German Startup Funding Plummets, AI Segment Booms, EY Says
January 16 2024 - 6:11AM
Dow Jones News
By Helena Smolak
Funding for German startups slumped in 2023 for the second year
in a row but quadrupled investments in artificial intelligence
suggest a potential turnaround, according to Ernst & Young's
Startup Barometer.
The auditing and consultancy firm said Tuesday that 6 billion
euros ($6.57 billion) flowed into the German startup scene in 2023,
from EUR9.9 billion the year before, partly due to the decline in
large-scale financing, or megadeals--with a volume of more than
EUR100 million--and fewer financing rounds last year. The number of
funding rounds fell 15% on year, and the number of deals fell to
861 from 1008, with only eight derived from large-scale
financing.
"Investors are still very cautious," said EY partner Thomas
Pruver. "Good ideas alone are no longer enough for young companies
to obtain fresh capital. Solid and well-thought-out business models
combined with realistic sales forecasts and the prospect of
profitability are currently the be-all and end-all in the eyes of
investors," he said.
However, EY expects investments to pick up again in the
foreseeable future. In the AI sub-sector, start-ups raised EUR943
million in 2023, up from EUR220 million in 2022, although the
number of deals only increased slightly, according to the report.
Investments in mobility, fintech and health were down 60%, 62% and
50% respectively, it said.
Write to Helena Smolak at helena.smolak@wsj.com
(END) Dow Jones Newswires
January 16, 2024 06:56 ET (11:56 GMT)
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