KfW Research: German venture capital market is gaining momentum

• German start-ups raised EUR 2.4 billion in the second quarter
• Number of unicorns valued at over USD 1 billion has grown to a record 32
• Further study by KfW Research reveals that foreign investors have a strong interest in German start-ups
• Capital providers from outside Germany invested EUR 37 billion in domestic start-ups between 2020 and 2024

After a quiet first quarter, the German venture capital (VC) market picked up steam again in the second quarter. German start-ups raised EUR 2.4 billion in fresh capital, 45 per cent more than in the previous quarter. That puts the total transaction volume in the first half of the year at just under EUR 4 billion. Investments in German start-ups increased for the third six-month period in a row.

These are the findings of the KfW Venture Capital Dashboard, in which KfW Research publishes quarterly figures on the German VC market.

“This trend is particularly pleasing because the conditions in the first half of 2025 were rather challenging. The distortions in the capital markets in the wake of US tariff policies in particular weighed on the investment environment”,

said Dr Dirk Schumacher, Chief Economist of KfW.

A total of 208 funding rounds of start-ups took place in Germany in the second quarter, 98 of them with a volume of EUR 1 million and more. Over the six-month period it was 735 financing rounds, 198 of which exceeded the million-euro threshold.

At the start of May, two German enterprises joined the “league of unicorns”. Unicorns are defined as start-ups that are valued by investors at USD 1 billion or more. There were 32 unicorns in Germany at the end of the second quarter, a record number.

The market development in the second quarter was shaped by large individual financing rounds in the scale-up segment. This comprises enterprises that have already developed a functioning business model and now wish to expand. Scale-up financing transactions accounted for 57 per cent of the funds invested in Germany, including individual megadeals of EUR 100 million and more. As large transactions in the scale-up segment often involve investors from the US, their share in investments in German start-ups was again significantly higher than in the previous quarter, at 30 per cent. “So far, we have not yet identified any impacts of US President Donald Trump's economic and trade policy on the foreign investment activities of US venture capital providers in Germany”, said Dr Dirk Schumacher.

A further recent study by KfW Research on trends in cross-border venture capital finance in Germany and Europe revealed that investors from abroad, especially from the US, showed a strong interest in German start-ups in the past years. Venture capital providers from outside Germany invested approx. EUR 37 billion in young German start-ups between 2020 and 2024. At the same time, German investors invested some or EUR 21 billion in start-ups abroad.

The German venture capital market thus experienced a net capital influx of around EUR 16 billion. Based on the size of the domestic VC market, that was more than in any other major market in Europe with the exception of Spain. Over the same period, Belgium, Denmark, Switzerland, the Netherlands and Italy had net capital outflows, meaning domestic venture capital providers invested more abroad than foreign investors did in domestic start-ups.

The fact that the inflow of venture capital into Germany exceeded the outflow cannot be attributed to any reticence on the part of German VC investors. The spread of domestic versus foreign investment was comparable to the spread for European investors overall. It was more that foreign investors were particularly interested in German start-ups.

“The high influx on the German VC market is primarily a reflection of the quality of German start-ups and the potential foreign investors see for innovation and growth,”

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

About one quarter of the capital raised by German start-ups between 2020 and 2024 came from domestic VC investors. Another 26 per cent came from VC investors based in other European states. 31 per cent of the capital came from the USA and 10 per cent from Asia, both higher than average for Europe as a whole. US investors accounted for 27 per cent of the total investment in European start-ups.

The high level of capital flowing into the German VC market is, however, a double-edged sword. It indicates a high level of dependence on foreign capital in comparison to other European countries. During crises in particular, this can result in higher volatility in terms of the capital available to start-ups. A secondary effect can also be that start-ups, talented individuals and expertise are lost to other countries. On the other hand, in addition to capital, foreign investors bring access to important networks and expertise.

“Making the German market attractive for venture capital remains an important economic-policy task. If markets offer a more favourable environment for start-ups, growth and business financing, there are fewer reasons to leave the country,”

explained Dr Steffen Viete.

“It is also important to strengthen the exit channels in Germany and Europe – in other words opportunities for IPOs and takeovers. That would increase the potential returns on venture capital investments and help ensure that German start-ups have long-term financing prospects in this country."

The full study on cross-border investments in the VC market can be accessed at Focus on Economics | KfW

The current KfW Venture Capital Dashboard can be found at Venture capital market in Germany | KfW