Investment in German start-ups slumps 43 pct in 2022

Investment in German start-ups slumped by 43 percent in 2022 to around 9.9 billion euros (10.6 billion U.S. dollars), after a record year in 2021, consulting firm Ernst and Young (EY) Germany said on Wednesday.

The number of large deals of more than 50 million euros also dropped by around half last year.

"With the cost of capital rising and valuations falling, investors are paying more attention to profitability than to long-term growth promises," said Thomas Pruever, partner at EY. "Young companies are being challenged to adapt to this and to show a clear path to profitability."

Software and analytics companies in Germany collected by far the most venture capital in 2022, with 3.2 billion euros, according to EY. The Berlin-based InsurTech company wefox, and the software start-up Celonis from Bavaria achieved the highest financing round, with 399 million euros each.

A survey among young companies by the German Startup Association in September last year showed that "uncertainty among start-ups has increased significantly" as a result of economic and political turmoil. However, the situation was still "much more positive than the COVID-19-year 2020." (1 euro = 1.07 U.S. dollars)