KfW Research - Dossier

Venture Capital

Investors from outside Germany have a strong interest in German start-ups. Between 2020 and 2024, venture capital providers from outside Germany invested approx. EUR 37 billion in young German start-ups. At the same time, German investors invested some EUR 21 billion in start-ups abroad. The German venture capital market thus experienced a net capital influx of around EUR 16 billion – more than any other major VC market in Europe. The high capital influx to Germany demonstrates that foreign investors see quality in German start-ups. At the same time, however, the German VC market is dependent to a certain degree on capital from abroad. Economic policy must support the German VC ecosystem from two sides: by systematically strengthening the local supply of capital and by successfully integrating international investors.

Trends in cross-border venture capital investments in Germany and Europe(PDF, 819 KB, accessible)

The German venture capital (VC) market has developed positively over the past years and is now significantly more mature than a decade ago. Nonetheless, it still lags behind important international markets where more capital is available to start-ups. While the boom-and-bust phase that began in 2021 appears to have been overcome and much suggests that the market can continue on its growth path in the current year, targeted and long-term efforts are still required in critical areas of action in order for the market to develop on a sus¬tainable basis. The mobilisation of private capital for venture capital investments is particularly crucial for this.

The German venture capital market after the boom and bust: Returning to a sustained upward trend should be the goal(PDF, 720 KB, accessible)

Professional venture capital investors have in-depth technology and industry knowledge, invest to generate returns and therefore play a key role in the allocation of innovation and growth capital. The expectations of German investors currently diverge across the various technological domains. Investors see very good growth opportunities for artificial intelligence, cybersecurity and dual use technologies. Climate tech evolved into the technological area with the highest deal volume in the German venture capital market in 2024 but growth expectations for 2025 are more muted than three years ago. Investors see relatively low growth opportunities in more mature markets, especially in e-commerce.

Venture capital – market trends in 2025(PDF, 450 KB, accessible)

Private markets such as the VC market are characterised by the fact that they are relatively illiquid, so that external influences are slow to be reflected in observable market variables such as valuations and transaction volume. Furthermore, relevant information is publicly known in private markets to a limited extent only. Both of these factors hamper the real-time observation of market movements. Given that many market players actively communicate in social media, these constitute an interesting alternative source of information.

In order to examine the potential of social media posts for nowcasting global venture capital market sentiment, we have generated sentiment indicators using KI-based natural language processing methods. The findings suggest that the sentiment indicator thus developed allows changes resulting from market-moving events to be tracked and assessed with a high degree of timeliness.

Venture capital: Market observations using social media sentiment analyses(PDF, 549 KB, accessible)