German startups picked up €4.3 billion ($5.2 billion) in investment capital in 2017, 88 percent more than the previous year, according to the consultancy firm EY.
The consultancy said in its Start-up Barometer report released today that the major reason for the jump was a bounty of big deals over €100 million. The €2.3 billion raised in 2016 was made up of smaller deals. The number of funding rounds also increased by 5 percent to 507.
Germany’s capital city got most of the capital funding: Berlin accounted for 69 percent of all investment and the five biggest rounds of funding. A total of 233 rounds of financing for Berlin startups raised nearly €3 billion, three times as much as in 2016, putting it just behind London and on par with Paris.
“Berlin is developing very strongly,” EY partner Peter Lennartz said. “The other German startup strongholds are having trouble keeping up.”
Number two after Berlin was the state of Bavaria, whose startups raised €407 million, a decline of almost a quarter from last year. Hamburg placed third, with €230 million raised, an increase of 80 percent from 2016.
EY says low interest rates have pushed investors to make more risky investments in startups. And large companies are showing more interest in German upstarts, especially in the B2B area. The biggest magnet for venture capital was e-commerce companies.
These were Germany’s biggest capital funding transactions in 2017:
- Delivery Hero: The parent company of Foodora, Lieferheld and Pizza.de collected €989 million with its IPO and debt financing this summer.
- Auto1: The used car portal raised €360 million with an IPO and debt financing in May.
- HelloFresh: This meal delivery service spun off of Rocket Internet raised €268 million with its IPO in November.
- Soundcloud: The online music service raised €143 million in emergency funds in August after laying off 40 percent of its staff the month before.
Generally risk-averse German investors have been loathe to jump on the venture capital train with the enthusiasm of American investors. Most major financing rounds in Germany only happen with heavy participation from foreign investors.
Grace Dobush is an editor with Handelsblatt Global in Berlin. To contact the author: firstname.lastname@example.org