Germany is falling behind

While founders in London and Paris received more cash injections in 2020 than in the previous year, start-up investments in this country declined. There were no big deals.

In 2020, the Berlin Auto1 Group raised the most money from investors in Germany with its platform for used cars.

DGermany has fallen behind when it comes to investing in start-ups. Last year, the volume of financing from investors fell by 15 percent to just under 5.3 billion euros, while competition for France and Great Britain increased. This is shown by a study by the auditing and consulting company EY, which was available to the German Press Agency.

Founders in France posted cash injections of 5.2 billion euros (plus 3.4 percent) and Great Britain expanded its lead despite Brexit: Start-ups there received 13.9 billion euros more than in 2019, the number of financing rounds doubled. Founders in the traditionally riskier Great Britain and its many young companies close to the capital market would have benefited the most, said EY partner Thomas Prüver.

The picture is similar in the city ranking: While the start-up scene in London alone received 10.5 billion euros in money, Paris overtook Berlin with almost 3.9 billion euros (a good 3 billion euros). In 2019, the German founding stronghold was just ahead of Paris. Munich now landed in sixth place in the ranking.

There were no big deals

According to the analysis, neither the pandemic nor Brexit would have slowed down start-up financing in Europe in 2020. Thanks to a record-breaking second half of the year, the financing volume rose by 17 percent compared to 2019 to 36.5 billion euros. The number of financing rounds grew strongly by 58 percent to almost 6,700.

“In the Corona crisis, numerous challenges for the economy have become even more obvious – such as the urgently needed digitization, the vulnerability of logistics chains or the great importance of the security of IT networks,” said Prüver. Many start-ups have the right solutions. “That made them attractive to investors.” Prüver assumes that the momentum will be maintained in 2021 as well.

Start-ups are dependent on investors because they are usually not yet making a profit. Funds and large companies invest capital in young companies in the hope that their business ideas will prevail and bring them ample profits. With their ideas, start-ups are seen as innovation drivers for the economy. The corona crisis has dampened the long-term boom in the scene in this country and made it difficult for young companies to do business. In order to avert damage, the federal government has launched aid for start-ups.

Unlike the European competition, the German start-up industry hardly benefited from the rain of money last year. There were also more financing rounds, but there were no big deals. After all, the feared start-up dying in the pandemic did not materialize.

Even compared to other countries such as Switzerland, Sweden and the Netherlands, Germany is doing poorly: With the exception of the Federal Republic of Germany, higher investments in start-ups than in the previous year were recorded in all of the top 10 markets, it said. There is a lack of deals in the larger three-digit million range. The Berlin Auto1 Group raised the most money from investors with its platform for used cars, followed by the Munich air taxi developer Lilium and the Berlin start-up Tier Mobility, which rents out electric scooters.