KfW Research - Dossier
Financing with venture capital creates a key requirement for start-ups to be able to open up markets and generate growth with new technologies and innovative business models. The venture capital market therefore plays an important role in the competitiveness of the economy. The German venture capital ecosystem has continued to mature in recent years but there is still a need to catch up in an international comparison. KfW Research analyses the German venture capital ecosystem and, in addition to topic-related publications, offers a quarterly barometer on business sentiment among German investors and a dashboard on the development of the German venture capital market.
After the slump in sentiment in the German venture capital market appeared to have been largely overcome, the business climate fell again at the end of 2024. The VC market sentiment indicator dropped to -4.1 balance points in the fourth quarter of 2024. This decline is primarily an expression of the setback in the assessments of current business conditions, while expectations improved. The improved expectations give reason to be optimistic that the business climate will soon gain new momentum. The initial outlook for investment activity in 2025 therefore remains good despite mixed signals from deal flow.
The German private equity market was in the doldrums at the end of 2024. The sentiment indicator dropped to -44.6 balance points in the fourth quarter of 2024. Without the steep but brief slump during the COVID-19 shock in the first quarter of 2020, the indicator would have hit a new all-time low in the final quarter. The economic worries of small and medium-sized enterprises in Germany are obviously weighing so heavily on business activity in the private equity market that the recent key interest rate reductions failed to halt the further decline in sentiment.
The year 2024 gives cause for cautious optimism about the German VC market: In total, around EUR 7.4 billion was invested in German start-ups in 2024, moderately exceeding the deal volume of the previous year (+4%). In the final quarter of 2024, 484 deals were closed with a volume of EUR 1.4 billion. Overall, financing activity in the German VC market remains steady.
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