The rebound in venture capital investment in Germany seen through the first six months of the year has come to a halt, with significant declines in both deal count and value in Q3.
Here are six key trends from PitchBook’s Q3 2023 Germany Market Snapshot that illustrate the current state of the German venture capital market.
German startups raised a total of €1.5 billion across 213 rounds in the most recent quarter—a fall of 29% in deal value and 18% in deal count from Q2.
Prior to Q3, venture capital investment in Germany had been picking up, with two consecutive quarters of growth for both the number of rounds and their value. At the current pace, however, the annual total for 2023 is likely to fall short of last year’s figures.
Early-stage VC investments accounted for the largest share of deal value in Q3 at 43.75%, the stage’s highest proportion since Q1 2020.
For the last few years, late-stage deals accounted for a large portion of venture funding in Germany as the ecosystem continued to mature. However, the downturn has caused many investors to seek refuge in the earlier stages, which are less impacted by volatility in the public markets.
After reaching a peak of €200 million in the first quarter of the year, the median pre-money valuation for German late-stage companies sunk to €24 million in Q3.
The median price tag for early-stage companies, on the other hand, has seen a rebound, reaching €41.6 million in Q3—its second-highest quarterly figure—compared to €18.5 million in Q2.
The number of German unicorns has reached a high of 21 this year. However, the rate at which new unicorns are being created has slowed considerably. Among the new German unicorns to emerge this year is defense AI startup Helsing, which reached a roughly €1.7 billion valuation following its €209 million Series B, making it the largest German VC round this year.
VC-backed exit value has been minimal this year, with the number of deals returning to pre-2021 levels.
The biggest exits in 2023 have all been acquisitions: Confluent‘s purchase of software company Immerok is the largest at $54.9 million.
LPs have been putting more capital into larger funds as VC fundraising activity in Germany remains weak.
Four funds accounted for over three-quarters of capital raised this year. The largest came from HV Capital, which closed its ninth vehicle on €710 million in May.
Read more: Q3 2023 Germany Market Snapshot
Featured image by Peter Zelei Images/Getty Images
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