German start-ups in the field of Generative Artificial Intelligence (GenAI) are growing rapidly, defying the trend of declining start-ups and are characterized by ambitious goals. However, Germany is lagging behind in international comparison, especially compared to the USA, where GenAI startups are attracting significantly more capital. These are the findings of a new study that examines the startup ecosystem in the booming field of GenAI. A brief overview of the findings and the challenges for German GenAI companies as well as possible strategic measures to remain competitive in the global market.
The latest study by hubraum, Deutsche Telekom’s technology incubator and the German Startup Association, sheds light on the field of Generative Artificial Intelligence (GenAI) in Germany, which is showing impressive growth momentum despite a general decline in startup foundations. In 2023, 341 new AI start-ups were founded in Germany, an increase of two thirds compared to the previous year. The sector also recorded significant growth in terms of investment, with the volume of financing increasing by 363% to 22.3 billion euros.
Germany in international comparison
Although German GenAI start-ups are growing rapidly, Germany is lagging behind in a global comparison: US GenAI start-ups receive 12 times more capital per capita than their German counterparts. This discrepancy is also reflected in the perception of founders: only 4 percent see Europe as leading the GenAI race in the long term, while two thirds see the USA as the leader.
Challenges and opportunities
The study identifies several challenges for German startups, including strict EU regulations and a certain reluctance of the established economy to embrace new technologies. Despite these challenges, 93 percent of GenAI startups in Germany are active in the B2B sector and actively use GenAI tools such as ChatGPT to improve their products and services.
Stronger support required to increase international competitiveness
Experts see the need for targeted measures to strengthen the competitiveness of German and European GenAI start-ups. In particular, the strict AI regulation in Europe, which is seen by many founders as an obstacle to innovation, deserves attention. Nicole Büttner from Merantix Momentum and Deputy Chairwoman of the Startup Association emphasizes the urgency of mobilizing more capital and acting more strongly at the interfaces of financing, research and spin-offs.
Despite the international challenges, Axel Menneking from hubraum sees opportunities for German start-ups and also believes that the German government has a duty: “It is important to intensify cooperation between start-ups and the established economy and to improve access to relevant technical infrastructure.
The results of the study underline the potential of GenAI in Germany and at the same time show the need to actively take measures to strengthen international competitiveness.
About the study:
The study “Startups and Generative AI: A new era begins” examines the importance of Generative Artificial Intelligence in the startup ecosystem and the role of these companies in the current transformation. The central data basis of the study is a survey of German startups, which was conducted between January and February 2024 and contains information from 306 companies. In addition, commercial register data from startupdetector and data from the German Startup Monitor and the Dealroom platform were used to analyze general developments in Germany.
Click here to the GenAI study
