GERMANY Trends and Developments Contributed by: Felix Blobel and Sascha Leske, Noerr
Noerr Felix Blobel, LL. M. Noerr PartGmbB Rechtsanwalt und Notar, Partner Charlottenstraße 57 10117 Berlin Tel: +49 30 20942163 Email: felix.blobel@noerr.com Web: www.noerr.com
Strategic Realignment and Emerging Confidence
eter 2024, Germany saw a 12% increase in the number of startup financing rounds in 2023 compared to 2022, but total investment volume declined by 25% in the same period. This diver - gence appears to reflect the shift from growth- at-all-costs strategies to a more conservative, fundamentals-based approach. Median round sizes fell across Series A through C, with late- stage deals seeing the sharpest drops in valu - ation. Internal bridge rounds, often using con - vertible instruments, became more prevalent as startups tried to avoid down rounds or unfa - vourable valuations. In the course of 2024, the market reset showed signs of stabilisation, with cautious optimism emerging early in the year on sector-specific growth in areas such as AI- based business models, cybersecurity, space and defence tech. According to EY investment activity figures for 2024, while the number of startup financing rounds in the year fell by 12% compared to 2023, total investment volume increased by 17%, indicating that average round sizes are back on an upward trajectory. German start-ups raised approximately EUR7.6 billion in 2024, making Germany the third-largest VC market in Europe, according to Crunchbase News. This accounts for about 15% of the con - tinent’s total funding, closely following France’s
Germany’s venture capital (VC) landscape has transitioned from hypergrowth to a more disci - plined and sector-focused ecosystem. Following a period of market correction beginning in mid- 2022, investors and founders are recalibrating toward capital efficiency, long-term sustainabil - ity, and strategic innovation, particularly in areas such as artificial intelligence (AI), green tech, and, more recently, defence tech. Despite mac - roeconomic pressures and geopolitical instabil - ity, and against a backdrop of evolving regula - tory landscapes, Germany remains one of the most attractive VC destinations in Europe. The slowdown in funding has not hurt innovation, but resulted in a shift in mindset – ie, profitability over growth, efficiency over expansion, meas - ured risk over speculative hype. This overview explores some of the key trends shaping Ger - many’s VC landscape as we move through 2025, including sectoral shifts, legal and tax develop - ments, the use of convertible instruments such as SAFEs, the emergence of defence tech, and the integration of AI into the VC process. The German VC market at a glance The German VC market remains in a period of transition. According to the EY Startup Barom -
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