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German Venture Capital Barometer: VC business climate continues to slide but remains in the green

Press Release from 2020-03-18 / Group, KfW Research

  • VC fundraising climate has dropped significantly from record high
  • Dissatisfaction with entry prices near rock bottom
  • Very good business climate throughout 2019 despite drop in second half

The business climate in the German VC market fell again in the fourth quarter of 2019 but remains good. The indicator fell by 8.0 points to 10.1 balance points. Whereas VC investors rated the current business situation much worse than in the previous quarter (-14.3 points to 13.2 balance points) the indicator for business expectations stabilised (-1.7 points) to close at 7.0 balance points. Despite the weak are business climate in the second half of the year, market sentiment in 2019 was very good overall and the fourth best since the indicator was first measured in 2003.

At the end of the year, things appeared to slow down a bit in all stages of VC investors' business model – fundraising, investment, and exit. Thus, although the fundraising climate is still very good compared with the previous years, in the last quarter it suffered the second sharpest slump ever recorded. In addition, investors were more dissatisfied with overall investment conditions. The climate for entry prices dropped for the fourth consecutive quarter to just above its record low. Although the assessment of exit opportunities recovered at the end of the year from the sharp correction in the third quarter, it only made up for half the decline. Within a year, exit opportunities appear to have deteriorated noticeably for VC investors.

“2019 was generally an above-average VC year in Germany”, said Dr Friederike Köhler-Geib, Chief Economist of KfW. “As we saw in the final quarter, the good business climate was sustained primarily by fundraising. By contrast, VC investors were only moderately satisfied with deal flow and exit opportunities. Nonetheless, 2019 saw the highest VC investment volumes overall in nearly twenty years. Only at second glance is this consistent with the mixed market sentiment. However, we do see that more and more foreign investors are active in the German market. While this is jumpstarting investment, it is weighing on sentiment because it is increasing competition for deals and, in particular, prices.”

Ulrike Hinrichs, Managing Director of the German Private Equity and Venture Capital Association (BVK), added: “The German venture capital market has developed exceptionally in the past years. Venture capital firms invested more in Germany in 2019 than ever before. That is good news for German start-ups. At the same time, the competitive situation and rivalry for the best enterprises have intensified, which probably has affected sentiment as well. What makes us optimistic about the future is that German companies have used the positive fundraising environment and that we are seeing many new, established funds. This secures future investment.”

KfW calculates the German Venture Capital Barometer exclusively for the Handelsblatt business daily together with the German Private Equity and Venture Capital Association (Bundesverband Deutscher Kapitalbeteiligungsgesellschaften – BVK). Detailed analyses with data tables and graphs illustrating the development of the business climate in the venture capital and later-stage segment can be retrieved at www.kfw.de/gpeb.


Portrait Wolfram Schweickhardt


Wolfram Schweickhardt


+49 69 74 31 17 78


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