GERMANY Trends and Developments Contributed by: Felix Blobel and Sascha Leske, Noerr
Sectoral focus Germany’s start-up segment has seen a deci - sive shift in sector preferences. While generalist, sector-agnostic investing was common during the boom years of 2020–2021, investors are now showing a clear sectoral bias toward technolo - gies with long-term value creation, strong IP pro - tection, or strategic relevance. AI, climate tech, and defence tech have emerged as the leading verticals, closely followed by fintech infrastruc - ture, biotech, and deep-tech hardware. Germa - ny’s leadership in applied sciences, engineering and industrial tech provides a strong foundation for these sectors. AI startups: centre stage in 2024–2025 AI remains Germany’s most dynamic VC vertical. The launch of OpenAI’s ChatGPT-4 has triggered a global rush for AI capability – with Germany no exception. Homegrown start-ups such as Aleph Alpha (USD500 million raised in 2023), Brighter AI, Nyonic, and Cologne-based AI translation company DeepL are leading the charge in lan - guage models, data privacy tools, and ethical AI. Germany’s AI landscape benefits from a combi - nation of strong academic institutions, applied research, increasing public awareness and pub - lic funding support, and some 500 AI-focused start-ups are headquartered in the country. AI is no longer just a vertical – it is a cross-cutting enabler for SaaS, healthtech, biotech, logistics, fintech and industrial automation. According to figures from the German public bank KfW, AI- related start-ups accounted for 25% of Ger - many’s early-stage VC volume in 2024, slightly below the 30% share observed in late 2023. Spurred further by the most recent mega-round of OpenAI announced in early April, in which the company took in another USD40 billion of fresh money – approximately one-third of the overall amount of global start-up investments in the first quarter of 2025 – resulting in a post-money valu -
EUR7.9 billion (with the UK leading at EUR17 billion). Germany continues to attract robust cross- border investment. US and UK-based VCs have remained highly active in Series B and later rounds of German start-ups. Over 30% of all deals with an overall round size larger than EUR10 million involved at least one non-Europe - an fund. Strategic and corporate VCs, including multinationals and sovereign wealth funds, have boosted exposure to German deep-tech and industrial automation start-ups. Berlin, Munich, and Hamburg remain leading start-up hubs, with the Bavarian capital, in particular, vying to pro - duce more “Municorns” in the short term, but emerging centres such as Leipzig and Karlsruhe also growing, driven by university spinouts, public co-investment programmes and regional accelerator ecosystems. How the recent introduction of substantial and across-the-board tariffs by the US administration might impact German start-up companies – that have benefitted from access to the US both as a source of capital and as a significant market for their goods and services – remains to be seen. While this development may lead some Europe - an founders to start their businesses in the US, the option to “flip” existing, more mature com - panies to the US comes with substantial com - plexity, ranging from corporate law and taxation to immigration issues. The more likely response to the emerging new trade policy framework by German start-ups might therefore be to focus on the domestic European markets and seeking to expand sales into other world regions. Compa - nies offering services, rather than producing or delivering goods, are less affected by tariffs. This will apply to a significant number of companies within the German community.
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