Number of Billion-Dollar Start-ups in Germany Doubles Since 2020

The German tech landscape has witnessed a remarkable surge in the number of start-ups valued at over one billion euros, more than doubling since 2020. This growth is attributed to significant investments from venture capitalists and the emergence of booming sectors within the industry.

According to data from the Start-up Association, the count of non-public start-ups reaching unicorn status, defined as those valued at one billion euros or more during funding rounds, has increased from 11 at the end of 2019 to 28 by the end of 2024. Although the previous record of 34 unicorns set in 2023 was not surpassed, the overall trend indicates a robust upward trajectory.

Leading the pack among Germany's most valuable start-ups are companies such as Flix, a bus service provider, the AI-based translation service DeepL, the neobroker Trade Republic, the defense contractor Helsing, the software firm Celonis, and the mobile bank N26. The recent influx of investment has been particularly pronounced in fields like artificial intelligence and defense technology.

Verena Pausder, chairperson of the Start-up Association, noted that the increasing number of unicorns in Germany and Europe reflects a growing capacity for innovation. Hendrik Brandis, co-founder of venture capital firm Earlybird, pointed to technological advancements, particularly in artificial intelligence and cloud computing, as driving forces behind this phenomenon, emphasizing that achieving unicorn status in such a short period was once considered unattainable.

Europe and Germany have become significant players in the realm of innovative business models. This is exemplified by companies like Aleph Alpha, a firm specializing in AI, Isar Aerospace, a rocket manufacturer, and Marvel Fusion, a start-up focused on nuclear fusion technology.

Despite the positive trends, challenges remain. Brandis observed that while the number of unicorns is increasing, the valuations from five years prior were more optimistic. He remarked that during tough economic conditions, investment tends to be concentrated on established players.

During the COVID-19 pandemic, many start-ups benefited from a digitalization boom and low-interest rates, but as interest rates have risen, numerous growth-oriented companies have faced financial difficulties. Some have had to downsize, while others, like the electric aircraft manufacturer Lilium, have declared bankruptcy.

Pausder highlighted that despite the rise in unicorns, there are still considerable obstacles for the tech industry, including a lack of capital and insufficient exit strategies for investors. Many German start-ups often rely on non-European capital to become global players, underscoring the need for increased private investment from major investors and more exit opportunities through acquisitions and public offerings.

Currently, Germany sees approximately 90 euros per capita invested in venture capital, significantly lower than the 510 euros per capita in the United States, indicating a substantial financing gap of around 30 billion euros annually. Additionally, large investors, such as insurance companies, face restrictions on their venture capital investments and tend to funnel their resources into government bonds.

Brandis proposed the establishment of a fund backed by government guarantees with a substantial volume to attract greater participation from large investors in venture capital.

Nevertheless, the long-term outlook for Germany as a start-up hub is positive. The KfW Development Bank has noted improvements in the financing environment, particularly with declining interest rates. In 2024, German start-ups raised approximately seven billion euros in venture capital, nearly one billion euros more than the previous year.

Brandis also observed a shift in political perception regarding venture capital, with policymakers recognizing its fundamental importance, a realization that was less evident three years ago. However, he stressed that more needs to be done regarding the implementation of support initiatives, which he considered inadequate.