• Modest improvement after confidence fell in late 2025
• Investors are wary of the coming months
• Possible interest rate hikes could bring fundraising to a halt

After the slump in confidence at the end of 2025, sentiment in the German venture capital (VC) market stabilised again at the beginning of 2026. The indicator climbed by a moderate 6.2 points to -25.9 points in the first quarter of 2026. With that, however, VC sentiment remains subdued and well below the long-term average represented by the zero line.

The slight improvement on the final quarter of 2025 was mainly driven by better assessments of the current situation by VC investors. Their six-month business expectations, however, moved sideways.

This is one of the findings of the VC Barometer which KfW Research and the German Private Equity and Venture Capital Association (BVK) prepare jointly on a quarterly basis to gauge the sentiment of venture capital investors in Germany.

Investors have a significantly more negative view of the interest rate environment than just a few months ago, when signs were pointing to further rate cuts. Market participants now expect the European Central Bank to raise interest rates. “That will likely make fundraising more difficult again for venture capital funds and weigh on valuations for start-ups. It will make exits even more challenging. These prospects hang like a sword of Damocles over the VC market, which actually experienced a stable start to the year with EUR 1.7 billion,”

said Dr Dirk Schumacher, Chief Economist of KfW.

Ulrike Hinrichs, Executive Board Member at the German Private Equity and Venture Capital Association (BVK), however, remains optimistic about the year as a whole:

“Artificial intelligence, robotics and defence drove investment both globally and across Europe in the first quarter, and are likely to shape venture capital activity in the further course of the year. Germany has achieved a number of successes in these fields. Among them, recent funding rounds at Parloa, Neura Robotics or Upvest, as well as the exits at Tubulis and Talon.One are likely to act as positive signals both nationally and internationally and should boost domestic market sentiment, too.“

Investors also viewed the deal flow in the first quarter positively. But the indicator for entry valuations fell, which shows that VC investors are increasingly dissatisfied with the entry prices of new commitments.

Sentiment around fundraising among VC investors in Germany improved in the first quarter, showing itself to be extremely volatile. At the same time, investors remain very dissatisfied with the options for getting out of their investments, with the exit climate remaining deep in the red.

Note: KfW produces the quarterly German Venture Capital Barometer in cooperation with the German Private Equity and Venture Capital Association (BVK) for the Handelsblatt business daily. For detailed analyses with data tables and graphs on the development of business sentiment in the venture capital and private-equity segments, go to www.kfw.de/gpeb.