Early this year, a study by the consulting firm EY counted 24 unicorn startups in Germany. A year earlier, just six young companies were given a valuation of more than one billion dollars. The 18 new unicorns alone raised 7.1 billion dollars last year. Among the 24 unicorns, there are eight fintechs, four companies in online retail, four in the mobility industry and three in the field of software & analytics.
The Berlin-based fintech N26 has secured the most capital of all German startups so far with 1.7 billion dollars. They are followed by 1.4 billion and 1.3 billion dollars respectively for the two Munich companies Celonis and Flixmobility.
The group behind the unicorn startups, namely companies that have received at least 100 million dollars since their founding, has also grown substantially – from 39 to 62. Of these top startups, 41 are located in Berlin and 14 in Munich. Thomas Prüver, Partner at EY, said:
“The German startup ecosystem took a major leap forward last year. More young companies received fresh capital last year than ever before, the total volume of investment reached a record high and the number of unicorns quadrupled.”
He said that he expects many more companies to reach a valuation of more than a billion dollars this year. The rapid increase in the number of unicorn companies last year can be explained as the corona effect, said Prüver:
“After holding back in 2020, investors were under major pressure to invest and the coffers were full. At the same time, there is now fierce competition to find attractive target companies, which is driving up valuations. Moreover, the low-interest environment and inflation expectations have further increased the appeal of alternative investment opportunities.”
On top of that, said Prüver, the professionalization of the tech ecosystem in Germany has increased significantly, driven by the network and capital from founders and investors who have been successful in the past.
For 2022, he expects investment activities to remain strong in Germany. This should also be ensured by the new venture capital funds that are active in the German market. Last year alone, the total of new funds with a focus on Germany reached a volume of 9.6 billion dollars. In the previous year, the relevant funds came to a total volume of 8.6 billion US dollars. Prüver said:
“The chances for promising startups to receive growth capital have never been as good as they are right now.”
“Vast improvement in exit options”
Exit activities also really picked up last year: The number of fusions and acquisitions that startups were involved in totaled 171 in 2021, which is a 90 percent increase compared to 2020. More than two thirds of the transactions – 68 percent – came from foreign investors. North American corporations are particularly interested in German startups: A total of 52 young German companies were acquired by US companies last year – 38 more than in the previous year. Companies from other European countries bought 49 German startups, and Asian companies acquired three young German businesses.
“Germany has built a good reputation as a startup location and the visibility of the German startup ecosystem has improved significantly in recent years,”
said Prüver. This boosts young entrepreneurs’ chances of making a successful exit:
“There was a vast improvement in exit opportunities last year – be it by going public or by selling to a strategic or financial investor. This brought more fresh money into the German startup ecosystem that can now be invested.”