Ozva AdminAfter a very successful year of funding in 2021, VC investments in German tech startups cooled in the second half of this year, as the effects of war, inflation and rising prices took hold. Interest rates.
In 2022, the total value of investments in German startups fell 46% year-on-year to $11.9 billion. The number of funding rounds also fell, falling 29% from 1,606 to 1,137 deals, according to Dealroom data through the end of November analyzed by early-stage VC Morphais. The overall level of funding remains above the 6.5 billion dollars registered in 2020.
While the later stage funding has sunk further, the early stage funding (before the Serie A seed) has held up. relatively stable. and a burst of new venture capital funds, Particularly small funds of less than $50 million were raised.
Funding in later stages plummets
Funding rounds of more than $250 million have seen the steepest decline in Germany, both in terms of number of deals and investment volume, according to Morphais VC analysis.
2021 saw 14 deals worth $250 million or more, and that’s down to six deals this year.
Investment volume (the amount of money raised by a fund) also fell by 78%, from almost 10,000 million dollars in 2021 to 2,200 million dollars in 2022 for the main operations.
Rounds between $100 million and $250 million were also down in terms of the number of transactions. From January to November, 19 operations of this size were closed, compared to 33 in the same period last year.
It’s a situation that has played out across Europe this year: Investors backing late-stage companies have seen public share prices fall and are looking more skeptically at later-stage private valuations.
Another aspect is that US funds have historically supported many later stage investments in German start-ups, but with the tightening of the financial market in the US, many funds that previously invested heavily in German start-ups have retired.
Seed funding remains stable
Funding has proven resilient in the early stages in Germany, in terms of number of transactions and amount invested. The trend is also mirrored across Europe: in terms of investment volume, 2022 has been the best year so far for early-stage financing on the mainland, according to Dealroom data.
investors say that seed funding has remained strong across Europe, because it makes more sense to support start-ups that will mature and exit when economic conditions improve.
According to Morphais’ analysis, the number of pre-seed and seed deals decreased in Germany this year, but the number of deals in Series A and Series B increased.
The amount of cash invested in pre-seed startups this year also fell in 2022. $51 million was invested in seed startups last year, a 37% drop from the $80 million 2021 total.
Seed investment volume was basically flat compared to last year. In Series A it increased by 13% and in Series B by 12%.
Eva-Valérie Gfrerer, CEO and founder of Morphais, says now is the best time for investors to pour money into early-stage startups.
“In the past, negative interest rates led to effortless fundraising and record valuations. In 2022, with rising costs of capital, we see a valuation reset leading to more attractive entry valuations for investors,” he explains.
Additionally, with the end of the free flow of capital, early-stage companies must now focus on sustainable growth and profitability. This gives investors the opportunity to support companies with more efficient financial planning. “This new environment is very healthy for the market in general and more promising in terms of long-term profitability,” says Gfrerer.
A boom in new venture capital funds
VCs may have invested less this year than in 2021, but they still have plenty of cash in the bank as the amount of new VC funds Y the total volume of the fund has increased in recent years.
This year, venture capitalists raised 58 new funds (both existing managers and emerging managers) in Germany, which is double the amount of funds raised in 2020.
Gfrerer says the reason for the funding increase this year is due to “the strong [boom] years before.”
Many of the funds closed in 2022 benefited from a favorable market environment in previous years: “for example, easy monetary policies to avoid an economic disaster in the midst of a pandemic and negative real interest rates, all of which led to a low cost of capital,” says Gfrerer.
The volume of the fund has also been increasing gradually: going from $4.3 billion in 2019 to $17.8 billion in 2021. This year, the trend slowed slightly, with fund volume declining to $14.7 billion.
In total, German venture capitalists raised $14.7 billion between January and November. And small funds, under $50 million, in particular, have benefited.
In 2022, there has been a 16% increase in investing in small funds compared to last year: going from $182 million to $211 million.
The best deals in Germany in 2022
Celonis and WeFox topped the charts in terms of amount raised this year, having both secured $400 million in Series D funding.
Below is a list of the top ten funding rounds this year. Note that none of these companies have female co-founders:
celonis — $400 million Series D extension
wefox — $400 million Series D
OneFootball — $300 million Series D
commercial republic — Series C Expansion €250M
For to — $250 million Series D
Taxation — $220 million Series D
Hy2gen AG — €200 million (unknown)
1Komma5° — €200M Series A
person — $270 million Series E
Coach — $200m Series C
Miriam Partington is the DACH correspondent for Sifted. She also covers the future of work, co-authors Sifted’s Startup Life Newsletter and tweets from @mparts_
Ozva Admin
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