At the midpoint of 2019, venture capital deals in Berlin have broken their annual record in terms of aggregate value, totalling €2.2bn from only 94 deals. With these figures likely to increase by the end of the year, Berlin is narrowing the gap with London as the largest European venture capital hub – deals in London so far this year amount to €3.8bn in comparison, and €1.7bn for transactions in Paris.
The Rise of Venture Capital
It is an exciting time for start-ups in Berlin, as venture capital firms recognize growing opportunities and channel funds into new businesses in the city. From 2007 to 2011, Berlin-based start-ups struggled to attract funding from venture capital firms, but in 2012 the number of deals shot up by 67% to 117, which completed for a total of €288mn. Since then the number of deals has remained high, reaching a peak of 182 deals in 2016, and the value of these transactions has generally followed an upward trend.
Berlin is fast becoming the German equivalent of San Francisco and London in the US and UK respectively. And the reasons are similar. Increasing digitization has enabled creative people to innovate, set new trends, found companies, create jobs and build a digital economy. Berlin is the perfect storm of affordable rents and available co-working spaces, along with accelerator programs, numerous incubators, talent in Central & Eastern Europe and funding from entrepreneurs, angel investors, family offices and venture capital firms. This proliferation has attracted attention and increased the amount of venture capital funding from key domestic and international players.
Some Berlin start-ups have attracted large sums since the beginning of 2019. Online travel platform GetYourGuide Deutschland GmbH raised the highest value ($484mn) in Series E led by Softbank. Fintech N26 GmbH raised $470mn in Series D in two tranches, the first led by Insight Venture Partners. In comparison, London-based Roofoods Ltd., known as Deliveroo, raised the larger amount of $575mn in Series G funding, but this does not mean that start-ups in Berlin are less successful.
In fact, venture capital firms have supported start-ups in Berlin through the early and later stages of development. Angel, seed and unspecified rounds have dominated in terms of number of deals since 2013. In 2019 alone, start-ups have secured €354mn in Series C financings, while Series D topped the table with €954mn. It should be noted that not all transactions specify the type of investment, and €934mn was raised in unspecified rounds in 2015.
The ecosystem in Berlin has succeeded in encouraging creative people to set up businesses, supporting start-ups at all stages of development and attracting more funding. All things considered, the city’s ascendance in the venture capital space is likely to continue.
In our recent report on Alternative Assets in Europe, we turn the spotlight onto Germany as one of the key European hubs for alternatives. Read the report for more on how Germany is an increasingly key market in Europe, particularly in the private equity & venture capital space. For more information on the German venture capital data available on Preqin Pro, arrange a demo today.