PitchBook noted in a report that Germany’s venture capital (VC) and private equity (PE) markets have been fairly resilient amid global economic shifts.
PitchBook revealed in its comprehensive research report that as of December 2024, Germany’s private capital ecosystem demonstrates steady growth, though tempered by cautious investor sentiment and macroeconomic uncertainties.
The report from PitchBoook also mentioned that Germany’s VC market in 2024 saw a rebound from the slowdown of previous years, with deal value reaching €9.8 billion across 632 deals by Q4.
The report added that while this marks an improvement over 2023, it remains below the highs of the zero-interest-rate-policy (ZIRP) era, aligning more closely with pre-pandemic norms.
The report notes a shift in investment focus, with early-stage and seed-stage deals driving much of the activity.
The extensive PitchBook update also stated that Berlin continues to dominate as Germany’s startup hub, accounting for a significant share of deals, followed by Munich and Hamburg.
The report further noted that artificial intelligence (AI) and cleantech emerged as standout sectors, with companies like Aleph Alpha and Enpal drawing substantial investments.
However, PitchBook pointed out that late-stage deals lagged, reflecting investor caution amid high interest rates and a lack of clear exit pathways.
As stated in the report, the median deal size for VC investments grew slightly to €2.1 million, signaling confidence in high-potential startups, though overall deal count declined compared to peak years, suggesting a more selective approach.
VC fundraising in Germany totaled €2.3 billion across 28 funds in 2024, a figure bolstered by large closes from established firms like HV Capital and Earlybird Venture Capital.
However, the report underscores a stark divide: emerging managers struggled, raising just €150 million—the lowest since 2018.
According to the report from PitchBook, this concentration highlights a flight-to-quality trend, with investors favoring proven funds over new entrants.
The median fund size rose to €85 million, driven by a handful of “megafunds,” yet the overall fundraising pace suggests a conservative stance as limited partners (LPs) navigate portfolio rebalancing and the denominator effect.
Exit activity in Germany remained subdued, with €3.1 billion in exit value across 87 transactions.
The IPO market showed faint signs of life, with only two notable listings—both in the tech sector—compared to none in 2023.
Mergers and acquisitions (M&A) accounted for the bulk of exits, though values were modest, with larger deals (over €500 million) comprising just 5% of transactions but 65% of total value.
The extensive research report points to a backlog of mature companies awaiting liquidity, constrained by high valuations and a cautious buyer market. However, anticipated rate cuts and stabilizing equity markets offer hope for a stronger exit environment in 2025.
Looking ahead, the report from PitchBook forecasts a cautiously optimistic 2025 for Germany’s private markets.
The European Central Bank’s rate cuts—three in 2024, with more expected—could ease borrowing costs and spur dealmaking.
Public market strength and lower volatility may also reopen the IPO window, particularly for tech and cleantech firms.
Yet, the emphasis remains on capital efficiency, with investors prioritizing profitability over growth-at-all-costs strategies.
The secondary market is gaining traction as a liquidity tool, enabling firms to reposition assets for future exits.
The report also stated that Germany’s private capital markets in Q4 2024 reflect a landscape of recovery and adaptation.
The report from PitchBook added that while VC activity rebounds and fundraising consolidates, exit challenges persist.
The research report concluded that the interplay of monetary policy, sector innovation, and investor discipline will shape Germany’s role in Europe’s evolving private capital ecosystem.