A study has revealed that start-ups in Germany received more venture capital than ever before last year. Most investment went into companies in the finance, online trade and software sectors.

German start-ups received over 17 billion euros

Germany has long been known as a home for start-ups, with many aspiring entrepreneurs moving to the federal republic with the intention of forming their own company. While start-ups in Germany certainly felt the pressures of the coronavirus crisis in 2020, they raked in record investments in 2021. A study by consulting company EY found that newly founded companies in Germany received around 17,4 billion euros in 2021, which is about three times as much as in 2020.

The study found that the number of investments of over 100 million euros rose significantly, from eight in 2020 to 33 in 2021. There was also a record number of financing rounds in 2021, which rose by 56 percent (compared to 2020) to 1.160. “There is a lot of investment pressure on the investor side,” said EY partner Thomas Prüver. “There is a lot of money on the market - this is currently benefiting the promising young companies."

Tech and finance sectors see high investment

Most of the venture capital received by young businesses was invested in the finance, online trade and software sectors. Prüver believes that the coronavirus pandemic is the catalyst for the current financing boom start-ups are enjoying. New companies that follow online or digital-based business models, allowing for better employee flexibility, have benefited from the increased focus on digitisation and remote working during the pandemic.

"Young companies are often highly innovative and often have the potential to advance the digital transformation of the German economy with their solutions and thus act as innovation drivers," Prüver said.

The largest transaction to happen in Germany in 2021 took place in September: an investment of 861 million euros in Gorillas, the grocery delivery company based in Berlin. Munich-based software provider Celonis, online bank N26 and online broker Trade Republic also received significant investments.

Berlin rakes in most investment

Entrepreneurs in Berlin received the most investment in 2021, followed by entrepreneurs in Bavaria. In Berlin, the average investment per round of financing was around 21 million euros; in Bavaria, this figure stands at 19 million. "For the other start-up locations, however, it is difficult to keep up," says Prüver. This is because entrepreneurs in federal states such as Baden-Württemberg and North Rhine-Westphalia only received eight to six million euros on average.

Berlin start-ups managed to receive seven of the 10 largest financing rounds in 2021, while the other three went to companies in Bavaria.