Germany’s start-up ecosystem is riding a fresh wave of momentum, with venture capital (VC) investments hitting nearly €4 billion in the first half of 2025. According to new data from the country’s state-owned development bank KfW, this marks the third consecutive half-year of growing funding activity, reflecting heightened interest from international investors, especially those from the United States.
VC Activity Rebounds After Slow Start
After a subdued first quarter, Germany’s venture capital market bounced back strongly between April and June. Start-ups secured €2.4 billion in fresh capital during the second quarter alone — a 45% increase over the previous quarter.
“These gains are remarkable given the challenging climate in early 2025,” noted Dr. Dirk Schumacher, Chief Economist at KfW. He pointed to market turbulence linked to U.S. trade policies as one factor dampening sentiment earlier in the year.
Record Number of Unicorns
Germany’s start-up scene has now produced 32 unicorns — privately held companies valued at over $1 billion — the highest number on record. Two new companies joined the unicorn ranks in May, highlighting the sector’s ongoing growth.
In total, there were 208 funding rounds in Q2 2025, with 98 deals exceeding €1 million. Across the first half of the year, start-ups closed 735 financing rounds, with 198 surpassing the million-euro mark.
Large Scale-Ups Dominate Deal Flow
Much of the recent surge was driven by significant funding rounds for scale-ups — firms with established business models seeking expansion capital. These larger deals accounted for 57% of the funds invested in Germany during the second quarter. Several transactions exceeded €100 million each.
American investors played a prominent role in these large-scale financings, contributing to 30% of investments in German start-ups during Q2 — a notable jump from earlier periods.
“So far, we haven’t seen any significant impact from U.S. policy shifts on American VC interest in Germany,” Dr. Schumacher observed.
Foreign Investment Fuels Growth
Data from KfW Research reveal that foreign investors, particularly from the U.S., have poured roughly €37 billion into German start-ups between 2020 and 2024. In contrast, German VC firms invested about €21 billion into start-ups abroad over the same period, resulting in a net capital influx of €16 billion into Germany’s VC market.
This level of net inflow is among the highest in Europe, surpassed only by Spain. Meanwhile, countries like Belgium, Denmark, Switzerland, the Netherlands, and Italy saw more venture capital flowing out than coming in.
Germany’s Growing Reliance on Foreign Capital
Despite the boom, experts caution that Germany’s heavy reliance on foreign funding brings potential risks. Foreign capital comprised about three-quarters of start-up funding between 2020 and 2024, with U.S. investors alone contributing 31% — a higher share than the European average.
“There’s a downside to depending so heavily on foreign capital,” said Dr. Steffen Viete of KfW. “During economic crises, international investors might retreat, leading to volatility in funding availability. There’s also the risk of losing talent and know-how to other countries.”
However, Dr. Viete acknowledged the upsides: “International investors bring more than just money — they offer networks and expertise that are crucial for helping start-ups grow.”
Policy Focus: Keeping Start-Ups in Germany
To secure the long-term future of the domestic start-up landscape, experts emphasize the need for a supportive policy environment.
“Germany must remain attractive for venture capital,” Dr. Viete said. “Creating better conditions for start-ups, ensuring smoother paths to IPOs and acquisitions, and expanding exit opportunities would boost investor confidence and help keep innovative businesses anchored here.”
As Germany’s VC market continues its upward trajectory, the balancing act between attracting foreign capital and safeguarding domestic interests remains at the center of the country’s start-up policy debate.
