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
01-16-24 0656ET
