Better prospects for start-ups in Germany: their chances of receiving investment from investors have improved. The latest survey by KfW Research, the German Private Equity and Venture Capital Association (BVK) and the Deutsche Börse Venture Network shows that the mood among venture capital investors is much more positive in the second quarter. Both the current business situation and future prospects are viewed more optimistically.
Although the assessment of the current situation is still below average in a historical comparison, the trend is pointing upwards. For the first time in two years, the outlook for the future is viewed positively again.
‘We perceive a mood of optimism in the German venture capital market, as the climate indicators are improving across the board,’ said Dr Fritzi Köhler-Geib, Chief Economist at KfW. In early summer, more venture capital investors stated that they were finding it easier to raise capital than in spring. They also expect the situation to ease further in the near future. This positive development is probably related to the interest rate cut by the European Central Bank, which continues the trend towards lower interest rates. Lower interest rates make investment companies more attractive as they make it easier to raise capital and make the asset class appear more lucrative compared to other options.
The willingness of venture capital investors to invest in new start-ups increased significantly in the second quarter. In return for their financial commitment, investors receive shares in the startups, giving them a stake in their potential success. ‘Startups should find it easier to attract venture capital investors this year than last year,’ said Dr Fritzi Köhler-Geib.
Ulrike Hinrichs, Managing Director of BVK, said: ‘Since the low at the end of 2022, sentiment in the German venture capital market has been showing a strong recovery for six quarters now. On the one hand, the fact that business expectations have already returned to positive territory gives us confidence for the rest of the year. On the other hand, key indicators such as the fundraising and exit climate, willingness to invest and the economy are showing signs of easing. Together with the optimistic assessments of entry valuations and deal flow, this should also be reflected in a further increase in investment activity and certainly larger financing rounds again. And if key interest rates continue to fall, this would give the market a further boost.’
Note: The German Venture Capital Barometer is compiled by KfW in cooperation with the German Private Equity and Venture Capital Association (BVK) and the Deutsche Börse Venture Network (DBVN) on a quarterly basis exclusively for Handelsblatt. Detailed analyses with data tables and charts on the development of the business climate in the venture capital and private equity segments are available at www.kfw.de/gpeb.
