Bavaria Surpasses Berlin in Start-up Funding as Investment in German Start-ups Rises

Investment in German start-ups experienced significant growth in 2025, with Bavaria emerging as the leading region for venture capital inflows, outpacing the traditional hub of Berlin. According to a recent analysis by consulting firm EY, German start-ups collectively secured approximately 8.4 billion euros in venture capital funding in 2025, marking an increase of about 1.3 billion euros compared to the previous year. This rise follows a period of decline in 2022 and 2023 after the pandemic-induced investment boom.

For the second consecutive year, Bavaria attracted more venture capital than Berlin, solidifying its position as a central location for entrepreneurial activity in Germany. Bavarian start-ups raised around 3.3 billion euros, while Berlin-based firms attracted nearly 2.7 billion euros. Together, these two states accounted for over 70 percent of all start-up funding in the country, demonstrating their importance within the national innovation landscape.

Munich, Bavaria's capital, has become a hotspot for start-up activity, benefiting from its proximity to leading universities and strong financial backers. In 2025, the largest funding rounds in the country were recorded in Bavaria. Noteworthy investments included 600 million euros for Helsing, a Munich-based company specializing in artificial intelligence for the defense sector, 400 million euros for the energy-focused start-up Green Flexibility, and 344 million euros for the biotechnology firm Tubulis. Out of the top ten funding rounds nationwide, seven involved Bavarian companies, while two were based in Berlin.

Despite Bavaria's lead in total investment volume, Berlin maintained its status as a dynamic center for start-ups, especially in terms of the number of deals. Berlin reported 218 financing rounds, surpassing Bavaria's 149. The Berlin start-up scene remains robust, particularly in sectors like e-commerce and financial services, even though these areas showed signs of slower growth. Both regions continue to draw substantial investor interest, with Berlin retaining its reputation as one of Europe's foremost start-up cities, especially in technology and artificial intelligence.

On a national level, the trend towards increased venture capital was tempered by a decrease in the number of funding rounds, which fell by five percent to 716 transactions in 2025, marking the fourth consecutive year of decline in deal count. While the first half of the year was characterized by strong investment activity, the latter half saw a slowdown, introducing uncertainty about future trends in the start-up financing environment.

Comparatively, Germany lags behind other major economies in terms of venture capital per capita. According to the German Start-up Association, start-ups in the United States received over 700 euros per capita in 2025, while the figure was less than 90 euros in Germany. France surpassed 100 euros per capita, and the United Kingdom approached 300 euros. The association emphasized the need for improved conditions to attract more private investment into the German start-up ecosystem, highlighting the crucial role of policy reforms in supporting innovation and scaling young companies.

Overall, while the German start-up sector showed resilience and a positive trajectory in raising capital during 2025, challenges remain in sustaining growth and enhancing Germany's global competitiveness in innovation and entrepreneurship.