German Venture Capital Barometer: VC sentiment indicator is back in the green, offsetting coronavirus losses

• VC sentiment in final quarter of 2020 was above comparison value of 2019
• Coronavirus doldrums have been shaken off
• Satisfaction with promotional environment reaches new high

Venture capital sentiment improved noticeably at the end of 2020, overcoming the drastic slump in sentiment caused by the coronavirus in the spring of 2020. The sentiment indicator is up 26.7 points to now 17.0 balance points, with similar improvements in business situation assessments (+28.3 points to 16.1) and business expectations (+25.2 points to 17.8). The three indicators thus present themselves unimpressed by the renewed lockdown. The coronavirus restrictions generally appear to affect the start-up scene less than initially feared.

Mirroring the business climate, most indicators for the market environment exhibited higher levels at the end of the coronavirus year of 2020 than in the previous year. Thus, the indicators for the quality and strength of deal flow are now clearly in the green zone and the development of the ‘price indicator’ also remains positive. The level of satisfaction with entry valuations is also much higher than in the previous year, while the fundraising climate is back in the green but has not fully offset the coronavirus-induced losses. The promotional environment is also being assessed positively, most likely bolstered by the coronavirus support for start-ups.

Dr Fritzi Köhler-Geib, Chief Economist of KfW, said: “The venture capital year ended on a positive note. The progress made towards future funds and with the Fund Location Act were two important mood enhancers in the final quarter which, unimpressed by the new lockdown, provided a good basis for the start of the year. The coronavirus shock at the start of 2020 has so far been digested more quickly than expected, so that business sentiment in the final quarter even surpassed the pre-coronavirus level. What is pleasing is that important indicators such as fundraising and deal flow have recovered noticeably without entry prices rising by the same rates. That is a good basis for new investments. Here in particular, start-ups that have demonstrated during the coronavirus crisis that their innovative business ideas meet demands can be tomorrow’s big winners.”

Ulrike Hinrichs, Managing Director of the German Private Equity and Venture Capital Association (BVK), added: “The newly introduced lockdown measures have so far weighed less on venture capital providers’ sentiment than was the case in the spring. VCs and their start-ups have learned to deal with the situation and assert themselves in a challenging environment. The rapid sentiment rebound attests to the increased robustness and maturity of the market and makes us optimistic for 2021. Moreover, this year we also expect important impetus from the individual measures of the future fund. With this fund the German Federal Government has made an important contribution to supporting the German start-up and venture capital ecosystem.”

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 segments can be retrieved at

www.kfw.de/gpeb.