KfW Research: Venture capital investors in Germany have different priorities than elsewhere

• Start-ups that focus on climate technologies and defence receive a greater share of funds than in other countries
• Young enterprises that focus on artficial intelligence are successful in fundraising in Germany as well
• Investors see the Internet of Things and robotics as offering the greatest growth opportunities for start-ups in 2026

The German venture capital (VC) market has some characteristics that differ greatly from global VC activity. It is true that German start-ups in the field of climate tech – technologies and services aimed at decarbonisation and at minimising climate risks – last year received significantly fewer funds from investors than in previous year. Despite decreasing to EUR 1.3 billion, however, their share in venture capital distributed in Germany remained at a high 18 per cent. Globally, only eight per cent of all VC funds were invested in this area.

VC investors in Germany also invested significantly more in young innovative enterprises operating in the dual-use and defence industry than elsewhere in the world. These are start-ups that focus on products with civilian and military applications. Last year, EUR 1.16 billion was invested in this area in Germany, 42 per cent more than in the previous year. Thus, VC investment in this area accounted for 16 per cent of total investment in the German VC market, which amounted to EUR 7.2 billion – significantly more than the global share of four per cent.

This is one of the findings of an analysis conducted by KfW Research using the database provided by Dealroom.co. Furthermore, VC investors in Germany provided more funds to start-ups operating in the area of cybersecurity than is typically the case in other countries. Eight per cent of investments in Germany went to this segment compared with five per cent worldwide. The cybersecurity industry grew by 632 per cent in Germany to EUR 578 million last year.

Another area that experienced high growth in Germany in 2025 was artificial intelligence (AI). Investments in German AI start-ups rose by 45 per cent to almost EUR 3 billion. Around the world, VC investments in AI increased by an even higher 74 per cent. The global market share of VC investment in AI was 47 per cent, with Germany also coming in at a high 41 per cent.

“The widespread assumption that Germany has little to offer in the field of artificial intelligence is incorrect. Germany now has many promising start-ups that are active in this field,”

said Dr Dirk Schumacher, Chief Economist of KfW.

VC investors expect their priorities to shift this year. A special survey among venture capital investors operating in Germany revealed that they see the highest growth opportunities this year for domestic start-ups that focus on the Internet of Things and robotics. These are young innovative businesses that develop, for example, networked devices and automation technologies. At EUR 809 million, these enterprises experienced an increase in deal volume again for the first time last year (+24 per cent), after declines in the two preceding years.

“This shows that industrial culture in Germany continues to provide very fertile ground for innovation in production technology,”

said Dr Dirk Schumacher, Chief Economist of KfW.

VC investors see businesses that work in the defence and dual-use sector as having the second highest growth opportunities, followed by the fields of cybersecurity and AI. A year before, investors had still ranked these two areas first and second, where they eventually stood at the end of the year as measured by their growth in funding volume.

The youngest technological areas currently being funded with VC include quantum technologies and nuclear fusion. VC investments in German start-ups in these areas have increased successively in the past two years but remain on a comparatively low level. In 2025, investments in start-ups with a focus on quantum technologies increased by 37 per cent to just under EUR 96 million, and in nuclear fusion start-ups by even 212 per cent to EUR 258 million. Quantum technologies are currently among the areas for which VC investors have high growth expectations, ranking them fifth.

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