The German Venture Capital Market after Boom and Bust (KfW)

Summary

• VC deal volume in Germany tripled to €18.6 billion compared to the previous year (€5.8 billion) in the exceptional year 2021.p.3
• Fintech is the largest sector in European VC at 21%.p.8
• Companies provided 24% of the funds raised by German VC funds in 2021 to 2023, while insurers and pension funds provided only 4%.p.5

Key insights

1. ESG criteria are considered in the investment process by 82% of firms and are decisive in due diligence for 49%.p.8
2. Of recently launched funds with an SFDR classification, 23% fall under Article 6, 61% under Article 8 and 16% under Article 9.p.8
3. Exits most often occur through trade sales rather than IPOs, which are the most profitable but demand more of companies.p.7
4. Venture debt is repaid with interest over a predefined period and avoids diluting founders and existing investors.p.6
5. The denominator effect led investors to exceed their target allocation to illiquid assets such as VC and made fundraising harder.p.4
6. The ECB has cut its policy rate several times since June 2024 and the fundraising climate has recovered markedly.p.5
7. Larger funds can co-finance bigger rounds and act as lead investors, and large institutional investors need larger VC funds.p.1