KfW Research: Venture capital investments with a focus on climate technologies are losing momentum

• Discourse on climate ambitions is affecting venture capital market
• Young businesses with a focus on cybersecurity, artificial intelligence and defence are attracting more attention
• Previous growth segment of online trade appears to be saturated

The debate around the prioritisation of climate targets is also influencing the expectations of venture capital providers. Last year, start-ups with a focus on climate technologies were the segment in the German venture capital market with the highest volume. These start-ups were able to raise twice as much money from capital providers in 2024 than five years before.

For the current year, however, venture capital investors no longer expect such a strong run for the climate technology segment. Climate tech now only ranks midfield for the growth potential of technologies in 2025.

“For one thing, this could signal a degree of market saturation. For another, the economic environment has changed. Climate targets are competing more heavily with other priorities than just a few years ago. Start-ups that have this as a focus could therefore be facing greater challenges raising capital”,

said Dr Steffen Viete, venture capital expert at KfW Research.

These are the findings of a supplementary survey conducted among venture capital investors operating in Germany under the German Venture Capital Barometer of KfW Research, the German Private Equity and Venture Capital Association (BVK) and the Deutsche Börse Venture Network.

Investors believe German start-ups in the field of cybersecurity have the greatest growth potential for 2025. In 2024, the deal volume in this segment was already 65 per cent above the 2019 level. Investors also see young enterprises with a focus on artificial intelligence well ahead. In 2024, the deal volume in this field was 127 per cent above the 2019 level. And the euphoria does not seem to have worn off.

Investors also expect major growth potential in the defence and dual use technology sector (goods with both military and civilian uses), a segment that hardly played a role for venture capital investors in Europe just a few years ago.

However, investors have low growth expectations for mobility and logistics technologies, agri-food technologies and online trade.

“For many years, start-ups that focused on online trade were one of the most important and dynamic areas for venture capital investment. But this area has moved into a mature phase in recent years. Although more than EUR 1 billion was invested here again in Germany in 2024, that was a 67 per cent decline from 2019",

said Dr Steffen Viete.

The study can be downloaded from Focus on Economics | KfW.