KfW VC Dashboard: German venture capital market stabilised noticeably in the first half of 2023

• Transaction volume rose for the second consecutive quarter, number of deals fell slightly
• Increasing financing transactions in the start-up segment, growth financing remained steady
• Venture capital market clearly recovered after collapse of Silicon Valley Bank

German start-ups raised almost EUR 2.5 billion in the second quarter of 2023. That was a 25% rise in deal volume on the previous quarter, the second straight increase. A total of 266 financing rounds were conducted, a slight drop of 23 on the previous quarter. Across the first half of 2023, 555 financing rounds with a volume of EUR 4.4 billion were completed. After deal volume in the German VC market fell noticeably in 2022, investment activity has stabilised again thus far this year.

In the second quarter of the year, the market showed positive momentum especially in the start-up segment, in other words, in financing rounds of Series A and B. Just under EUR 1 billion was raised, nearly double the sum of the first quarter (EUR 520 million). At around 42%, the percentage of financing for the start-up segment in total deal volume thus exceeded the previous years’ level.

As a result of the upturn in the start-up segment, just barely half the funds invested in Q2 2023 went to the growth financing (scale-up) segment. It had come under particular pressure in the course of the market slowdown of 2022 but stabilised again very clearly in the first half of this year. A more favourable exit environment, that is, better conditions for the sale of company shares, will be important for the further funding prospects in this segment.

The prospects for a successful exit are decisive for investors’ interest in start-ups. A similar number of exits from VC-funded start-ups took place in 2022 as in the boom year 2021. With 24 transactions in Germany, exit activity remained on a similar level in Q2 2023. But public listings, a particularly promising exit channel, failed to materialise in the past three quarters. Buyouts, in other words, sales of company shares, often by members of the management, did not take place either. Instead, exits were only in the form of takeovers. They have become more attractive for buyers since last year because valuations were revised downward during the cooling of the market.

A further German start-up, 1 Komma5°, which offers products and infrastructure for climate-neutral homes, reached a valuation of one billion euros. The number of German unicorns thus rose to 30.

“The German VC market is showing itself to be well capable of adapting to the new market environment in 2023. Measured by funds invested, the first half of 2023 was above the average of all years that preceded the exceptional year 2021 in the world’s VC markets”

, said Dr Fritzi Köhler-Geib, Chief Economist of KfW.

“Overall, however, the environment remains challenging, which is reflected in the number of deals being entered into. The further development of the economic, monetary policy and geopolitical environment will likely create uncertainty for the rest of the year as well and therefore continue to dampen investment activity. At the same time, promising technological trends, for example in the field of AI or climate technology, which currently offer a wide range of business opportunities, are likely to provide positive impetus.”

Detailed analyses with data and graphs on the development of the venture capital market are available at:

Venture Capital-Markt in Deutschland