Funding for German Startups Declines for Second Consecutive Year


According to Ernst & Young’s Startup Barometer, funding for German startups experienced a slump in 2023 for the second consecutive year. However, the report suggests a potential turnaround as investments in artificial intelligence (AI) quadrupled.

In 2023, a total of 6 billion euros ($6.57 billion) flowed into the German startup scene, compared to the previous year’s 9.9 billion euros. This decline can be attributed to a decrease in large-scale financing, or megadeals, as well as fewer financing rounds. The number of funding rounds fell by 15% compared to the previous year, with a total of 861 deals recorded, of which only eight were derived from large-scale financing.

Thomas Pruver, a partner at EY, commented on the cautious approach of investors, stating that “good ideas alone are no longer enough for young companies to obtain fresh capital.” He emphasized the importance of solid and well-thought-out business models, realistic sales forecasts, and the prospect of profitability in attracting investors.

Despite the current downturn, EY expects investments to regain momentum in the foreseeable future. In the AI sub-sector, startups raised EUR943 million in 2023, a significant increase from EUR220 million in 2022. However, the number of deals only saw a slight rise. Conversely, investments in mobility, fintech, and health sectors witnessed a decline of 60%, 62%, and 50% respectively.

In conclusion, while German startups faced funding challenges in 2023, the surge in AI investments offers hope for a potential recovery.

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