GERMANY Law and Practice Contributed by: Carsten Berrar, Florian Späth and Heiko Blaut, Sullivan & Cromwell LLP
million. German 3D manufacturer BigRep’s list - ing in the general standard of the Frankfurt Stock Exchange was among the very few in the growth sector (along with Steyr Motors and Elaris in the junior markets). 1.2 Key Trends Overall Trends The broader trend of increased cost of capital in Germany and challenged valuations is reflected in both financing round valuations and liquid - ity events. Overall, investors are opting for safer bets and prefer companies with a proven track record or alternative investments over very early- stage ventures. Structured investments, comprising a mix of debt and equity, as well as primary and second - ary transactions, were noticeably more present than in previous years, marking a trend towards bespoke funding events as opposed to more traditional equity financing rounds. Further, cer - tain funding events that occurred in challenging conditions drew significant media attention – eg, air taxi start-up Lilium, or grocery delivery plat - form Flink. The number of financing rounds declined for the third year in a row, falling by 12% to 755 transactions vs 2023. Compared with the record number from 2021 (1,160 deals), the number of financing rounds was down 35%. However, the total value of venture capital (VC) investments increased significantly compared to 2023 by more than EUR1 billion to just over EUR7 billion – the third-highest value in the past ten years. At the same time, numerous growth compa - nies are facing liquidity constraints, prompt - ing some 336 start-ups to file for insolvency in 2024. This figure exceeds the number for the previous year and is 85% higher than in 2022.
Prominent examples include fintech Creditshelf, which underwent protective shield proceedings ( Schutzschirmverfahren ), and relocation start-up Movinga, which had to cease business opera - tions. On the other hand, the rescue of Insta - motion, a platform for used cars, illustrated that insolvency proceedings may be a means to con - tinue operations in certain cases. Regional Divergence Geographically, Berlin led with a total of 239 venture-backed financing rounds in 2024, sig - nificantly surpassing both Bavaria with 146 and North Rhine-Westphalia with 76 transactions. That said, Bavarian start-ups secured more than EUR2.3 billion in venture funding and surpassed Berlin for the first time in terms of volume, which attracted approximately EUR2.2 billion. North Rhine-Westphalia almost tripled its funding total from EUR331 million to EUR951 million in 2024. Investor-Friendly Deal Terms As the VC market is only slowly recovering from moderate levels, companies continue to con - cede more investor-friendly deal terms. These include founder lock-ups, vesting, and liquida - tion preferences, as further outlined in 3.5 Inves- tor Safeguards and 5.2 Securities . 1.3 Key Industries In line with the global trend, equity funding in German growth companies heavily favoured software and analytics (including AI) in 2024, with start-ups in the sector securing some EUR2.2 billion. The health sector, the second-largest in terms of total financing volume, realised a total volume of EUR958 million, more than twice as much as in the previous year. As a result of one sizeable transaction in September 2024 (eGym), the fitness segment accounts for EUR185 million with only two deals.
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