Last year, as Germany’s economy stagnated, an unlikely trend emerged among startups. Compared to the previous year, the overall volume of funding rose by around 1 billion euros to 7 billion euros. However, the funding round was 12% lower than in 2023, meaning the average trading size has increased.
“Most funding rounds are led by foreign investors over 20 million euros or 30 million euros,” not affected by the German recession. “I say 90% plus.”
Although funding increased in 2024, the 7 billion euros of investment is far from the 2021 peak when money was poured into well-known consumer startups, which ranged over 17 billion euros. “2021 was mostly driven by a large round of funding (quick commerce, e-commerce) from B2C companies,” says Prüver. “Now we’ve seen that these business models aren’t that robust and investors are reluctant to invest in them.”
Eric Weber, CEO and founder of Leipzig-based incubator SpinLab, agrees: Now, if you don’t have traction, investors aren’t interested. ”
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Investments have shifted from B2C to B2B startups as German consumers become more cost-sensitive and B2C startups struggle to increase profitability. “Some people say software eats the world, but the hardware continues to do that,” Weber says. “And that’s where Germany is great.”
The shift supports Bavaria in southern Bavaria, according to Karsten Rudolph, a local incubator based in Nuremberg. Meanwhile, Berlin has traditionally preferred consumer startups. For the first time last year, Bayern slightly surpassed the capital region in terms of total investment value.
These trends converge in the case of ISAR Aerospace, a Bavarian-based company founded in 2018. ISAR is developing rockets that introduce cargo up to 1,000 kg, such as satellites, into lower Earth orbit. Germany is very suited to compete in this niche, according to ISAR’s first angel investor and former vice president of SpaceX.
“It’s cheaper to run in Germany than in Silicon Valley or Los Angeles,” he says. “When you think about SpaceX and 100 hours of work each year, it certainly comes with some efficiency. But it costs less employee loyalty, a much more competitive market, higher pay and a certain amount of burnout culture.”
ISAR was incubated by Unternehmertum, an emerging laboratory based in Munich, and benefited from a vast network of partners, including the European Space Agency (ESA). “I often use ISAR as an example of smart collaboration between young startups and traditional space agencies,” says Géraldine Naja, director of ESA’s commercialization, industry and competitiveness.
ISAR successfully leveraged the agency’s support by securing critical contracts and using them to attract more private funds, she explains. However, they do not need to rely on the long term of the ESA. “I hope ISAR will ultimately become fully independent. It’s like raising a child – you support them, but in the end they have to fly themselves.”
Across Germany, while major investment rounds increased last year, the decline in small transactions means fewer startups earn early stage funding. “It’s not a good sign,” says Prüver of EY. Because early stage companies are fueling their pipelines for later stage funding. “The development discourages young Germans from pursuing entrepreneurial projects, said Volker Hoffman, who runs Humboldt Innovation, a subsidiary of the same name university in Berlin that aims to connect science with business. “Germany has lost 60% of its founders in the last 20 years. If we don’t reverse this, it doesn’t matter how much money we have. There are no enough entrepreneurs to invest.”
“We need a new way of thinking,” says Hoffman. “In Asia and the US, becoming an entrepreneur is seen as a major ambition. In Germany there are too many legal, financial and cultural barriers that discourage people from starting a business.”
Helmut Schönenberger, co-founder and CEO of Unternehmertum, highlights how mature the German startup scene has been since co-founding the educational institution in 2002. Now billionaires and global investors are coming to us. ” Schönenberger agrees that there are challenges, but refers to the way the startup ecosystem drives change at the city and state level. Unternehmertum, he says, is active in working with the city of Munich on startup visas, approval of test sites and securing government-supported funds.
Unternehmertum won the rankings for Financial Times-Statista 2025, the leading European startup hub, in its second year.
Back in Berlin, Hoffmann points out that Germany has multiple thriving startup hubs. But they are virtually silent. He believes they need to work together more to compete internationally. “Our ecosystem in Germany is too fragmented. We’re not working together as we need it, whether it’s between universities, industries, or even regions,” he says. “It’s not a regional competition, it’s about improving Germany and Europe as a whole.”
