German Startups begin getting the financial attention they deserve

German Startups Soaring as Investors Wake Up to their Potential

By Stephen Fuchs on Email @StephenWFuchs

Germany has long been known as the center for some industry changing startups, but despite their promising potential, much of the investor attention has been focused on the American scene and its silicon valley talent. Though one look at this year’s venture capital spending paints a new picture for the growing number of German startups, and after last Friday’s record-breaking €5 billion ($5.7 billion) IPO for Berlin’s Delivery Hero, other startups are beginning to see a chance to breakout into the scene as viable businesses.

Delivery Hero‘s IPO isn’t the only success story to come out of the German startup scene this year. Auto 1 Group, another startup in Berlin, raised another 360 million euros ($405 million) in May to bring their used-car business a valuation of 2.5 billion euros ($2.8 billion). According to a report by consultant EY, venture capitalists spent a total of 2.16 billion euros ($2.45 billion) in equity deals across 264 German startups during the first six months of the year. This number is a significant increase over the same period last year, which only saw a collective investment of 972 million euros ($1.1 billion) across 248 startups.

While more than doubling last year’s numbers is quite the success, it’s a far cry from what their American competitors are able to accomplish. Recent estimates show American startups raising $21 billion in just the first quarter of 2017. Germany is of course much smaller than the United States, and it would be almost unrealistic to expect the startup scene in Germany to match those numbers, but there are more specific hindrances that have made it more difficult to find investors across Europe.

In a report by Bloomberg, an investor from Munich’s EarlyBird Venture Capital, explained some of the disadvantages European investors have over those in America. A good amount of the American investments come out of lucrative pension funds, something that Europe’s state-sponsored retirement funds fail to provide. Germany also does not have hefty university endowment funds and despite operating on a budget surplus, the country chooses to spend more on science and research instead of boosting the startup economy.

Sources: Bloomberg, Crunch Base, Handelsblatt

Photo: Droidcon Global [Flickr]

Stephen Fuchs
Stephen founded German Pulse and LGBT Germany out of a passion to introduce Americans to a Germany that goes beyond beer and polka (although with enough beer he has been known to polka it up a bit). He's a coffee addict, lover of wine and good times, a hit in the kitchen and editor of TV commercials. You can follow him on Twitter (@StephenWFuchs) to find out a lot more.
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