Summarize this content to 2000 words in 6 paragraphs in Arabic Last year, as the German economy stagnated, an unlikely trend emerged among its start-ups: the amount of overall funding, year over year, increased by about €1bn, to €7bn. However, there were 12 per cent fewer funding rounds than in 2023, meaning the average deal size went up. “Most funding rounds above €20mn or €30mn are led by foreign investors,” who have not been as affected by the German recession, explains Thomas Prüver, author of EY’s Start-up Barometer for Germany report. “I’d say 90 per cent plus.”While there was an increase in funding in 2024, the €7bn in investment is still a far cry from the 2021 peak of more than €17bn, when money poured into high-profile consumer start-ups. “2021 was almost solely driven by huge funding rounds in B2C companies — quick commerce, ecommerce,” Prüver says. “Now, it turns out those business models are not that robust, and investors are reluctant to invest in them.”Eric Weber, chief executive and founder of Leipzig-based incubator SpinLab, agrees: “You used to be able to raise millions with a nice slide deck. Now, if you don’t have traction, investors aren’t interested.”As the German consumer has become more cost-sensitive and B2C start-ups have struggled to become profitable, investment has shifted away from B2C and towards B2B start-ups, often ones that have industrial and manufacturing applications. “Some say software eats the world, but hardware keeps it running,” Weber says, “and that is where Germany excels.”This shift has favoured Bavaria, in southern Germany — a natural home for B2B start-ups because of its strong industrial base, according to Carsten Rudolph, of Bay Start-ups, a regional incubator based in Nuremberg. Berlin, meanwhile, has traditionally preferred consumer start-ups. Last year, for the first time, Bavaria narrowly overtook the capital region in terms of the total investment value.These trends have converged in the case of Isar Aerospace, a Bavaria-based company founded in 2018. Isar is developing rockets that bring up to 1,000kg of cargo, such as satellites, to lower-earth orbit. Germany is well suited to compete in this niche market, largely because of its expertise in high-tech, automated precision manufacturing, according to Bulent Altan, Isar’s first angel investor and a former vice-president at SpaceX.“It’s cheaper to operate in Germany than in Silicon Valley or Los Angeles,” he says. “If I think about SpaceX and the 100 hour work week, year after year after year — sure, that comes with a certain amount of efficiency. But it comes at the cost of lower employee loyalty and a much more competitive market, higher salaries and a certain amount of burnout culture.”Isar was incubated by Munich-based start-up lab UnternehmerTUM and benefited from its vast partner network that includes the European Space Agency (ESA). “I often use Isar as an example of a smart collaboration between a young start-up and a traditional space agency,” says Géraldine Naja, the ESA’s director of commercialisation, industry and competitiveness.Isar successfully leveraged the agency’s support, by securing significant contracts and, in turn, using them to attract further private funding, she explains. But they needn’t be dependent on the ESA long term: “I certainly hope that eventually Isar will become totally self-sustainable. It’s like raising kids — you support them, but eventually, they have to fly on their own.”Across Germany, while large investment rounds increased last year, the decrease in small deals means that fewer start-ups are getting early-stage funding. “Not a good sign,” says EY’s Prüver, because “early-stage companies fuel the pipeline for later-stage funding.” This development has dissuaded young Germans from pursuing entrepreneurial projects, says Volker Hofmann, who runs Humboldt-Innovation, a subsidiary of Berlin’s eponymous university that aims to connect science with business. “Germany has lost 60 per cent of its founders in the past two decades. If we don’t reverse this, it won’t matter how much funding we have — we won’t have enough entrepreneurs to invest in.” “We need a new mindset,” Hofmann says, attributing the decline to Europe’s excessive bureaucracy and a cultural aversion to risk. “In Asia and the US, becoming an entrepreneur is seen as a great ambition. In Germany, we have too many barriers — legal, financial, and cultural — that discourage people from starting companies.”Helmut Schönenberger, UnternehmerTUM co-founder and CEO, sees things in a more positive light, highlighting how far Germany’s start-up scene has matured since he co-founded the educational institution in 2002: “Twenty years ago, we stood outside [the university food hall] handing out flyers for a business plan course. Now, billionaires and global investors come to us.” Schönenberger agrees challenges exist, but points to how the start-up ecosystem can push for change at the city and state levels. UnternehmerTUM, he says, is proactive in working with the city of Munich when it comes to securing start-up visas, test site approvals and government-backed funding.UnternehmerTUM topped the Financial Times-Statista 2025 ranking of Europe’s leading start-up hubs for the second year running.Back in Berlin, Hofmann points out that Germany has multiple thriving start-up hubs. However, they are in effect siloed. He believes they need to collaborate more to compete internationally. “Our ecosystems in Germany are too fragmented. We don’t join our forces the way we should — whether it’s between universities, industries or even regions,” he says. “It’s not a competition between regions; it’s about making Germany and Europe better as a whole.”
