Bavaria surpasses Berlin in funding for start-up ventures
In a significant shift in the German startup landscape, Bavaria has emerged as the leading hub for venture capital investments, according to a recent study by EY. The southern German state attracted more venture capital than Berlin in the first half of the year, marking a clear lead in the startup industry.
By the end of June, Bavarian start-ups had collected approximately 2.1 billion euros in venture capital, significantly more than start-ups from Berlin (1.5 billion). This trend reflects Bavaria's highly integrated and effective ecosystem, which includes strong university ties, startup labs, connected venture capital funds, and strategic public-private funding initiatives.
One of the key factors contributing to Bavaria's success is the presence of leading startup hubs like UnternehmerTUM, the startup lab of the Technical University of Munich. This close connection to local universities, investors, and corporations creates a fertile environment for research commercialization and startup creation, attracting venture capital.
Another significant player is Bayern Kapital, a public Bavarian venture capital firm established as part of the "Bavarian Future Initiative" since 1995. Managing substantial funds (around 200 million Euros), Bayern Kapital invests in young, innovative technology companies within Bavaria, providing continuous support through seed and follow-on financing.
The German government's new "startup factories" initiative also leverages models like Bavaria’s UnternehmerTUM and connects closely with universities and private funds. With its already strong startup infrastructure, Bavaria is better positioned to capitalize on this government support, driving higher venture capital flows into its ecosystem compared to Berlin.
While Berlin remains strong in terms of total investment volume and number of startups, Bavaria's emphasis on structured support mechanisms, university spinouts, and integrated public-private partnerships channel more targeted venture capital into promising ventures.
The increased venture capital in Germany has been particularly focused on defense, AI, and energy technologies, areas where Bavaria is performing well. Notable investments include the AI company Helsing, which received a major cash injection of 600 million euros, and Green Flexibility from Kempten, which secured 400 million euros.
The surge in venture capital has propelled the German startup industry to its third-best first half-year since 2015, with a 33% increase from the previous year, totalling 4.6 billion euros. The number of financing rounds nationwide also increased, with Berlin having 132 financing rounds compared to Bavaria's 76.
EY partner Thomas Prüver notes that the startup ecosystem in Germany has changed significantly in the past two years, with weights shifting. He emphasises that venture capital is crucial for growth in the startup industry, and the recovery from the crisis after the end of the corona boom has been a positive development.
However, not all sectors are experiencing the same growth. Berlin continues to lead in online retail, while Bavaria's economic strength benefits start-ups offering services, applications, or products to traditional industries.
In a separate development, construction sites in Hamm are causing despair among independent retailers, but this fact is not related to the startup industry.
In conclusion, Bavaria's combination of institutional support, university integration, and proven startup incubation models results in greater venture capital attraction compared to Berlin, making it an increasingly attractive destination for start-ups in Germany.
Investing in technology start-ups in Bavaria has been significantly boosted by the presence of artificial-intelligence companies like Helsing, which received a substantial 600 million euro investment. This rise in venture capital, driven by strategic public-private funding initiatives, artificial-intelligence research commercialization, and integrated university ties, has made Bavaria a leading hub for investing in start-ups, surpassing Berlin.
