KfW Research: German start-ups and investors are setting their sights on artificial intelligence

• Young enterprises with a focus on AI raise EUR 568 million
• For AI start-ups, the second quarter was the strongest in almost two years

Artificial intelligence is one of the megatopics for the economy – and many start-ups and investors are putting their hopes in it in Germany as well. In the second quarter of 2024, young enterprises in Germany that specialise in artificial intelligence (AI) raised a total of EUR 568 million from investors. That was the highest volume since the third quarter of 2022.

In the second quarter, AI start-ups were able to attract more capital than young enterprises with other focus areas, according to the KfW Venture Capital Dashboard, in which KfW Research publishes quarterly figures on the German venture capital market. A total of 30 funding rounds of AI start-ups took place in the second quarter.

“It is a good thing that German start-ups, too, are focusing on the topic of AI. Germany must hold its own against competitors in this important area”,

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

However, as is often the case in this field, the volume was driven by very large individual deals. In the second quarter, the Cologne-based online translation service DeepL received more than EUR 250 million from investors.

Overall, German start-ups raised some EUR 1.8 billion in 187 funding rounds, after EUR 1.9 billion in the first quarter. Still, the German market continues to lag behind other markets. In France, for example, start-ups received venture capital commitments totalling EUR 2.1 billion, while they raised EUR 5.1 billion in the UK and as much as EUR 41.4 billion in the US.

There were only few small deals of less than EUR 1 million in Germany overall. That figure was more than one fifth lower than in the preceding quarter. This was likely due to the subdued start-up activity in Germany over the past years. Scale-up companies – firms that are not quite so new in the market anymore and have already grown to a certain size – collected a particularly large amount of capital in the second quarter (EUR 842 million).

Start-ups received more commitments from domestic investors again. German investors provided 39% of the capital, compared with 26% in the preceding quarter.

The current KfW Venture Capital Dashboard by KfW Research can be found at Venture capital market in Germany | KfW