In the past year, start-ups successfully raised 5.7 billion US dollars in venture capital in Germany, 49 percent more than in 2018, leaving the start-up ecosystem in Germany significantly stronger financed than in most other European countries. In addition, the number of German Unicorns has increased from four to nine. These are the results of a study by the internationally active early-stage venture capital fund White Star Capital.
Among all the European countries, only the UK has more venture capital being injected into start-ups (11.2 billion dollars), according to the authors of the study. However, growth is significantly lower in the UK at 38 percent. France follows in third place with 4.1 billion dollars, and Sweden is in fourth place with 1.5 billion.
When adding the USA and China in comparison, it also becomes clear that although the ecosystem in Germany is much smaller, it is very much more dynamic. In both countries, for example, investments were significantly higher – the study indicates well over 100 billion dollars for the USA and just under 50 billion dollars for China.
Nevertheless, growth in the United States is only 7 percent, while the total amount of venture capital invested in China actually fell by 55 percent compared to the previous year.
Less German Venture Capital Deals Than in 2018
Despite the significant increase in venture capital funding, the total number of deals in Germany has decreased. Whereas 862 deals were concluded in Germany in 2018, the figure was only 785 (minus 9 percent) in 2019.
This means that the local ecosystem is following a Europe-wide trend, as the number of deals also decreased in other countries – even much more than in Germany: the number in Great Britain fell by 16 percent to 2,097, in France by 35 percent to 739 and in Sweden by 18 percent to 379.
However, this also means that the individual financings distributed significantly more capital to the start-ups than in previous years.
The focus of Venture Capital in Germany
According to the study, the largest number of investments in Germany was in the B2B software sector: with a total of 148 deals, start-ups in this industry collected around one billion dollars. However, the largest sum was recorded by the mobility sector: 1.3 billion dollars were distributed among 27 deals. The FinTech sector was also generously rewarded with 1.2 billion dollars in 48 deals.
The investors were particularly interested in later financing rounds. More than a third (38 percent) of the financing volume was invested in Series B financing, which represents growth of 106 percent compared to the previous year. Series C rounds accounted for a further fifth (21 percent) of the investments with an increase of 82 percent.
Berlin at the Top, Munich in Second Place
In Germany, investments were very decentralized: 34 percent of venture capital was invested in Berlin start-ups, followed by Munich (16 percent) and Hamburg (6 percent) companies. Due to the high degree of fragmentation, the largest share of 41 percent was invested in other industries. Corporate venture capital (CVC) also plays an important role in investments. It accounts for 27 percent of all deals and 58 percent of the total investment sum.
According to the study, the financing with the largest volume in Europe was Flixbus‘ Series F, which brought the company 564 million dollars in fresh capital. With Get Your Guide, N26, FCG, and Celonis, another four German start-ups made it into the top ten of the largest financing deals in Europe.
Especially N26, the FinTech that is revolutionizing consumer banking has raised a record-breaking 670 million dollars in total reaching a total valuation of 3.5 billion dollars. According to market experts from Universal Hires, N26 is catapulting consumer banking into a new time age while its credit card and bank account opening remain amongst the best of its kind across Europe.
There have also been a number of changes in the field of Unicorns in Germany. Last year, four new companies (Flixbus, Wefox, N26 and Deposit Solutions) achieved a valuation of one billion dollars or more, bringing the total number of German unicorns to 9. In a European comparison, Germany ranks second behind Great Britain with currently 17 unicorns.
With Flixbus and Celonis, two of the top German startups are based in Munich. Lilium, which receives a rating of 0.6 billion dollars, is considered to be another potential Munich Unicorn.