The turnaround in interest rates and concerns about the economy as a result of the war in Ukraine have left deep scars on German start-ups. Last year, the number of start-ups fell by more than a fifth (22 percent) to 2,705, according to an evaluation by analytics firm Startupdetector. That is 780 fewer start-ups than in 2021. In 2022, for the first time, more young growth companies were founded in Bavaria than in Berlin.
540 start-ups were founded in the capital, while 571 were counted in Bavaria, according to the study, which is based on registrations in the commercial register. When it came to funding rounds, Berlin was ahead of Bavaria with 551 (445). The Handelsblatt had previously reported on this.
Investors are becoming increasingly hesitant
German start-ups have enjoyed a long boom, recording record levels of investor funding in 2021. But with the war in Ukraine, rising interest rates and uncertainty about the economy, the market had turned: investors held back and jobs in the start-up industry were being cut en masse. The boom that was fueled by low interest rates and a lot of liquidity is over for the time being, writes Alex von Frankenberg, managing director of High-Tech Gründerfonds, who helped draft the report as a partner. “The year 2022 has shown us that the trees do not grow to the sky.”
Fewer start-ups due to crisis mood
According to the study, the number of start-ups fell due to the crisis mood among start-ups in almost all federal states, including Hamburg, North Rhine-Westphalia, Baden-Württemberg and Hesse. In the starter stronghold of Berlin, however, the drop of 30 percent was particularly large, so that Bavaria (minus 10 percent) overtook it.
The research also shows that it was more difficult for young start-ups to raise money. Although the number of financing rounds was at a similar level to 2021, the number of first financings fell by 18 percent compared to the previous year. “This suggests that in times of crisis, investors focus primarily on their existing portfolio.”
Source: Krone
I’m Ben Stock, a journalist and author at Today Times Live. I specialize in economic news and have been working in the news industry for over five years. My experience spans from local journalism to international business reporting. In my career I’ve had the opportunity to interview some of the world’s leading economists and financial experts, giving me an insight into global trends that is unique among journalists.
