therefore back at its best value from 2018, when the indicator stood at 34.5 points. KfW sees the reasons for the improved values in the implementation of the German government's Future Fund on the one hand, and in the increasing number of shell companies, so-called Spacs, which offer start-ups an alternative to conventional IPOs, on the other.

"The upturn in sentiment on the VC market that we observed at the end of 2020 continued in the first quarter of 2021," says Dr. Fritzi Köhler-Geib, Chief Economist at KfW. "The very good assessment of the deal flow by VC investors is particularly pleasing. After all, a promising deal flow lays the foundation for promising VC investments. The indicators for the quality and quantity of deal flow are only just below their best values."

KfW regularly calculates the German Venture Capital Barometer together with the Association of German Corporations and Handelsblatt.